Holiday spending outlook for Canadians

Holiday spending outlook 2009With the holidays approaching quickly, how do Canadians feel about spending? Will we be willing to slap down the credit card or dip into the bank account even in these shaky economic times? Responses are mixed.

According to Retails, a site breaking down the projection of retail sales in Canada, we'll see a "range of a 1 percent increase to a 1 percent decrease from a year ago, which showed a 7.6 percent decrease from 2007." (Data supplied from Global Hunter Securities Investment Bank on its early estimate of holiday retail sales released in August 2009.)

There is real concern among retailers since the 2008 holiday season was very depressing in terms of people spending money. As stated on RetailSails.com, "Average general merchandise sales for the June-to-September period 2008 was $374 billion, +1.05 percent year-over-year. By comparison, December 2008 sales were $136.3 billion, -6.01 percent year over year." According to these statistics, retail sales have remained low since January 2009 and have continued to fall each month. So, does this mean consumers will hold on tight to the purse strings this year, too? Some say yes, others say no.

"Well, I think people will be smarter about spending, but I don't think they'll stop," says Calgary resident John M. "But I don't think I'll be using my credit cards as much this year. I have a great job but...well...you just don't know."

Loss of employment and ability to pay off any holiday debt seem to be the biggest influences in terms of holiday spending. Just ask single mom of three Colleen C. "I work for a law firm, but my hours were cut a bit earlier this year. Obviously I have to go Christmas shopping and stuff, but I won't use credit. No way will I get caught with bills I can't pay off if I lose more hours."

How, then, will retailers entice leery consumers like John and Colleen? According to RetailSails.com retailers will be worrying about the following:

(a) Retailers are focused on free cash flow and cutting inventory spending.
(b) Consumers seem to be controlling prices by seeking the cheaper side of things like the dollar stores or Value Village, where their money can stretch further.
(c) Employment fears have been a major concern for sale weakness last year and it remains a concern this year. Unfortunately, neither retailers nor trackers of consumer sales, like RetailSails.com, think this issue will improve in the near future.
(d) Suppliers face issues as well with a concern for lower overall volume, plus consumers screaming for better markdowns.
(e) On the bright side, the slightly extended shopping season could result in some replenishment orders late in the season.

This means that suppliers who can give merchants what they need will help to increase those sales.

In the end, it's hard to say for sure what the outcome will be. But people don't seem to be saying that they won't buy, only that they'll be careful about using credit and that they'll be seeking better deals.

Written by Lily Wolf.

Published October 7, 2009

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