Canadian Retailer - Holiday 2013 - 17

Low inflation, slow growth

Factors contributing to this economic forecast of sluggish
growth in the retail sector include: softer domestic demand,
higher borrowing costs, muted inflation, increased competition, and a weaker Canadian dollar, which will most likely cut
further into profit margins. A slowdown in the housing market
is also affecting the retail trade sector.
Another key economic indicator that retailers will be watching next year is the lack of available pricing power. "It's quite
stunning how low inflation is right now," Burleton says. "This is
pulling down retailers' cash receipts."
While a slight improvement is expected sometime in 2014, it
does not appear that the Bank of Canada will raise its historically-low rates anytime soon. Most forecasts show interest rates
will remain the same until 2015. "No one is expecting a burst of
price pressures across the retail sector," Burleton adds.

in the middle. Looking ahead, competition is
set to further increase with more U.S. based
high-end retailers such as Nordstrom, Saks
Fifth Avenue, and Neiman Marcus expanding
their operations north of the border.
"We are seeing a pronounced bifurcation of
the discount versus luxury market," Askew explains. "Our research shows Gen Y consumers
don't like to spend a lot of money on everyday
items, but they have a different mindset when
it comes to splurge-type purchases. That is being reinforced and echoed by some of the new
entrants into the Canadian market who are focusing on both the highest end of the market
and the lowest end of market. The middle of
the market is getting eliminated."

Frugal consumers

While low interest rates usually spark con- "Even if you can't raise prices much because of
sumer spending, households are using these increased competition and decreased consumer
rates instead to manage and pay down their
disposable income, you can still grow your margins
debt. The lingering effect of the last recession
still weighs on the psyche of most shoppers. by operating more efficiently. Retailers will be
More than ever, consumers seek quality prod- operating faster, smarter, better, and cheaper."
ucts at a lower price. Today's price and value- ED STRAPAGIEL
conscious shopper also takes longer to make
Independent Retail Consultant
a purchase decision by browsing in several
stores and online before opening their wallets. All indications Revival of rural Canada offers opportunities
show that consumer spending will remain constrained in 2014.
One interesting trend retailers will be watching
Kelly Askew, managing director in Accenture's Canadian retail is what Askew calls "the revival of rural Canada."
management consulting practice says this trend dominates the "With farm and natural resources up, there is
retail picture.
a lot more disposable income in some of the
"Rising housing prices in Canada are continuing to push sparsely populated parts of our country," he says.
consumers to be better bargain hunters, which is putting downBesides this rural revival, economists don't
ward pressure on retailers," Askew says.
predict much change in 2014 to regional sales
Recent research conducted by Accenture shows there is also and provincial growth trends. Alberta and
a distinct divide between the bargain-hunting consumer and Saskatchewan will continue to lead. British
the high-end luxury shopper. This trend impacts retailers stuck Columbia may bounce back a bit. Ontario and

RETAILERS REACT
Omnichannel is here to stay
Throughout the year ahead, retailers will continue to
focus on the various ways they interact with and reach their
customers-never losing sight of the importance of each of
their sales channels.
Every moment: "At every given moment in a day there are
opportunities in each part of the omnichannel cycle to interact with your customers," says Mitch Joel, president, Twist
Image. "It's expanded the definition of what shopping is."
Seamless experience: Retailers will be tailoring their offerings to make the customers' shopping experience feel
seamless. "Consumers expect to interact with retailers in a
seamless way, so they can move between channels in a fluid
fashion," Askew says. "They want to get the same service,
same pricing, and the same products across digital, mobile,
and bricks-and-mortar. The days of e-commerce being a
side part of your business is over."

Online growth: While e-commerce still only represents
a small percentage of a Canadian shoppers' yearly retail
spend, online shopping rises more each year.
Leveraging all channels: Dwayne McMulkin, marketing
manager at Staples Canada, says they are looking at ways to
leverage all their sales channels heading into 2014.
"We are currently active in a wide variety of marketing
channels including online digital experiences, hard copy
through catalogues and direct mail, traditional media such
as flyers and TV, and of course with everything we do on our
website and in our stores. We are constantly looking for new
opportunities to better our user experience, including using
social media to connect with customers," he adds. "The
biggest challenge is to understand how the various touch
points work together to create a single customer experience
regardless of the channel or medium."

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Canadian Retailer - Holiday 2013

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