Sluggish Yule sales expected
In stores across the Greater Toronto Area, Christmas lights are already twinkling and ornaments sparkle from trees. Canadian retailers, however, can expect only modest growth of 5 to 6 per cent in holiday spending this November and December, according to an Ernst & Young forecast. Sales rose less than 5 per cent in the same period last year.
“ We don’t see any chance for really aggressive growth in retail sales in Canada again this year,” Jacques Dostie, head of Ernst & Young’s national retail and consumer products group, said yesterday. The slight growth that will occur won’t necessarily translate into higher profits. “ Too many other factors are influencing the market.”
Climbing inflation rates are cutting into retail margins. Escalating energy prices due to Hurricane Katrina helped push distribution costs up. But retailers will hesitate to pass these
costs on to consumers, the forecast noted.
Retailers with healthy inventories or backup distribution plans will be more prepared to offset the damage. The increase in spending this holiday season won’t occur equally across the country. Vancouver is expected to see growth on par with or above the overall forecast, but Toronto is expected to perform at or below the overall forecast.
Retailers are expected to promote holiday shopping earlier, and more aggressively. Some have a step- by- step strategy for introducing different merchandise and sales throughout the season to encourage multiple visits over a longer period.
Retailers can also take advantage of the growing trend toward luxury items such as gold and fine jewellery. In recent years, economic growth in Canada combined with low interest rates and access to credit created a situation where people had money to spend, Dostie said.
“ Everybody that had some sufficient income already bought the houses they like. They’ve already bought their second car.” Now, they’re upgrading the quality of goods they buy. “ They move from a typical TV to a plasma TV.” High definition DVDs were expected to be in demand this season, but deliveries of hardware and software will be less than expected.
“Wearable technology,” such as camera cellphones or small, portable music players, will be must- haves this season, Dostie said. The forecast for clothing is mixed. Upscale, designer- label and limited-edition products will be in high demand. Velvet and premium denim will be popular. But there may be significant discount pricing for clothing because of the “ elimination of apparel quotas, no new, compelling fashion trends and potentially weak consumer demand,” the forecast said. Concerns about childhood obesity will play an important role.
Expect such items as trampolines that promote children’s physical activity to be in demand, Dostie said. Interactive toys, such as remote- controlled robots, are also expected to sell well. But Canadians’ generosity may limit the gift buying and giving. Increased donations to cope with disasters, including last month’s massive earthquake in South Asia, may reduce spending on presents for family and friends.