As a result of the COVID-19 pandemic and Canada’s current economic outlook, the spending habits of Canadians are changing for the 2020 holiday season. More specifically, Canadians are planning to spend less for the upcoming holidays and are being more thoughtful with their expenditures and finances, taking on less credit card debt and focusing saving money.
Deloitte’s 2020 Holiday Retail Outlook survey revealed that Canadians expect to spend $1,405 during the 2020 holiday season which is an 18% drop since last year’s average. Deloitte’s survey also revealed that 68% of respondents reported that the COVID-19 pandemic impacted them in some way.
Out of the 1,000 surveyed individuals from various age groups, geographic locations and financial backgrounds, 29% responded that they’ve experienced a decrease in household income. Lastly, 26% reported that household expenses are on the rise which has become problematic, despite efforts by the Government to reduce income tax burdens through extensions to help Canadians have more available cash-flow in their households.
Price Waterhouse Coopers (PwC) performed a similar survey which revealed almost identical trends. PwC surveyed 1,000 people in the Canadian cities, Vancouver, Calgary, Toronto and Montreal. Respondents reported that they intend to spend approximately $1,104 for the 2020 holiday season which is a 31% drop from last year. PwC’s survey detailed that 57% of Canadians will be spending less on themselves. Also, 85% of Canadian consumers plan to use their credit card for holiday spending and 79% of those individuals weren’t concerned with debt.
How will COVID-19 affect consumer shopping over the upcoming holiday season? Explore the new shopping behaviours retailers need to be aware of.
— PwC Canada (@PwC_Canada) October 13, 2020
In terms of demographics, the Gen Z and Millennial generation are expected to spend the most for the upcoming holidays. Generation X and Baby Boomers reported a lower 2020 holiday budget. In PwC’s survey, it was reported that younger generations are more likely to be swayed by online and social media advertising compared to older generations. Furthermore, mature generations would prefer to do their holiday shopping in store whereas younger generations are more likely to utilize online shopping and curbside pick-up.
Both Deloitte and PwC’s surveys reported that consumers are worried about the current state of the Canadian economy and the uncertain nature of the COVID-19 pandemic. There is a direct correlation between less spending and the current status of the economy and coronavirus.
Because consumers are intending to spend less in the retail industry, retailers are expected to take a significant blow, especially small businesses. Many consumers have turned to Amazon for retail purchases and will continue to do so during the holiday season. In fact, Deloitte reported that Amazon has become Canadians’ leading choice for purchase research and buying of gifts. Deloitte’s survey determined that 66% of Canadians will use Amazon for holiday purchases which is 60% higher than the results from last year. PwC’s report stated, “This year—even more so than in past years—successful retailers will be those who can adapt and pivot as needed to a quickly changing business environment.”
Myles Gooding, PwC Canada’s National Retail Leader, commented, “Many Canadian consumers and retailers aren’t sure what to expect as we approach the 2020 holiday season. This year, the impact and implications of the COVID-19 pandemic are top of mind for consumers. Canadian consumers plan to do more of their shopping online than in stores this holiday season, as they focus on convenience, health and safety, rather than the shopping experience itself.” Gooding also reported that spending between gifts and travel has been the same historically in terms of dollar value. He continued to comment on how travel and entertainment were the two most impacted sectors of retail this year.
There are numerous campaigns in Canada that are encouraging consumers to support local businesses. However, challenges incurred by the pandemic will be difficult to overcome, according to Marty Weintraub, a partner and retailer leader at Deloitte Canada. Marty also addressed the fact that Canadians are inclined to be more frugal and thoughtful with their money during this strenuous economic time. The best way for retailers to fight changing consumer spending habits is to move operations to the digital world and make customers feel medically safe when shopping in stores. PwC also recommends optimizing online shopping experiences and prioritizing health and convenience in physical locations.
Veronica Ott attended Western University for accounting and obtained her CPA shortly after. Veronica owns and operates her own writing business with a specialization in personal finance, accounting and business related content.