BY SIMONE J. SMITH
Three more weeks until Christmas; you take a look at your bank account, and you are dismayed because with energy bills soaring, food prices at a peak, and inflation sucking the last cent out of your account, you have no idea how you are going to buy gifts for your loved ones this Christmas.
While there is so much joy and excitement at Christmastime, it can also be a source of anxiety if you lack the funds to give your family the Christmas you want. Yes, we know that Christmas is not just about gift giving, but everyone loves the idea of receiving and giving the perfect gift.
This year, some of us are going to be trying to figure out how to provide a nice Christmas meal for our loved ones; that alone is going to be a financial burden if you don’t have a lot of money. After paying for housing, energy, gas, groceries and other monthly bills, most of us are left with an increasingly smaller amount of money for discretionary expenses. And some of us aren’t even spending that money at all – but rather saving it to weather the storm that is ahead.
The word “recession,” has been floating around the alternative and mainstream media loop, and the question has come up, “Are we in a recession?”
A survey conducted by Nanos Research on behalf of CTV News asked more than 1,000 Canadians if they believed it was likely Canada would have a recession next year. The results came back that 9 out of 10 Canadians believe there could be a recession in 2023, with 4 out of 10 calling it “likely.” The vast majority answered that it was “somewhat likely” (44%) or “likely” (42%).
This survey was conducted after a Royal Bank of Canada report that Canada could be headed for a recession as early as the first quarter of 2023. That same report found that the average Canadian household could lose $3,000 of buying power next year.
Yes folks, inflation is making people more price-sensitive, and eight out of ten consumers will cut spending if the economy continues to get worse. What does this mean for retailers?
1,700 Canadian consumers and 700 Canadian small businesses were surveyed on their outlook on Christmas. The results of the new Intuit QuickBooks Holiday Shopping Survey highlighted how fragile consumer confidence and demand for competitive pricing could spoil the holiday season for retailers. If the economy worsens this year, 84% of Canadian consumers plan to reduce their holiday spending. 67% of consumers are planning to buy fewer gifts for friends and family to mitigate financial impact.
Deloitte Canada’s Holiday Retail Outlook reveals consumer spending nationwide will substantially drop this holiday season to levels below 2020. According to the report, inflationary pressures along with economic uncertainty are disproportionately impacting Canadians across different income levels and spending cuts will impact: restaurants, travel, groceries, and will span across several sectors as consumer sentiment continues to wane.
The report found:
- 48% of Canadians expect the economy to be worse in 2023, and 41% have seen their household finances worsen this year
- Overall holiday spending will fall 17% this year, to $1,520, with the biggest cuts in non-gift electronics (-55%), travel (-30%), and non-gift clothing (-27%)
- 37% of consumers will shop earlier this year, with 46% believing it will help them get better deals. 72% will shift to other brands if their preferred one is too expensive, 70% will buy from retailers that sell at the lowest possible prices, 69% and seek out sale items.
- 76% of survey respondents expect prices to rise this holiday season and, 68% question if retailers may be raising prices more than needed, a concern that has been creating tensions across industries. Additionally, supply chain challenges have trained consumers to find substitutes, with 61% indicating they’ll try new brands if what they want is out of stock
The current economic situation has left both traders and consumers dismayed. Traders say that due to the rising price, retail shops are losing business. On the flip side, consumers say that despite no change in incomes, expenditures keep increasing, and this is putting undue stress on consumers.
Consequently, even some of the biggest companies in North America are suffering from declining sales, shrinking profits and weaker earnings results. Many of them were already barely making it after two very complicated years for our economy with: a pandemic, supply chain problems, inflation and soaring commodity prices making conditions extremely difficult for these businesses.
Even big names such as McDonalds and Disney have been closing several locations in an attempt to cut costs and survive the downturn that is unfolding before our eyes. Some of the other larger corporations who have been closing locations nationwide include:
- Best Buy
- Microsoft
- Bath & Body Works
- Chipotle
- Office Depot
- Gap
- AT&T
- Sally Beauty Supply
If this is not scary to you, it should be. When even some of the biggest brands out there are being forced to make some deep cuts to reduce operational costs, slashing jobs and closing up shop in the process, then you know for a fact that the storm is coming. The worst part is that conditions aren’t likely to get any better for consumers or businesses any time soon.
Amazon founder Jeff Bezos has warned consumers and businesses to postpone large purchases during the holiday season in anticipation of an economic recession. In an interview with CNN, he advised consumers to keep their cash safe and avoid unnecessary spending. Due to the recession fear, he advised Americans to avoid purchasing high-ticket items such as expensive cars and televisions.
“If you’re an individual considering purchasing a big-screen TV, you might want to wait, hold onto your money, and see what transpires. The same is true with: a new automobile, refrigerator, or whatever else. Just remove some risk from the equation.”
Many small businesses, especially retailers, rely heavily on holiday season revenue. In fact, 80% of the small businesses surveyed say the 2022 holiday season is more important to their overall financial health than last year’s holiday season. The stakes are high. What can small businesses do to get ahead of these trends?
One way out of this pinch is to support your small businesses and “BUY LOCAL!” There is a potential $10 billion opportunity for Canadian small businesses if consumers direct their holiday spending to support local businesses.
This year, Canadians should start turning to small businesses as the go-to destination to secure the perfect, unique holiday gift. Small business owners can unwrap success by equipping their business with the right tools and resources.
We are in for a rough ride; so hold on, buckle down, and make the best of the holiday season as you possibly can.