Tepid optimism around Canadian holiday sales with 3.5% growth expected

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(Toronto, 31 October 2013) While economic uncertainty persists at home and abroad, Canadian holiday retail sales are expected to grow 3.5% over last year, supported primarily by online commerce, EY says.

“Retail sales were inconsistent this year. Still, the most recent sales results, bolstered by stronger consumer confidence and the promise of stable interest rates, are generating some cautious optimism in the short term,” says Daniel Baer EY Partner and National Retail and Consumer Products Industry Leader. “That said, retailers are grappling not only with modest sales growth, but increasing competition and an unprecedented pace and intensity of tech-driven change. Consumers are expecting more, especially during the busiest shopping season of the year – the way a retailer responds will have a big impact on its overall results.”

EY’s recent Americas’ Retail Quarterly Report supports that, showing 70% of Canadians research products online before buying. Of those who research online, 58% say they then buy a product. Although Canadians still trail American consumers in adopting e-commerce overall, retailers here must carefully evaluate how these shifting trends will affect their client base. That means assessing everything from loyalty programs to digital wallets. More and more, retailers need to evolve from a physical location where products are sold, to a comprehensive provider of knowledge, insight, convenience and service.

All that said, Baer notes, “While technology is definitely transforming the retail landscape, consumers remain conservative and focused on price. Online customers are even more price-sensitive and interested in promotions than their traditional consumer counterparts.”

Retailers are expected to use a number of strategies to make the most of this holiday shopping season, including deep discounts coinciding with American Black Friday promotions, free and faster shipping, better omni-channel delivery, a shift to digital advertising, improved use of social media, flexible returns, and better websites for tablet users.

Retailers are also expected to respond to spotty consumer confidence by adapting inventory and promotions to the different spending trends across the country:

  • The three Prairie provinces will continue to show the strongest sales results, with strength in Alberta continuing.
  • Sales in British Columbia will improve over last year, but are expected to remain below the national average.
  • Results in Ontario will continue to improve and be in line with the average national increase.
  • Soft sales are expected in Atlantic Canada.
  • Previously-noted softness in Quebec appears to have worsened for retailers there. With concerns around economic growth in Quebec, sales will continue to lag behind this year.

In terms of product popularity, clothing, electronics and jewelry should enjoy a fair piece of the spending pie. Expected new product releases for tablets and smart phones will help drive traffic, which will in turn drive higher volume in these categories, if not higher dollar sales. Gift cards will also remain a popular choice.

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