Several reports suggest local retailers face a challenging second half of the year, as consumers appear to limit their spending.
TNS’ second quarter Trends report found that Canadians have generally felt increasingly pessimistic about the state of the economy, likely a result of people appreciating Bank of Canada Governor Mark Carney’s continued concerns over the impact the eurozone debt crisis will have on global and Canadian economic growth.
TNS’ buy index, which gauges the degree to which people think the present is a good time to make a major purchase, has remained relatively stagnant the past few months.
Those figures seem to reflect stagnant retail sales growth for much of this year in B.C. A Central 1 Credit Union report noted that retail sales have remained flat for four consecutive months. While total retail sales edged up 0.17% to $5.16 billion in May, the report noted total sales have remained largely unchanged since February. That suggests Metro Vancouver’s retail sales may be peaking for the year.
For some retailers, the good news is that sales have generally remained higher year-to-date, with sales increasing 5.2% from the same period last year, with Metro Vancouver retailers seeing a 6.7% increase.
But sales growth is expected to slow for the rest of the year. An Ernst and Young report forecast back-to-school spending to rise only 2.5% this year in Canada, a result of lower expected consumer confidence and increased competition.
It noted that the price of goods will increasingly trump store brand loyalty with Canadians more willing to compare prices before making a purchase, whether they are shopping in-store, online or by mobile device.
While retailers will increasingly face stronger competition from U.S.-based online retailers, they will also face increased cross-border competition from the recent increase in traveler exemptions allowing Canadian residents to import products without duties or taxes. •
