In this podcast episode, Aaron Aerts, CPABC's economist, talks to Robert Coard, CPA, CA, partner at PwC Canada, about PwC's report on emerging consumer trends for the 2022 holiday season. Part of our Coffee Chats with CPABC podcast series.
How much are Canadian consumers intending to spend this year, and how does that compare to previous years?
Robert: This year’s edition of our annual holiday outlook survey shows about two-thirds of Canadian consumers plan to spend the same or more as last year. On average, Canadian consumers expect to spend roughly $1,440 on gifts, travel and entertainment this holiday season, up 2% from last year.
How does this year’s spending compare to 2019?
Robert: Consumer spending is still recovering in Canada after the significant economic downturn in 2020. This year, the average consumer’s planned holiday spend remains 9%, or around $150, below pre-pandemic levels. Our survey shows that the primary reason for this is that the rising cost of living is weighing on the minds—and wallets—of consumers.
How are Canadian consumers treating the inflationary pressures, and how did consumer shopping trends break down by income level?
Robert: Canadian consumers are increasingly concerned about the rising cost of living. Unlike the pandemic-related pressures that influenced the shopping habits of virtually all Canadians the last two holiday seasons, inflation is affecting different consumer groups unevenly.
Our survey shows households earning between $60,000 and $100,000—a group likely to have a modest amount of disposable income and limited flexibility in their budgets—are the most likely to say the rising cost of living could affect their holiday shopping plans. Nearly three-quarters of these consumers say inflation could influence their spending, compared to two-thirds of consumers in other income brackets.
So, given this significant consumer concern around rising prices, how can retailers best cater to customers this holiday season?
Robert: It’s no secret that retailers are facing inflationary pressures themselves. But those companies that uncover ways of maintaining their margins without fully passing along their cost increases have a valuable opportunity to engage cost-conscious Canadian consumers.
We’re seeing retailers adopt a variety of cost transformation initiatives. A prime example is automation technologies, which can be powerful tools for reducing costs while also helping to manage labour shortages and improve customer experiences.
Automation can help streamline administrative tasks in corporate offices, accelerate the movement of goods between distribution centres and let consumers research and purchase in-store products without employee assistance through self-checkout options. In addition to reducing costs, automation tools can free up employees to spend more time on higher-value activities that enhance the consumer experience.
Another very topical issue facing our economy has been supply chain disruptions. What did the survey find about that?
Robert: Canadians have become accustomed to occasionally finding their preferred product out of stock over the past year. But many consumers say they’ll simply go without making a purchase rather than redirecting their spending to an alternative product. In fact, 43% of Canadian consumers say persistent product unavailability could affect their holiday spending this year. That’s the most cited disruptive factor after inflation.
Retailers that iron out the supply chain wrinkles that lead to product unavailability have an opportunity to differentiate themselves in the eyes of consumers. More than a third of our survey respondents say they’re likely to shop with brands and retailers that have a strategy in place to mitigate supply chain disruptions.
We’re also seeing retailers looking to shorten and simplify their supply chains. This can make it easier to manage production and shipping disruptions. It also gives retailers greater supply chain visibility and reduces environmental, social and governance (ESG) risks, such as unknowingly purchasing products from suppliers whose subcontractors fail to meet the environmental or social responsibility standards demanded by consumers. Domestic sourcing can also be a competitive differentiator: 57% of consumers in our survey say they’re likely to shop with retailers that offer products made in Canada.
Expanding on that ESG topic, how important is it for consumers to trust the retailers they are purchasing from?
Robert: Canadian consumers overwhelmingly say there’s an additional factor that could influence their holiday purchasing decisions this year: trust. Three-quarters of respondents say they’ll likely shop with retailers and brands they perceive to be trustworthy this holiday season.
Building and sustaining that trust requires retailers to align their values with those of their customers. Our survey shows that consumers are looking for help managing the rising cost of living, engaging in entertaining experiences and purchasing the products they want without delays. A strategy-led plan to address these priorities, coupled with meaningful actions that match commitments, can give retailers a competitive edge and earn the sustained loyalty of Canadian consumers, both this holiday shopping season and beyond.
Aaron Aerts is CPABC's economist
In Other News
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While inflation remains well above the Bank of Canada’s 2% target, it continues to slow both provincially and nationally. In March 2023, overall prices in BC rose by 4.7% in BC and 4.3% in Canada compared to March 2022, the slowest rate in BC since February 2022. In comparison, BC’s annual inflation rate was 6.2% to start this year and peaked at 8.1% last May.
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Starting in early 2022, central banks around the world began to increase interest rates to combat inflation, resulting in significant and quick successions of interest rate increases. As of the writing of this article, the Bank of Canada’s (BoC) key interest rate stands at 4.5%, up from 0.25% at the start of 2022.