Discount Stores More Popular in Tough Economic Times

Discount stores get more business during economic uncertainty

It’s been a ho-hum start to 2013 for Canadian consumer confidence – according to the index run by Investors Group – Harris Decima, confidence stands at 77.6 – down slightly from 79 in November of last year.

 Canadians Cautiously Optimistic About the Future

Despite tough economic times and a tough job market, a lot of Canadians feel 2013 will be a good year. The Investors Group survey found a quarter (25 per cent) of Canadians believe they will be better off financially next year, while only 13 per cent feel their net worth will take a hit. This is a slight improvement of last year’s results of 24 per cent and 12 per cent respectively. When it comes to making a major purchase like a house, nearly half (44 per cent) feels it’s an ideal time, while 38 per cent are taking a wait-and-see approach. These split results are similar to the Canadian employment market. 43 per cent believe they’ll be good times financially over the next five years, while 41 per cent are concerned about their job security and believe another recession is on the horizon over the next five years.

 Less Confidence in Canada’s Growth

The survey paints a far different picture when it comes to the Canadian economy. Only 13 per cent believe next year will be a time of growth and prosperity for the Canadian economy, while 20 per cent believe they’ll be tough times ahead. This doesn’t come as a surprise with Canada’s GDP results coming below forecasted in 2012 with sub-three per cent GDP growth expected for the foreseeable future.

Canadian Customers Reign in Spending

It’s no secret the federal government is concerned about consumer debt. With the debt-to-income ratio ballooning to near pre-U.S. housing bubble levels, Canadian households are being told to save as much as possible, focus on debt repayment, and refrain from spending. While you can put off some major purchases like a new car, we still need to buy the necessities like food and clothing.

The message of paying down debts while rates are low looks to be hitting home with most Canadians – and they’re staying away from the mall as a result. The 2012 holidays season saw lower than expected profits, with retail sales growing only a modest 2.5 per cent, down substantially from over five per cent just two years ago. With average wage growth and a less than stellar job market, Canadians aren’t likely to see any increase to their purchasing power this year, paving the way for discount stores to capitalize.

 Retail Chains Looking to Capitalize on Consumer Confidence

Despite the lackluster holiday season, discount department stores like new entrant Target and Walmart are looking to make a killing with consumers looking to save a penny. With an average wage increase of three per cent expected in 2013, Canadians are increasingly looking to discount stores to score a deal. During tough economic times it’s only natural for consumers to gravitate towards generic brands to cut back on their spending.

With over 100 new Target stores opening across Canada by year end, there will be increased competition among discount department stores. This could be good news for Canadians who have been up in arms lately about higher prices here than in the U.S. This will likely translate to more choice of higher quality products at lower prices for Canadians, as department stores look to woo in new customers at any cost. Some of the best items to score a deal on are clothing and shoes, which have seen their prices slashed year after year. The bottom line is if you’re looking to score a deal 2013 looks to be a great year for customers.


This post is also available in: French

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