Retailers face bleak holiday season unless they offer deeper discounts

TORONTO, Nov. 16, 2023 – With eight in 10 Canadian consumers being more careful about how they spend their money this holiday season, retailers need to double-down and lean into loyalty programs, offer deeper discounts and improve customer experience if they hope to entice shoppers to loosen their purse strings, finds a new consumer poll conducted this month by KPMG in Canada. 

According to KPMG’s survey of 1,507 Canadians, 83 per cent are more cautious about what they are spending money on this year compared to last year, given high inflation, interest rates and mortgage costs. What’s more, 62 per cent are frustrated by their online shopping experience with over two-thirds wanting to see retailers think outside the box to replicate online that in-store shopping experience. 

“Our survey shows that this holiday season will be more challenging for retailers,” says Kostya Polyakov, Partner and National Leader for Consumer and Retail, KPMG in Canada. “With so many Canadians navigating a financial tightrope and frustrated by their shopping experience, retailers need to sweeten their offers and provide a better environment. It’s the only way that they will be able stand out from their competitors and drive sales during what’s typically a make-or-break period for them.” 

Seventy per cent of Canadians say they don’t plan on spending as much on discretionary items as they did in previous years and 66 per cent indicated they plan to only spend on essential goods this year. 

“These financial pressures have significantly shifted spending patterns, with most Canadians opting to economize and really prioritize any discretionary purchases to what matters the most to them. But that’s about it, with seven in 10 consumers planning to cut back and tighten their belts,” adds Mr. Polyakov. 

• 83 per cent of Canadians say they are more careful about what they spend their money on this year compared to last year given high inflation, interest rates and mortgage costs 
• 80 per cent of men vs. 87 per cent of women 
• 70 per cent don’t plan to spend as much as they used to on discretionary items like travel, apparel, electronics, entertainment, toys, and restaurants 
  • 67 per cent of men vs. 73 per cent of women 
  • This is particularly the case for those aged 45 to 55 (typically known as the sandwich generation - caring for their aging parents while raising children), at 74 per cent, and those aged 55 to 64 at 75 per cent. 
• 66 per cent will “only be spending on essential goods this holiday season (e.g., groceries, personal care products, prescriptions, etc.) 

The survey findings show Canadians are frustrated with both their in-store and online shopping experiences. As many as 68 per cent of Canadians say they prefer to shop in-person but find the in-store selection and merchandise “just doesn’t compare” to what they can find online. Similarly, 62 per cent are “frustrated by the online shopping experience”, saying either “the product is not what was advertised or returning the merchandise is inconvenient or costs too much.” 

“Retailers are increasingly trying to offer the best of both worlds to consumers,” says Mr. Polyakov. “They are creating phygital shopping experiences that seamlessly merge the physical and digital realms. While it’s clear Canadians love to go shopping, they expect a superior, personalized online customer experience from their retailer’s website. Retailers need to stay a step ahead through data and technology to improve sales and encourage brand loyalty to keep customers coming back.”

Loyalty programs are proving increasingly important when it comes to where Canadians are shopping this year, the survey finds. Nearly eight in 10 (78 per cent) Canadians are opting to shop at retailers that offer loyalty rewards programs, with over half (55 per cent) saying that they are worth giving up their personal information. In fact, 70 per cent are not worried about their information being compromised when signing up for rewards programs. Although the vast majority, 93 per cent, think retailers should be more transparent in how they protect and store personal data.

• 67 per cent prefer to shop in-person, but the in-store selection and merchandise just doesn’t compare to what is available online.
• 62 per cent are frustrated by the online shopping experience, e.g., either the product is not what was advertised or returning merchandise is inconvenient or costs too much
• 67 per cent think retailers need to think outside the box to replicate online that in-store experience (e.g, virtual reality dressing rooms with augmented reality and artificial intelligence (AI) to see what an outfit looks likes without physically trying it on)
• 78 per cent tend to shop at stores that have loyalty programs
• 55 per cent think loyalty programs are worth giving up their personal information
• 70 per cent are not worried about their information being compromised by signing up for loyalty programs
• 93 per cent think retailers should be more transparent in how they protect and store personal data
   

KPMG in Canada surveyed 1,507 Canadians from Oct. 20 to Nov. 2, 2023 on Sago’s premier AskingCanadians online panel.

Caroline Van Hasselt 
National Communications & Media Relations 
KPMG in Canada
(416) 777-3288
cvanhasselt@kpmg.ca