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The holiday season is an important time to boost the bottom line for retail businesses.
But just how much consumers are spending this year is hard to pin down, says Brad Davis, a retired Associate Professor at Wilfrid Laurier University’s Lazaridis School of Business and Economics, who specializes in consumer behaviour and trends.
According to the Retail Council of Canada (RCC) and Leger, this year average holiday spending was expected to be around $972, which is up $74 or eight per cent from the 2023 holiday season. Meanwhile, PwC Canada says Canadian consumers were planning to spend an average of $1,853 on gifts, travel, and entertainment this holiday season, a 13% increase over last year.
Shoppers, it seems, are adopting more strategic behaviours when it comes to gift giving. With inflation still impacting prices, an Angus Reid Group study indicates that 71% of Canadians are budgeting carefully, seeking promotions, and comparing options extensively.
Black Friday and Cyber Week have remained key shopping periods, with many delaying purchases to capitalize on discounts.
“The last few years I've taught I've been kind of really disparaging about spending surveys and I think you see so many of them where the results say one thing and then the actual behaviour is totally different,” says Brad. “I think we've created this environment where there's kind of a disconnect between immediate gratification of purchase and then the actual feeling of having spent money you don't see until the credit card bill arrives.”
That same Angus Reid Group survey, conducted from Oct. 15-21 from among approximately 1,500 Canadians 18 and older, also indicates at least 46% of holiday shoppers were planning to spend less this year.
Sustainability and quality key factors
Sustainability and quality are also playing a significant role in purchasing decisions this year. Shoppers increasingly prefer high-quality, longer-lasting items and even second-hand products. For retailers, offering compelling loyalty programs and promoting ethical practices could further attract this value-driven demographic.
Brad says while the holiday shopping season is an important time for many businesses, planning for the long term has also become a priority.
“You’ve got the sales now and the cash flow, but there is so much stuff going on with artificial intelligence and the relationship between online and bricks and mortar stores,” he says. “There’s that balance between being very reactive to what’s happening now and not compromising what you’re going to have to do for that long-term adjustment to current changes. I think many are still dealing with kind of a post-COVID restructuring.”
According to the Angus Reid Group, 26% of Canadians were planning to do most of their holiday shopping in-store this year, while 34% will do the majority online. With half (48%) of small businesses finding it harder to compete with the rise of online giants.
Survey results show Ontarians are leading nationwide in online shopping, with 41% of their holiday budget spent digitally, balancing this with the tactile experience of in-store shopping, something Brad says is hard to define for many retailers.
“Every retail space has presumably different consumer experience expectations,” he says, adding the term ‘customer experience’ is the mantra retail experts often tout. “But when you have so much traditional retail stuff or a customer experience which is designed to create that kind of more spontaneous or in-store decision making, how do you balance that with online?”
By focusing on value, engaging promotions, and omnichannel excellence, experts say Ontario retailers and businesses should be maximizing their potential this holiday season.
Some key spending drivers this holiday season:
Consumer spending growth: Rising disposable incomes, particularly among millennials and Gen Z, are fueling higher expenditure on gifts, travel, and entertainment.
Preference for online shopping: Retailers with robust digital platforms and promotions, especially during key events like Black Friday and Cyber Week, are poised for success.
In-store experience matters: While online shopping grows, 62% of Canadians still value the tactile experience of in-store shopping. For Ontario retailers, curating an engaging, festive in-store atmosphere could capture the attention of consumers seeking the traditional holiday shopping experience.
Strategic shopping and sustainability: Items like clothing, home essentials, and gift cards dominate wish lists. Retailers offering eco-friendly options or emphasizing value-driven strategies are likely to resonate with shoppers.
Impact of promotions and loyalty programs: Businesses offering early deals, compelling promotions, and customer-centric loyalty programs will stand out during this competitive season.
Challenges facing Ontario businesses:
Economic uncertainty: While economic indicators are improving, the lingering effects of inflation mean that consumers remain cautious. Retailers need to balance pricing strategies carefully to attract budget-conscious shoppers without eroding profit margins.
Supply chain and inventory management: Ensuring adequate inventory while avoiding overstock is critical. Supply chain disruptions seen in previous years underline the importance of proactive planning.
Diverse consumer preferences: Businesses must cater to a broad range of consumer priorities, from those seeking traditional gifts to those favoring experiences or sustainable options. Flexibility and adaptability will be key. |
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