For budget-minded holiday shoppers, it's all about price: Ernst & Young

Holiday sales forecast to grow modestly in Canada

MONTREAL, Nov. 1, 2011 /CNW Telbec/ - As market volatility and economic uncertainty continue to make headlines, retailers are facing major obstacles going into the critical holiday shopping season, Ernst & Young says.

With consumer confidence shaky, shoppers will tend to err on the side of caution, focusing on necessities and stretching dollars to cover the rising costs of commodities.

"Cautious and conservative consumers tend to focus on price and, in particular, price integrity," says Daniel Baer, Ernst & Young Partner and national retail industry leader. "Successful retailers will not only match their prices with their competitors, but need to ensure they offer the same prices in all channels — in store, online and cross border."

This holiday season more than ever, Canadian retailers will compete in a heavily promotional and highly competitive market. Price guarantees, price matching, free delivery, price checking and promotional pricing will all be popular terms.

"Consumers have been stressed since last August — in particular dealing with uncertainties created by a roller-coaster market," explains Baer. "Even if Canada compares well to other countries, uncertainties around the globe are worrying shoppers here and affecting their behaviour. Consumers are focusing on debt, be it European or their personal debt situation."

Accordingly, Ernst & Young is forecasting that holiday sales will grow by a modest 2%, in line with core inflation, compared to last year. "While Canadian retail sales might appear to be growing more slowly than in the US, it's important to remember that sales never fell quite as sharply here as they did south of the border," adds Baer.

Rising inflation — close to 3.2% on commodity and gas prices — is also restricting consumers' spending power as wages grow more slowly. Consequently, dollar stores, discount chains and warehouse clubs should grow their share of holiday spending.

Consumer trends will vary across Canada, with Alberta and the Prairies leading, Ontario and Atlantic Canada in line with the average, and British Colombia and Quebec lagging behind.

In terms of product popularity, clothing stores and electronics retailers should enjoy a fair piece of the spending pie. "It looks like tablets and smartphones are no longer considered discretionary items but, rather, necessities," notes Baer.

As for gift cards, while they will still be popular this year, the market is maturing, and sales are expected to be flat compared to last year. Online spending, including cross-border online spending, will continue to increase.

Baer says Canadian retailers have already reacted and adjusted to the consumer's cautious mood, and are themselves acting carefully.

About Ernst & Young
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