With concerns over the economy and more people choosing to pay down their debts, Canadians are less likely to splurge this holiday season according to a report released by Deloitte Canada.
Entering the 2011 holiday shopping season, only 29 per cent of Canadians surveyed for the report said they expect the economy to improve this coming year, while 33 per cent thought it will decline. Last year, 49 per cent of Canadians were optimistic about the economy for the coming year and 15 per cent had a negative outlook.
"The uncertain global economy and the resulting volatility of the stock market, the Canadian dollar and fuel prices have taken their toll on Canadians' confidence," said Jean-Philippe Vorsanger, Retail Consulting Lead with Deloitte Canada. "Survey respondents told us that their highest priority is to pay off debt, although debt-to-income ratios continue to rise across the country and are now much higher than those of Americans who have focused on paying down their debt in the past couple of years," Vorsanger added.
The report noted that its consumer confidence index had dropped to 75 from 89 last year, though Canadians are still more optimistic than shoppers south of the border, where the confidence index hovers around 45.
The survey results show that Canadians will go out and shop this holiday season, albeit cautiously. 50 per cent of respondents said they will stick to a budget, with the median being around $477. Those earning less than $30,000 reported a median budget of $264 while those households with an income greater than $150,000 reported a median budget of $816. "As a result, retailers should anticipate low, single-digit growth over the holiday season," Vorsanger said.
Regionally, Vancouver area consumers are less optimistic about the economy, with two-thirds saying they felt the economy would stay the same or improve, compared to 80 per cent a year ago. 58 per cent said they plan to spend the same as last year this holiday season. Also, plans for cross-border shopping are down with 50 per cent of respondents saying it is likely they'd cross the border to shop compared to 65 per cent last year, with clothing, gasoline and groceries being the top three cross-border purchases in 2011.
Those in Prairie province cities such as Edmonton, Calgary and Winnipeg, where unemployment is lower than the Canadian average, were more positive than elsewhere, with about three-quarters responding they expect the economy to improve or stay the same. 88 per cent rated their job as secure compared to the national average of 78 per cent. As a result, this holiday season, more residents plan to spend the same or more compared to last year.
In the greater Montreal area, the economic outlook is worse than last year with 60 per cent of consumers feeling positive compared to 89 per cent last year. Job security remained unchanged at 50 per cent. 33 per cent see their economic situation as having deteriorated versus 25 per cent last year. More than half of Montreal residents plan to spend about the same as last year this holiday season. Cross-border shopping intentions were down with 15 per cent saying they are likely to do so this year compared to 30 per cent last year.
Meanwhile, those in Atlantic Canada said they will spend more than the average Canadian this year during the holiday season, though 42 per cent said they felt the economy would remain the same over the next year. Two-thirds are feeling secure in their jobs. Nine out of ten employed residents are significantly less attracted to shopping south of the border than last year.
Trend wise, roughly the same proportion of Canadians (45 per cent) say they plan on doing some of their holiday shopping online this year as did last year, although the number climbs to 60 per cent for the 18 to 29 age group. Although, this percent will likely increase in the future with younger Canadians leading the charge toward adopting mobile shopping applications, with one-third planning on using a mobile app this holiday season.
"We expect the Canadian retail scene to continue to evolve significantly in the next few years. We see more U.S. retailers entering the market, expanding e-commerce offerings by Canadian retailers and more importantly the number of new retail CEOs that have been appointed in the last few months is a sure sign that Canadian retailers are ready for fresh perspectives and big changes," Vorsanger noted.
The survey shows that this year's holiday season should benefit electronics retailers as one-third of Canadians are planning on purchasing a technology gift, up from 25 per cent last year. Traditional gift categories such as clothing and home furnishings and accessories should also do well as consumers take advantage of the season to catch up on purchases they have been delaying earlier this year. Experience gifts such as spa packages and golf lessons, which tend to do better in good times, will not be high on Canadians' shopping lists this year.