As Canadians prepare for their second holiday season under the cloud of COVID-19, rays of light are emerging for many retailers as signs of a demand-fuelled recovery start to take hold.
In this year’s edition of our annual holiday outlook survey, Canadian consumers say their personal finances are strengthening, perceptions of the country’s economic outlook are improving and they plan to significantly increase their holiday spending over last year.
But even with vaccination rates rising across the country, COVID-19 concerns still remain front and centre in the minds of Canadians. A slight majority (53%) say they expect the pandemic to have a negative impact on their 2021 holiday spending.
We prepared this year’s holiday spending forecast to give retailers insights into consumer sentiments as they navigate the country’s uneven economic recovery and meet new customer needs. Here, we explore Canadians’ evolving shopping habits, preferences and priorities, based on our cross-country survey of more than 1,160 consumers in late August 2021.
There is pent-up demand among Canadian consumers. While their 2021 holiday spending is expected to jump significantly from last year, it will remain below pre-pandemic levels.
As online shopping trends continue to evolve, consumers are changing how they choose to receive their purchases. While home delivery remains most popular, the use of curbside pickup is increasing as consumers look to save money.
TikTok’s influence as an advertising platform that drives retail sales is growing, particularly among Gen Z shoppers. But it still lags behind Facebook, YouTube and Instagram.
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.
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.
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.
Canadian consumers expect to spend an average of $1,593 over the holidays, with a greater proportion allocated to travel ($743) than gifts ($647).
Feeling generally positive about the economy
Upbeat about the state of their personal finances
Increasingly favour making holiday shopping an event
|Total holiday spend||$1,593|
|Holiday spend on gifts||$647|
|Holiday spend on travel||$743|
|Holiday spend on entertainment||$204|
|Average spend on yourself||$537|
|Average spend on family||$869|
|Average spend on friends||$118|
|Average spend on pets||$40|
|Shopping done online||41%|
|Shopping done in-store||59%|
Physical retail continues to persevere. Canadians plan to spend 59% of their holiday shopping time in-store, with many planning to shop where there are also restaurants, movie theatres and other entertainment facilities.
Concerns about the pandemic outweigh all other factors
Job losses and reduced work hours decrease personal spending capabilities
With in-person cross-border travel limited, online cross-border shopping gains traction
Per-person holiday spending intentions drop by nearly one-third to an average of $1,104, with travel spending in particular plummeting..
Canadian consumers plan to do more of their shopping online than in stores (51% vs. 49%) as they focus on convenience, health and safety.
|Average spend on yourself||$272|
|Average spend on family||$653|
|Average spend on friends||$111|
|Average spend on pets||$33|
|Total holiday spend||$1,104|
|Holiday spend on gifts||$630|
|Holiday spend on travel||$308|
|Holiday spend on entertainment||$166|
|Shopping done online||51%|
|Shopping done in-store||49%|
Personal finances are improving
Growing confidence in the economy
Pandemic concerns still dominate
Canadian consumers once again expect to spend a narrow majority of their holiday shopping time online, rather than in-store (52% vs. 48%). But their e-commerce experiences are evolving, with the popularity of curbside pickup growing rapidly.
Holiday spending intentions rebound to an average of $1,420, up 29% over last year. However, that’s still below pre-pandemic levels recorded in 2019 due to the slow return of travel spending.
|Total holiday spend||$1,420|
|Holiday spend on gifts||$669|
|Holiday spend on travel||$511|
|Holiday spend on entertainment||$209|
|Average spend on yourself||$478|
|Average spend on family||$768|
|Average spend on friends||$115|
|Average spend on pets||$33|
|Shopping done online||52%|
|Shopping done in-store||48%|
With travel restrictions continuing to make it challenging to enter the United States, in-person cross-border shopping intentions remain subdued.
Among those who self-identified as living close to the Canada-US border, one-third say they’ll do less in-person cross-border shopping than in a typical holiday season.
But online cross-border shopping intentions are growing. Some 38% of respondents say they’ll cross-border shop online this holiday season, an increase from 28% over last year.
Despite their growing enthusiasm for cross-border shopping, many Canadian consumers also report a patriotic pull when they open their wallets. More than three in five (62%) say they want to show loyalty to Canadian retailers and brands. Additionally, more than half (55%) say they want their shopping dollars to stay in Canada and help the economy.
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?
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.
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?
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.
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.
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%).
Sustainability concerns among consumers are growing, especially among younger generations. 84% report an interest in sustainability. That figure rises to 89% among Gen Z and to 88% among Millennials.
As a retailer, it’s no longer just about appealing to an eco-conscious segment of your consumer base. Canadians—particularly younger generations—are looking for brands to be clear and upfront about their values and beliefs.
The opportunity for retailers: Brands have an opportunity to align their values with those of their customers, but should avoid looking for one-off measures. Instead, retailers have a chance to create value through a holistic environmental, social and governance (ESG) approach that combines overall strategy, transformation and reporting for transparency.
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.