Same uncertainty, different season.

With continued fears of an economic recession, Canadians, according to a newly released Deloitte Canada report, are planning to spend less on their holiday purchases this year – a projected decrease of 11% in comparison to 2022. Consumers are rightfully concerned about meeting their financial responsibilities, including housing costs and credit card debt, leading them to approach holiday spending with caution.

Their expectations are pessimistic when it comes to prices, with many accepting they will only continue to rise. And whether justified or not, consumers feel that retailers are doing so unfairly.

The Weight of the Season: Financial strain curbs holiday spending report from Deloitte takes a look at 2023 holiday retail spending plans and yields some key insights. In its fifth edition, the data collected is based on a survey of 1,000 Canadian consumers across age groups, financial situations, and geographic regions.

Perhaps the pandemic left enduring feelings of YOLO (you only live once), or perhaps it’s that more and more people are simply trying to make up for lost time, but the one space consumers are choosing to spend more on is travel, and experiences. Projected spend on travel will see an uptick of 11% and 26% of consumers plan to invest in experiences like attending a sports event or a concert, according to the report.

That said, almost seven in 10 Canadians have recession concerns and a little over half are worried about rent or mortgage spikes. About 41% of them say that the financial situation of their household has worsened in 2023. And so, with the holidays nearing, 33% are naturally apprehensive about how they’ll be paying for holiday gifts, leading to an 18% drop in spend.

For those who decide to go shopping for the upcoming holiday season anyway, resentment toward increased pricing pushes 77% of them to shop around more than usual for the absolute top deals and 71% will be looking specifically for items that are on sale. There’s a need to be extra savvy and trade-offs will have to be made (23% of Canadians plan on cutting back on their grocery spending so that they can spend on the holidays).

Trust in retailers is definitely being challenged, which means Canadians will gravitate toward those that offer the most bang for their buck – 37% will shop at dollar stores, mass merchant retailers and warehouse clubs.

It may be too soon to say, but it appears that e-commerce growth is stabilizing. Online shopping numbers fluctuated ever since 2019, showing that each year between 36% and 44% were making their purchases virtually. This season, 41% of consumers plan to make their holiday purchases online, reflecting a similar number last year. While it was out of necessity during the pandemic, consumers have come to embrace the omnichannel experience and expect to be provided with a seamless customer experience. In fact, over half say that a retailer’s return policy dictates where they will spend their money and 20% will wait for free in-season delivery options.

On an encouraged note, shoppers haven’t let economic instability deter them from investing in sustainability and the future of the planet. For sustainable products and services, 55% of Canadians (an increase of one percent from last year) share that they would still accept to pay more. But even though one in three consumers opt to buy clothing from retailers that demonstrate a commitment to the environment, 44% admit that they just don’t believe the green claims that brands make. This highlights the ongoing need for brands to uphold their sustainability investments and educate their consumers on them.

“Merchants and marketers have to get price and promo right,” says Marty Weintraub, partner and national retail leader at Deloitte Canada. “We have a trust issue growing between retailers, brands and consumers. And while I expect the promotional intensity to heat up, there will be those that don’t heat it up fast enough. And for those that do, there will be an advantage. In addition, know what the competition is doing in this context. Not everybody is as finely attuned to the details of competitive behaviour, both in stores and online, to make sure what they’re dreaming up in terms of pricing and promotions is differentiated or competitive.”

Stretching holiday budgets, putting more effort into the shopping experience will make for another challenging holiday season. Thankfully, the holidays have a way of bringing warmth and joy regardless.