Retailer discounts take toll on price index

Inflation continues dive, StatsCan says, as stores aim to lure consumers with price drops

While some consumers are still reluctant to get out and start shopping again as the threat of COVID-19 lingers and the economy sputters along, retailers are starting to drop prices to lure them back.

For the second straight month, inflation was in negative territory, Statistics Canada revealed Wednesday, with the Consumer Price Index falling 0.4 per cent in May from the same month a year ago. In April, the CPI dropped 0.2 per cent.

Some of the sharpest non-gasoline price drops came in women’s clothing, which decreased 3.9 per cent in May compared with April. Footwear dropped 2.9 per cent.

That came as little shock to retail analyst Lisa Hutcheson, managing partner at retail consultancy J.C. Williams Group. Clothing and shoe retailers, says Hutcheson, have too much stock and not enough customers.

“Some of it’s excess inventory; some of it’s consumer confidence,” said Hutcheson.

The excess is largely because most bricks-and-mortar retailers were shut down for at least eight weeks as the pandemic spread across the world. The consumer confidence is partly because many people are worried about their own financial futures in the wake of COVID-19. Some may also be concerned about the safety of going into a store to shop.

For people who are still working at home, Hutcheson added, there’s not exactly a burning need to buy spiffy new work clothes.

“If you’re working from home, what are you going to do? Say, ‘I’m going to up my game in leisure wear?’ People just don’t need new clothes as much during this,” she said.

Yet, while clothing prices have fallen, other household staples have risen sharply, Statistics Canada noted. Meat, canned tuna, flour and rice all rose.

In the case of meat, the agency cited a falling loonie as well as supply chain issues and COVID-19 outbreaks in meat-packing plants. Tuna, flour and rice rose as consumer demand for non-perishable food items skyrocketed.

While larger clothing retailers might be able to drop their prices, local independent shops have tighter margins and can’t do that as easily, says Krysten Caddy, co-owner of Coal Miner’s Daughter, an independent women’s clothing and accessories retailer specializing in local and indepedent designers.

“Discounting can actually hurt our local small businesses rather than help them. We have huge overheads and want to get our employees back to work,” said Caddy.

Coal Miner’s Daughter has grown to four stores since being founded by Caddy and Janine Haller in 2009. Caddy worries that deep discounting by bigname retailers will make it harder for independent shops to survive.

“I do think that it is larger retailers who are offering deep discounts on their

in-season merchandise and, unfortunately, that can pressure the smaller neighbourhood shops to follow suit,” said Caddy. For now, Coal Miner’s Daughter is keeping its stores closed, but has been making money through online sales. Caddy is grateful for the revenue and the support.

“Knowing that our fellow community members are also suffering financially I’ve been surprised and humbled by the amount of customers buying gift cards they can use once we open, and the support we’ve been getting with online sales,” Caddy said.