With every newsfeed portending economic doom and gloom, it’s no wonder Canadians are feeling the pinch this holiday season. It seems like inflation is pushing up the price of just about everything. But the truth is there are still deals to be found. And price isn’t the only consideration that should go into making a smart purchase.
So what’s a savvy shopper to do? Arm yourself with information so you know where to look and what to think about before you open your wallet, say two University of Alberta experts.
Folio gets a handle on this year’s festive retail outlook from academic director John Pracejus and executive director Heather Thomson at the Centre for Cities and Communities in the Alberta School of Business.
Under pressure
With annual inflation most recently reported at 6.9 per cent, accounting giant Deloitte predicts Canadians’ holiday spending will drop by 17 per cent this year, to about $1,520 per person. That takes us back to about the same level as 2020, according to Pracejus.
“It's a big drop from last year, which was a giant increase from the year before that, but it’s not like we're falling off a cliff,” Pracejus notes. “So there may be a little bit of adjustment going on after COVID.”
If you think that’s a lot of pressure on you as a consumer, consider what’s happening for retailers: Inflation is pushing up costs, the labour market crunch means it’s harder to hire and retain reliable staff, and then there’s that recession looming for 2023.
“Retailers are trying to make as much money as possible in the next six weeks to weather the storm of 2023,” notes Thomson.
“With the exception of the grocery sector, for a wide variety of retailers, the holiday season and gift giving makes the difference between profit and loss,” says Pracejus.
In fact, many believe that’s where Black Friday got its name — in recognition of the time of year when businesses’ books finally go from red to black.
The supply chain issues that plagued retail during the pandemic have mostly been cleared up (again, groceries are an exception), so many retailers are actually overstocked this year.
These cumulative pressures mean there’s a “weird dance” going on right now between retailers and shoppers, says Thomson.
“On one hand, consumers have more buying power because there's more inventory,” she says. “On the other hand, businesses need to be very careful about their margins right now, with the anticipation that spending is going to cut back into the first few quarters of 2023.”
Mind the gap
Though overall spending is predicted to drop this holiday season, you have to dig into those numbers further to get the total picture, says Pracejus, because inflation affects people and businesses differently.
It hits hardest for consumers with the tightest budgets, so Pracejus predicts some families will be making virtually no holiday purchases this year.
Middle-income shoppers will be looking for price breaks and will likely shop at large discount stores (think Walmart) more than they normally would, he says.
Meanwhile, higher-income consumers are ready to go on a bit of a spree this year for travel and luxury goods.
“The wealthy held back a bit during the height of the pandemic when stores were closed and they couldn't get together with family and relatives, so they want to spend a little bit more this year, and they're going to go to the same stores they always have,” Pracejus predicts.
That means luxury brand retailers should do well, but the picture is different for other businesses.
“Discounters may actually be OK because, while they're losing people at the bottom rung of the income ladder, they may be gaining customers from a few rungs up,” he explains. Retailers in the middle will feel the crunch the most, he predicts.
Hold your horses (or reindeer?)
Both Thomson and Pracejus see the overstock problem most retailers face as good news for shoppers. There are real deals out there, and they’re just going to keep getting better.
During Black Friday and Cyber Monday stores promote “loss leaders” just to get you into the store, but Thomson says just because those campaigns are over, it doesn’t mean you’re out of luck.
“If you miss a deal, call the business and explain, ‘Hey, I'm sorry, I missed this.’ Most of the time they're going to say, ‘Sure, we'll honour it.’”
Markdowns on individual products — especially the ones retailers want to move out of their warehouses before new products arrive in February — will keep dropping until Christmas and will be further slashed on Boxing Day, according to Thomson.
She says holding off to make your purchases until the first week of January will pay off even more.
“If you are prepared to wait and gamble that they don't sell through all of the items you’re looking for before the Christmas deadline, then you'll get a really good deal,” she says. ”Something that is slightly marked down on Boxing Day can be 20 times cheaper a week later.”
Shop online, locally
Aside from price, one of the big factors shoppers have started to weigh when making purchases is the impact of our purchase dollars on the local economy. Most Canadians now say they’ll go out of their way to shop locally, according to the Canadian Federation of Independent Business.
“The Buy Local movement got stronger during the pandemic because it got people thinking about their neighbourhoods and what they were missing,” says Pracejus. “I suspect that will carry through this Christmas season.”
Thomson is more skeptical about the trend’s staying power.
“Shop local campaigns can actually be really irritating and not effective because sometimes they’re kind of nagging people to shop local and not actually giving them reasons to shop local, so I just don't know how sustainable those campaigns are,” she says.
“Consumers are going to choose what's right for their bank account, what's right for their wish list and what's right for a variety of factors, not necessarily just within their geographical location,” Thomson says.
Convenience is definitely at the top of those other factors, which is what has driven the huge growth in online shopping in Canada, reaching an all-time high of US$3.82 billion for the month of December 2020 and expected to grow to more than US$40 billion annual sales by 2025.
When COVID hit, many local businesses were unprepared to make the switch, which is why the Centre for Cities and Communities set up the Digital Economy Program with funding from the Government of Alberta and Prairies Economic Development Canada.
The program matches businesses with students who help them go digital — from optimizing online searchability to tracking inventory and providing a seamless checkout experience for customers. The program has worked with more than 1,000 businesses so far.
“Helping retailers do the things they need to do to show up in an appropriate way helps people to shop local too,” says Pracejus.
Make your dollars count
Thomson calls the divide between what this year’s holiday will look like for some families versus others “shocking.”
Inflation is pushing overall Canadian charitable donations down too, and charities rely on this time of year to bring in up to half of their fundraising.
“If you can afford it, please support Santas Anonymous, support your food bank, support your hampers this year, because there's going to be a lot of families who are not going to experience a great Christmas,” she says.