Back-to-school spending to increase 2.5% in Canada: Ernst & Young

Shopping season starts earlier in an increasingly competitive market

MONTREAL, July 30, 2012 /CNW Telbec/ - Back-to-school spending is set to climb only 2.5% over last year in Canada despite the early start to the shopping season, according to Ernst & Young.

"Back-to-school sales started on July 1 south of the border, stimulating demand and forcing Canadian retailers to follow suit and get in step earlier than ever," explains Daniel Baer, Ernst & Young Partner and National Retail Industry Leader. "Consumers' low confidence level means they are careful, looking for bargains despite brand loyalty, and aren't hesitant to compare prices before buying, whether shopping in stores or online from home or by mobile."

Baer adds that retailers understand that every dollar spent at the competition is a dollar less in consumers' budgets that could be spent in their stores. On the other hand, most back-to-school purchases are not discretionary.

Aside from the growing trend to shop online for low US retail prices, cross-border competition is also being stimulated by new traveller exemptions, allowing Canadian residents to import products without duty or taxes. As of June 1, traveller exemption limits increased from $50 to $200 for visits of at least 24 hours, and from $400 to $800 for visits of at least 48 hours.

Losing ground to US retailers isn't the only challenge facing Canadian consumer products companies. According to a recent global publication by Ernst & Young, Disrupt or be disrupted: creating value in the consumer products brand new order, 74% of consumer products company leaders believe they need to make significant changes to sustain historic margins. The survey also shows that 68% of responders are under pressure to reappraise their operating models.

Baer says, "The consumer landscape is in constant evolution, both here and around the globe. Canadian retailers aren't immune to worldwide trends. Thanks to technology and new modes of communication, consumers are taking control of the conversation and demanding better value."

Back-to-school sales are not limited to traditional items like clothing, shoes and stationery. A growing number of increasingly younger students purchase electronic items and devices. Baer adds this sector will likely perform very well this year.

Baer expects that back-to-school spending will vary across Canadian regions, mirroring 2011 trends: Alberta and Saskatchewan will continue to lead, and spending in Québec and Ontario will be below the national average.

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SOURCE: ERNST & YOUNG

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