A retail industry guide to the evolving holiday shopping habits of Canadian consumers

The demand-fuelled retail recovery

On the whole, consumers plan to open their wallets wider this holiday season than in 2020.

Canadians expect to increase their individual holiday spending by 29% over last year, with an average outlay of $1,420. While that’s welcome news for retailers, it’s still 11% below pre-pandemic levels recorded in 2019, largely due to the sluggish return of travel spending.

Looking deeper into the data, higher-income earners in particular are expecting to significantly increase their spending. Whereas individuals earning $60,000 or less annually expect to spend an average of $919 this holiday season, those earning more than $60,000 annually say they’ll spend $1,773. That figure jumps to $2,451 among those earning more than $150,000 a year.

It’s not just a matter of wealthier individuals having more money to spend—individuals at the top end of the earning scale are driving the overall increase in spending intentions.

Millennials are projected to be the highest-spending generation this holiday season

Gift-giving and entertaining guests are central to the holidays for many Canadians. So it’s no surprise respondents say they expect to spend the most on family members—an average of $768 this holiday season, up nearly 18% from 2020.

But consumers expect to increase their spending even more dramatically on another cohort: themselves. Respondents say they’ll spend 76% more on themselves—an average of $478—this holiday season. This retail trend is particularly pronounced among males.

Takeaway

Personal pampering, luxury spending expected to rise

School closures, stay-at-home orders and agonizingly long Zoom calls—it’s been a stressful and trying year. And many consumers are looking to treat themselves with expensive restaurant dinners and other discretionary purchases.

At the same time, the rise in spending intentions among high-income earners is an additional sign the luxury retail market may start to recover in earnest in 2022. Luxury retail spending is typically a lagging indicator that follows a broader economic recovery. And it stands to accelerate further if international travel resumes in earnest in the new year, with more foreign travellers visiting—and shopping in—Canada.

The opportunity for retailers: Even amid the popularity of online shopping, consumers plan to spend approximately half their holiday shopping time in physical stores. Retailers can differentiate themselves by creating meaningful in-store experiences that keep customers engaged from their first impression to the point of sale.

Takeaway:

Keeping consumer dollars in Canada

The perception that consumer goods cost less in the US may fuel the enthusiasm for cross-border shopping among many Canadians. But reality doesn’t always meet those expectations in all cases once exchange rates and travel costs are considered.

The opportunity for retailers: Mass-merchandise retailers can educate savvy consumers by letting them know what products are available in US border towns, as well as where they can find the same products and their price points in Canada. And with consumers looking inward, keen to show loyalty to domestic brands, retailers can tap into this “Buy Canadian” sentiment by re-examining their supply chains. Where are you procuring goods? Can they be purchased closer to home? Are there ways of more closely aligning your supply chains with your customers’ values?

Cost savings, health and safety concerns changing how Canadians shop

For many retailers, the pandemic accelerated experimentations with different delivery and customer pickup methods. Consumers’ use of these services is growing as we head into the 2021 holiday season.

When shopping online, Canadian consumers primarily use home delivery services. But the number of Canadians who regularly or occasionally opt for curbside pickup jumped to 50% this year, up from 33% in 2020.

Even though many retailers introduced curbside pickup as a COVID-19 safety measure, 45% of consumers say price considerations motivate them to pick up their orders themselves. Only 8% say physical distancing is a primary factor.

When it comes to purchasing food and ingredients, most consumers still prefer to shop in-store. But online home delivery is growing in popularity, with 21% of consumers saying they’ll use the service to receive their groceries, up from 7% in 2020.

And where will Canadians be breaking bread this holiday season? In many cases, somewhere close to home. There is still some reluctance around travel, with 48% of respondents saying they plan to stay in their own community over the holidays. Among those planning to hit the road or board a plane, most say they’ll stay within Canada.

COVID-19 is on the minds of many in-store consumers

Takeaway

Aligning online and physical retail experiences

Digital and in-person retail experiences are no longer mutually exclusive. A consumer may interact with a brand online while browsing merchandise in a physical store, for example. Or they may place an order online and look to pick up their purchase at a location of their choosing—be it in-store, curbside or at another location, such as a GO train station.

The opportunity for retailers: Merchants can use new technologies to create a seamless experience for consumers and increase customer stickiness. This often starts by asking questions about your supply chains. How do you forecast demand? Can you monitor your inventory in real time? How can you bring your products closer to consumers even faster?

The growing online influences on consumer choices

What attracts consumers to one retailer over another? 

Three-quarters of respondents say they are likely or extremely likely to shop with brands or retailers that they consider trustworthy this holiday season. Additionally, 62% say they anticipate they’ll shop at retailers offering Canadian-made products.

And how are Canadians finding their retailers of choice? Respondents say they’re increasingly turning to Amazon and Google to help them plan their holiday shopping. Some 59% of respondents say they’ll look to Amazon for ideas and inspiration for products and holiday gifts, up from 43% in 2020.

Social media and digital influencer marketing also continue to shape consumer choices, although the relative reach of various platforms continues to evolve. In particular, TikTok—while still overshadowed by Facebook, YouTube and Instagram—is growing in importance as an advertising platform. Overall, 27% of respondents say their holiday shopping will be influenced by ads on TikTok, up from 17% in 2020. The jump was even more dramatic among Gen Z consumers, 55% of whom say they are influenced by ads on the platform, up from 35% in 2020.

The effectiveness of advertisements on different media outlets and channels varies by generation. Here’s what has the largest influence on holiday purchases

Top social media channels used for product inspiration and purchases

Takeaway

Building trust

Canadian consumers want to shop with businesses they consider trustworthy—a perception that typically starts with retailers providing quality products, but is often shaped by every interaction between a customer and a brand.

The opportunity for retailers: Retailers can build consumer trust through transparency and traceability measures, such as digital processes that allow customers to track the location of their purchases and gain visibility into the last-mile delivery process. Trust can also be built by giving consumers the opportunity to communicate and follow up on the channel of their choosing—be it in-store, phone or online.

Holiday shopping with a conscience

Sustainability is a growing priority for consumers, many of whom are also looking for products that are cruelty-free and produced without the use of child or forced labour, among other ethical considerations.

This holiday season, 45% of respondents say they’re likely or extremely likely to shop with socially and environmentally responsible retailers. That’s up from 35% in 2020.

When it comes to specific environmental issues, consumers say they’re most concerned about avoiding the use of plastic and single-use materials where possible (cited by 43% of respondents), buying items with less packaging (39%) and looking for products with environmentally friendly packaging (33%).

Unwrapping consumers’ holiday shopping plans

With spending intentions and consumer confidence on the rise, retailers that adapt to the evolving expectations of Canadian shoppers have an opportunity to be at the forefront of the industry’s recovery.

Contact us to learn more about how to attract and engage consumers this holiday season and beyond.