Canadian retailers face pressure-cooker year ahead: Ernst & Young

Retail sales expected to rise marginally in the new year as buying power erodes

TORONTO, Jan. 19, 2012 /CNW Telbec/ - Canadian retailers will have no time to enjoy the post-holiday season, as 2011 challenges spill into 2012. Retailers face numerous challenges, including an influx of foreign competitors, weak consumer sentiment and decreased consumer buying power, says Ernst & Young.

"National holiday sales to date increased approximately 2% in 2011, in line with expectations," says Daniel Baer, Ernst & Young Partner and National Retail Industry Leader. "Consumers will continue to focus squarely on price in 2012. Retail sales are expected to rise marginally. Meanwhile, higher gas prices, taxes and costs for groceries and certain manufactured goods will further erode buying power and combine to squeeze retailers' bottom lines."

Retailers will also need to contend with the ripple effects of new US competition in the Canadian market. As Canadian retailers continue to reel from the entrance of numerous US companies in 2010 and 2011, they'll need to focus on differentiating themselves. We're likely to see more patriotic "buy Canadian" marketing in the year ahead. 

"In 2011, Black Friday and Cyber Monday events were much more common among Canadian retailers, demonstrating the impact of US marketing in Canada," explains Baer. "Expect Canadian retailers to emulate their US brethren in 2012, particularly through the adoption of social media, more aggressive online strategies and international expansion."

What's more, many Canadian retailers will look beyond the country for growth opportunities. Baer explains: "a number of Canadian retailers have been very successful in the US and in other countries around the world, and these success stories will be examples to other Canadian retailers looking for a competitive advantage."

Additional trends to watch in 2012:

  • Online shopping: This distribution channel, especially used from mobile devices, will continue to influence the retail landscape, and retailers will continue to sharpen their online offering.
  • Logistics and delivery policies: Everything from ease of use to delivery charges will be challenged. Long term, retailers will reconsider their physical store strategies in light of increasing online sales.
  • Social media: The use of social media will increasingly influence how, when and where consumers buy.
  • Real estate and talent: As US retailers continue to enter the Canadian market, retailers will be pressured on real estate and talent.
  • Consolidation and restructuring: While the Canadian marketplace saw a number of retailers go out of business in 2011, consolidation and restructuring will become more commonplace in 2012. Some retailers are weakened by the recession and will need to restructure or to sell.

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