A new spirit of optimism

Beneath the windswept Saskatchewan fields, dormant under a blanket of welcome snow, lies a sense of hope.For perhaps the first time in a decade, there is a feeling that this will indeed be a better year.Saskatchewan, a perennial have-not province in...

Beneath the windswept Saskatchewan fields, dormant under a blanket of welcome snow, lies a sense of hope.

For perhaps the first time in a decade, there is a feeling that this will indeed be a better year.

Saskatchewan, a perennial have-not province in recent years, is about to spring to life.

Higher prices

Higher commodity prices, the lowest unemployment rate in the nation and positive reports from the front lines of a stubborn cross-border shopping war are all combining to create a fresh spirit of optimism, not only on coffee row in rural Saskatchewan, but in the corporate boardrooms of retail giants with headquarters around North America.

‘We’re moving towards a restructuring of the agricultural economy that we haven’t seen for a long time,’ says Dale Botting of the Canadian Federation of Independent Business (cfib).

Revolution

‘It’s a quiet revolution, but it really is a revolution,’ Botting says.

In a land in which wheat has been king since the first homesteader broke the prairie sod a century ago, Saskatchewan people have been at the mercy of weather and world markets.

When Mother Nature co-operated, Saskatchewan producers supplied the world with high quality grain. And, when quality, quantity and demand meshed, the province prospered.

However, throughout the 1980s, little went right after a decade of growth and prosperity.

Drought, high interest rates and low commodity prices all conspired to devastate a provincial economy that depends heavily on agriculture.

The heady days of the mid-’70s, which saw the province’s population climb from 921,000 in 1976 to more than one million 10 years later, were left behind in the dust.

The revolution Botting sees is based on strong prices for canola – currently at an all-time high – and other less traditional crops.

More canola

Farmers, who have been listening to the diversification message for years without changing their ways, planted considerably more canola acreage last year.

The time could not have been better as yields for the oilseed crop were excellent and the price climbed steadily throughout the year.

The canola success, combined with strong prices for red meat products and the promise of stronger prices for wheat largely due to the gatt (General Agreement on Tariffs and Trade) – which should place Canadian grain growers in a better position to compete in the global market – bode well for Saskatchewan agriculture.

More money

Botting, who works out of the cfib’s Regina office, says there is bound to be more money in farmers’ pockets in the next year or two. And, according to the conventional wisdom of Saskatchewan, when farmers have money, they spend it.

Already there are indications that more money is being spent and Saskatchewan consumers, notoriously cautious and inclined to squirrel their money in safe, secure places such as guaranteed investment certificates and savings bonds, are opening their wallets once again.

Sales figures suggested a mood of confidence that has been lacking.

Retail sales for the one-year period from November 1992 to November 1993 were up a healthy 5.9%. Leading the way were semi-durable goods and durable goods. Strong increases were also reported in recreational and motor vehicle sales.

After a decade of steady decline in sales, farm implement dealers are reporting significant sales improvement in almost all product categories, according to the Canadian Farm and Industrial Equipment Institute.

The institute credits pent-up demand among Saskatchewan farmers, low interest rates, the strengthening of commodity prices, an increased level of long-term confidence based on the gatt resolution and the positive effect of the Small Business Investment Tax Credit Program.

The Royal Bank, in its annual economic outlook, is predicting a further increase in retail sales of 4.7% in 1994 and 5.5% in 1995. The bank also sees improvements in housing starts.

Lynn Danbrook, executive officer for the Saskatoon Homebuilders Association, represents an industry that has been battered in the last two or three years.

‘We’ve gone through our worst time and we seem to be on an upward swing,’ Danbrook says, pointing to 1990 and 1991 statistics that show housing starts at the bottom of her association’s scale.

‘We had 269 single unit dwelling starts in 1993, which is up from 1992 when we had 250,’ she says.

‘We’re looking for even better things for ’94, and although it’s not exactly a boom, there’s a positive attitude out there.’

Danbrook says that in Saskatoon, where prices for resale homes are among the lowest in the country for large cities, most of the new homes are being built by people in the ‘move-up category,’ rather than first-time homeowners.

Always a good indicator of economic activity because it tends to spill over to other sectors, including furniture and appliances, carpet and other home-related products, housing starts and the sale of existing inventory rebounded in most areas of the province in 1993 and that trend is expected to continue.

Saskatoon’s real estate market got a shot in the arm during 1993 with the arrival of Atomic Energy of Canada Limited’s (aecl) Candu 3 design team which brought more than 100 jobs to the city.

Many of the new arrivals came from Toronto and were quick to snap up bargains in the Saskatoon real estate market.

Crown Life relocation

Regina received a similar boost with the relocation of Crown Life’s head office to that city in 1992.

‘We’re on the road to recovery,’ says Mary Ann McFayden, executive director of the Saskatchewan Chamber of Commerce.

‘When you offer the big, big sales, with the big, big discounts, you get the response, so you know the money is there,’ McFayden says.

The recent arrival of retail giants including Toys R Us, Costco, Office Depot and Future Shop has not gone unnoticed in Saskatchewan.

As well as being credited with adding to the province’s healthier retail sales figures through their aggressive marketing, these outlets have caused some established retailers to do a little soul-searching.

