With holiday shopping approaching full swing, retailers are already adapting to the times and bracing for what’s expected to be a slower season.
Experts anticipate retailers will offer steeper discounts earlier to entice shoppers back to stores, while smaller operators may focus on making shopping more of an event, such as a holiday market.
“We’re definitely seeing retailers stepping up their game to try and make sure that there’s some still compelling reasons for folks that come in to the store,” Roshan Jhunja, head of retail at Square, told BNNBloomberg.ca in a phone interview.
“It’d be a lot to ask a retailer to completely switch their entire assortment, but maybe they can drive discounts by bundling more things together offering a combination discount.”
Square’s 2023 Holiday Spending Report, released Thursday, found Canadian shoppers are bracing to pay more for gifts this year, which the financial services company calls “gift-flation.”
Eighty-three per cent of respondents to Square’s holiday shopping survey said they intend to be more thoughtful with their gifts this year, while 69 per cent of respondents plan to hold off on big-ticket items.
“When folks are out and purchasing, on average, they’re buying a little bit less than they had been previously,” Jhunja said. “They’re being a little bit more focused about it.”
FOCUS ON ESSENTIALS
Retail analyst Bruce Winder said some consumers may focus on essential items this holiday season, rather than look to make splashy purchases.
“The reports show that sales are going to be down, it’s just a matter of how much and consumers are buying more essentials and less discretionary items,” he said. “Consumers are shopping around a lot more, but the main thing that retailers need to do is offer value. Consumers need that value.”
Value and essentials are also the focus at Canadian Tire, which the company calls itself “Canada’s Christmas Store.”
While not speaking specifically about the holiday season, Greg Hicks, president and CEO of Canadian Tire Corp., told investors on an earnings call last week he sees the company shifting away from discretionary items to focus more on necessities, specifically within its auto parts department.
“You can expect us to be extremely focused on value, value through Triangle (rewards), value through promotions, value through our own brands’ portfolio and very focused on getting every single dollar that we can out of essential categories that continue to be really important to Canadians,” he said on a conference call.
BIG BLACK FRIDAY EXPECTED THIS YEAR
For Winder, deals from the big box stores are key this year, as many of the biggest holiday retailers began offering Black Friday deals more than two weeks before Black Friday, which falls on Nov. 24.
“Black Friday (and) Cyber Monday – which have become almost month-long events – are going to be even more powerful,” he said. “You’re going to see a lot more sales, you’re going to see a lot more discounts, you’re going to see more hoopla around that more promotion.”
“Consumers are going to buy a lot during that time, because they’re really shopping around waiting for that discount,” he added.
Arun Sundaram, senior equity research analyst with CFRA Research, also believes retail is headed for a “much higher promotional environment.”
“If you look at the past few years, promotions and discounts were actually significantly down,” he told BNN Bloomberg in a television interview last week.
“One of the reasons was everyone was facing supply chain issues, so in order to avoid exacerbating those issues, it was prudent not to discount and promote, but now that the supply chain issues are put aside, we’re seeing a lot more retailers reintroduce promotions and discounts.”
Square also expects consumers will see steep discounts this year. The company’s holiday report found Canadian retailers plan to offer customers an 18 per cent discount on average this year, more than the United States (17 per cent), Australia (13 per cent), and the United Kingdom (10 per cent).
“From a retailer standpoint, I think there’s also just leaning into ways to make things differentiated and compelling for shoppers,” Jhunja said.
MAKING IT AN EXPERIENCE
To compete with the big discounts at top retailers, Jhunja suggested local shops will need to focus on making shopping at their stores more of an experience, by hosting events such as a holiday markets or tasting nights.
More than half of retailers Square surveyed reported plans to have an event to lure customers.
“There’s also a way to more directly appeal to folks in a particular community, as opposed to just trying to compete on the basis of the same products, as everybody else is just cheaper,” he said.
“The big box stores, I think you tend to see a lot of just discounting, driving traffic, whereas the smaller stores trying to differentiate on the experience.”
Source : BNN Bloomberg