Tough Year Ahead for Canadian Retailers

January 13, 2011 Updated: October 1, 2015

Canadian retailers will meet with a host of challenges in 2011 including Canadian consumers' savvier buying ways and potential shrinking purchasing power.  (Photos.com)
Canadian retailers will meet with a host of challenges in 2011 including Canadian consumers' savvier buying ways and potential shrinking purchasing power. (Photos.com)
Retailers should get prepared for a tough 2011 in which foreign competition, the rising Canadian dollar, and decreased consumer buying power will likely be major issues they will have to address, says Ernst & Young.

Although sales across Canada were up between 3 to 4 percent for the recent holiday season, 1 to 2 percent higher than forecast, Canadian retailers will have more competition from foreign companies which will be looking for a share in the reviving Canadian market, Daniel Baer, Ernst & Young Partner and National Retail Industry Leader, said in a news release.

Retailers in Canada will have to push back with effective strategies of their own.

Baer suggests that retailers focus more on their online services and offerings, and integrate social media into their online advertising in order to “build strong relationships and drive brand loyalty with their customers.”

Moreover, “consumers want convenience and efficiency—we saw that from the favourable online response towards free shipping offers throughout the holiday period,” he said.

“Canadians just don’t have time to squeeze in trips to the mall whenever they need to buy something, and that’s why online shopping is likely to increase this year. It’s not a novelty—it’s here to stay.”

Another suggestion was to capture certain demographics, such as based on ethnicity and meeting the needs of the aging population.

On top of this, Canadian consumers have become more savvy shoppers and seeking out good deals has become second nature for many.

“They’re proud to be value shoppers. They want their dollars to stretch further and are keeping their eyes open for the best deals.”

Although retail sales have bounced back and Canadian consumer confidence is up, Ernst & Young predicts that several trends will continue in 2011 that could affect the retail industry.

The ever-increasing Canadian dollar will continue to drive cross-border shopping. And higher fuel prices along with increased consumption taxes in some provinces will leave consumers with less buying power, as will higher interest rates and rising prices for certain manufactured products.