‘I’m not exactly sure what they see,’ says Al Anderson, owner of Al Anderson Sports in Saskatoon.

‘Maybe it’s a case of their type of approach, more warehouse, non-frill, volume-saving, having its best success in more difficult economic times,’ Anderson says.

‘But, more likely, it’s that a lot of these people come into an economy like this with the knowledge that it’s going to break, it’s going to get a lot better, and they want to be there when that happens,’ he says.

Office Depot, which opened a Saskatoon store in mid-December, is one large North American retailer that intends to be a force in Saskatchewan as it is in other regions.

Office Depot has 360 locations in the u.s., and 18 in Canada. The Saskatoon outlet is the company’s first in Saskatchewan.

Office Depot manager Mike Rathwell says the company expects ‘our low price guarantee, name brands, large selection and service to make us successful in this market.’

Anderson says there will always be room for ‘the entrepreneur who does it differently and better.’

He believes opportunities in Saskatchewan for those with an entrepreneurial spirit are excellent.

It’s been difficult

‘As a general statement, it has never been more difficult in Saskatchewan than it has been during the last year or two,’ Anderson says.

‘As a result of that, real estate costs, building costs, and everything else is going to be extremely low,’ he says. ‘For a person that comes in now, it’s got to turn around, and by then he will be established.’

Botting says some small businesspeople are eyeing the coming of Wal-Mart, the largest retailer in the u.s., with some apprehension. Similar fears surround the arrival of Costco, Kmart, Future Shop and others.

‘But a lot of retailers are saying they’re just going to have to redouble their concentration on service to help offset that,’ Botting says.

‘The thing you have to remember is that chains like the Future Shop have done their homework,’ he says.

‘They’re not stupid, and they’ve looked at the big numbers, and they’ve seen that we’ve had our shakeout in Saskatchewan, so they see some opportunity.’

What the market studies have no doubt shown speaks volumes for the future of retailing in Saskatchewan and the demographics of a province of one million people.

‘Here’s one of the most important things to remember,’ Botting says.

‘If you look at the market in Saskatchewan, we’ve got some very old durables that are in people’s homes and businesses, some of the oldest durables in the country,’ he says.

Studies have shown that Saskatchewan homes boast some of the oldest furniture and appliances in the country.

And Botting says out in the garage, consumers have opted to repair and rebuild rather than replace automobiles that are eight, 10 or 12 years old.

‘There’s a lot of latent spending demand that’s been pent-up,’ he says.

‘People in Saskatchewan have been cocooned for a long time, and it’s now sort of time for them to come out and do some spending. [Large retailers] see that, too, and so I think that they believe Saskatchewan is a good place to be.’

Botting, ‘like most good entrepreneurs,’ sees opportunity lurking behind every grain elevator.

‘In terms of demographics, we’ve got the oldest population in the country, so if you’re into home health care or health services, looking at these Saskatchewan demographics should tell you something,’ he says.

Communities along the u.s. border in southern Saskatchewan have endured the indignity of watching their once-faithful local shoppers take their business across the line in search of bargains and to avoid the 9% provincial sales tax and the despised goods and services tax.

The gst has put many Canadian retailers at a decided disadvantage, but, now, according to Botting, the tide has turned.

‘We’re winning the cross-border shopping war now,’ he says. ‘You shouldn’t underestimate the huge amount of money that we were losing from our retail sales, but we’ve been able to recapture much of that.’

How that has happened is due largely to the weak Canadian dollar, which has made the trek to the u.s. less appealing.

‘You can say what you want about the gst tracing at the border, or whatever, but, let’s face it, it’s the dollar,’ Botting says. ‘People are finding with the [low] dollar it’s just not worth it to go down there.

‘More American-like’

‘And we’re also becoming more American-like in our aggressive retailing and merchandising, not just the big guns, but the little guys are beginning to sharpen their pencils more.’

Arguably, the most exciting news for Saskatchewan outside the recovery in the agriculture sector, is what Botting calls, ‘a quiet little megaproject that even people in Saskatchewan don’t recognize.’

What Botting is referring to is the huge infusion of treaty land entitlement money that is gradually making its way through the aboriginal community.

‘We’re talking about hundreds of millions of dollars flowing out over the last couple of years, and again this year, and that is a factor that people should look at.’

Saskatchewan native bands are actively courting joint ventures, buying existing businesses and seeking new enterprises, all aimed at providing work for a sector of the population that desperately needs employment.

Botting says that as the money makes its way through the system, the spending power of the Saskatchewan native community will increase dramatically.

‘There’s no doubt that there is a huge pent-up demand for just about any product you want to name, in this province,’ he says.

‘Very fragile’

‘There are opportunities, and there are signs of a recovery, but it’s very fragile. That’s why government policy still has an awful lot to do with whether or not we’re going to have a good year or not.’

An avid canoeist, Botting offers this analogy: if you’re moving along, and the waters are a little choppy, don’t stand up in the canoe.

‘That’s our message to [Prime Minister Jean] Chretien and [Premier Roy] Romanow; don’t stand up in our economic canoe. We’re still trying to get through this.’