5 Reasons 2023 Could be the Best Holiday Season for Canadian Small Businesses
Deloitte has released their annual consumer prediction for the holidays and it’s bleak, but I say there’s reason to hope
Canadian consumers will be tightening their wallet this holiday shopping season, according to a preliminary report released from Deloitte this week. Retailers rely primarily on holiday spending and after an already tight year, it’s unlikely the retail sector is going to see the boost it needs before year’s end. Personally, I think this is the best thing to happen to Canadian small businesses in a long time and here’s why:
1. Shoppers will be visiting more stores
The number of stores visited is expected to increase. That’s a reverse trend from what historically has been great for big box retailers. When shoppers prefer convenience, they’ll get everything they need in one location. This has killed downtowns, but inflation is making consumers shop around.
The average Canadian shopper is predicted to visit 16–17 stores this holiday season. That’s an increase of 37% from 2022.
This is a significant change in consumer behavior, driven by necessity, that creates opportunity for more businesses. Overall, spending is expected to decrease this year, but the change in consumer behavior will create more transactions spread across more locations.
2. Online sales are flat
Amazon and other online retailers have been chipping away at small business. As shoppers increase their spending online, the majority of that business has gone to Amazon. Brick and mortar stores offer an experience that was difficult to recreate online, which they tried during the pandemic. When small businesses tried to compete online, they were in competition with the juggernaut that is Amazon. Amazon offers free one day shipping, free returns, a gigantic marketplace, and free TV shows with prime.
Online sales have been increasing year over year, but this year that trend is predicated to plateau. Amazon has been losing market share as shoppers are returning to their previous shopping habits, and finding it harder and harder to make a profit with free shipping. As shoppers are disenchanted with the lackluster experience of e-commerce, this is an opportunity for brick and mortar stores to shine.
3. Black Friday Trends are Not as Obvious in Canada
Black Friday has been mostly bad for Canadian small businesses. Black Friday sales created FOMO in Canada and disrupted previously good shopping days. Midnight Madness sales were staggered, and retailers could plan around them. Black Friday was forced on Canadian retailers, and very few have really benefited. Canadians are working during the majority of Black Friday shopping hours, and in the little time they have left, they wait in line at Best Buy or Wal-Mart. It also pushed shoppers to go online, which ends up at you guessed it, Amazon.
The data for American shoppers is clear — they’ll be looking for deals on Black Friday and in the last two weeks of November. In Canada, it’s anyone’s guess where and when shoppers will be looking for deals to stretch their budget.
Stores that create specialized deals tailor made to the right shopper will benefit. If they get it right, and if they advertise in advance. The data is indicating that shoppers will be planning their purchases ahead of time, looking for bargains, and postponing other purchases.
4. Getting away from gift cards
Gift card programs have been costly for small businesses to implement. The majority of gift cards are never cashed in and that money has to be kept on the books for a long time. A lot of stores have looked at this as a loan from consumers. It’s a cash injection they can keep on the books and leverage those dollars elsewhere without having any expenses attached to it. But at the end of the day retail is retail, not a bank, and they need shoppers to come in and move product, not prepay for products that they may or may not ever actually buy.
Deloitte predicted that in order to combat inflation, Americans would be taking advantage of gift cards to stretch their dollar, avoiding physical goods that have become costly. Canadians are facing the same problem, but Deloitte predicted the opposite trend north of the border. Gift card spending is anticipated to drop by 18%. I question the discrepancy in consumer behaviour, so we will have to see how this plays out.
The emphasis from Canadian respondents was on value for the goods they’re buying. They want to make thoughtful purchases and they’re willing to put in some effort to get that deal. Whatever strategy retailers plan to implement, they’re going to have to know their customer, but this at least means the customer is willing to be persuaded.
5. Bargain Hunting is easy to appeal to
Consumer trends in the last decade have been very challenging for small businesses. The economy was so good that consumers got entrenched in convenience. Buying habits became more and more predictable as customers became more and more loyal.
Busy people + expendable income = passive consumers
Big box stores have been using data to offer well-off Canadians a steady drip of offers they couldn’t resist. Loyalty points. Next day shipping. Just stay in your car, sip your Starbucks, hand over your credit card, and we’ll hand you everything you want for a little extra cost. But you’re busy, and you can afford it, so it’s worth it.
The average consumer’s footprint got smaller and harder to disrupt. The result was Retail-pocalypse.
Welcome back to the era of the savvy consumer. Passive consumers turn their nose up at coupons, but savvy shoppers will sacrifice their ego for savings. This kind of customer is easy to predict, and easy to understand. It doesn’t take costly data-analytics to understand people on a budget. They want lots, and they want it cheap. A good deal is a no-brainer that doesn’t take sophisticated, expensive tools.
Never underestimate the importance of a change in habit. For stores that have been missing out, now is the time to get those moms in their SUV’s, out of their convenience-induced coma, and offer them a deal they can’t resist.
Shoppers are looking for something new. They’ve peaked their heads out of their gopher holes, and they’re on the lookout for a bargain. They’re receptive to your advertising. They’re flipping through flyers. They’re clipping coupons. They’re willing to drive a little further out of their way for the right offer.
Consumers will be forced to get back to the basics which is where small businesses thrive. I would argue the big guys have more to lose. Customers will be planning their purchases and deals will have to be advertised well in advance. The winners will offer strategic, value-driven deals that solve problems. Eliminate line-ups, because shoppers will be visiting more stores. Be clear with your refund policies. Let your customer know that your product is more ethical, and it’s right here. Get personal with your offers. Know your customer.
Consumers will be spending less in 2023 and are forced to stretch their dollars even further. They’ll be sacrificing travel plans and cutting back on groceries to make it work. Any business that can cater to this customer is poised for a very successful 2023 holiday shopping season.
The full Holiday Outlook is released next week, and Canadian businesses will get an even deeper insight into the plans of consumers this holiday shopping season.
Jen Whitfield is a culture writer with expertise in digital marketing, retail and entrepreneurship.
