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Retailers face repeat of 2008 holiday season

November 3, 2009  By Amanda Ryder


Retailers face repeat of 2008 holiday season

This holiday season will be a challenge as recession-sapped consumers are unlikely to
open their wallets too widely, too quickly.

Nov. 3, 2009 – Canadian retailers should brace themselves for another challenging
holiday shopping season, as recession-sapped consumers are unlikely to
open their wallets too widely, too quickly, Ernst & Young says.

today may be somewhat buoyed by better news in the last several months,
and consumer confidence has increased. But a long, tough year has left
them battered, concerned over employment and salary growth and weary of
spending large amounts of cash all at once”, says Daniel Baer, Ernst
& Young Partner and National Retail Industry Leader.


says this year’s holiday shoppers will be more price savvy than ever,
all looking for the best deal. “Consumers are spending more of their
dollars at discount chains, warehouse clubs and dollar stores. Finding
the right price is paramount in this market, and shoppers are likely to
hold off on making actual purchases until they find the bargain they’re
looking for. Consumers will likely avoid impulse purchases.”

popular holiday categories such as apparel, electronics and toys are
likely to suffer deflation this year, as retailers rely on heavy
promotions and deep discounts to draw in consumers who have come to
expect sales in these categories. However, retailers have reduced
purchases and inventory levels, such that discounting will be somewhat
less prevalent than last year.  “Inventory management is the hallmark
of a new era of retail,“ says Baer.

Statistically, Ernst &
Young expects holiday sales to be flat versus 2008 sales. However,
given the weakness in last year’s results, this translates into less
than buoyant sales for retailers.

“Because consumers have likely been holding off on major purchases
this year, we could actually see some pent-up demand result in a surge
of certain categories, such as sales for flat-screen televisions,
notebooks or next-generation iPods,” explains Baer. “But consumers will
still be choosy, and products will only move if the price feels right.
Gift cards will continue to be a popular gift.”

Retailers are
already jostling to capture their share of holiday spending, with major
chains launching “Boxing Day” sales as early as September. Those price
cuts and promotions will be crucial to keeping Canadian shoppers on
this side of the border if the dollar continues to climb.

on the strength of the Canadian dollar, we could begin to see something
similar to the 2007 shopping season, when retailers here had to compete
not only against one another, but also against American counterparts,”
Baer says. “Savvy retailers are adjusting their pricing, particularly

Holiday spending will vary across Canada:

  • The recession has hit Alberta and British Columbia hard in recent months, as gas prices fell and oil sands projects slowed.
  • The
    picture is somewhat brighter in Ontario where, despite consumers
    reeling from manufacturing losses, the last three months show
    relatively stable sales that are likely to continue through the holiday
    season. Ontario is expected to mirror the national average.
  • Quebec
    — where the manufacturing sector is more diversified than in Ontario
    and government infrastructure spending more advanced — has shown
    resilient sales over the last few months, which will likely lead into
    relatively healthy sales throughout the holiday season.

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