Canadian back-to-school spending to increase 4%, says EY

Shopper loyalty is transforming, as Gen Z's influence on spending grows

MONTREAL, Aug. 4, 2015 /CNW/ - Retail sales are expected to increase 4% in Canada this year, as inflation and the lower Canadian dollar increase prices, according to EY.

"This year's back-to-school season will be one of contrasts," explains Daniel Baer, EY Partner and Canadian Retail and Consumer Products Sector Leader. "On the one hand, consumers will have additional disposable income boosted by the recent Universal Child Care Benefit payments, lower gas prices, and low interest rates. The lower Canadian dollar will also translate into more spending at Canadian retailers and less across the border. On the other hand, inflation, higher housing costs and economic uncertainty will dampen consumers' urge to spend." 

To thrive, successful retailers will have to manage the combined effect of these factors. Additionally, they'll need to target a wider range of consumers, as children are now calling the shots for back-to-school supplies, footwear and clothing needs.

"A growing trend is just how much influence children have on what parents buy," noted Baer.  "Children are looking for what's cool for the new school year, and as a result, loyalty to a retailer or brand is being eroded."

In fact, according to EY's recent report, Redefining loyalty for retail, access to more diverse retailers (physical and virtual), more brands (national and store brands) and more information to validate every decision – are changing the dynamics of shopper loyalty, especially with younger generations.

The report shows that Gen Z (teens aged 14 to 17) is the most pragmatic of all generations. "This group has grown up in a digital shopping world and expects retailers to develop trusted relationships through two-way communication," Baer explains. "They're price-sensitive because they were raised during tough economic conditions of the post-2008 recession."

During this time of year, retailers have traditionally catered to parents, who usually make most spending decisions. Now, retailers must be flexible enough to cater to younger shoppers. To thrive in this back-to-school season and in the long run, successful retailers will recognize that:

• Different segments think differently about loyalty and shopping.
• Rewards and loyalty programs no longer equate to creating more loyal shoppers.
• Price and convenience are not sustainable in creating a differentiated shopping proposition.

This year, back-to-school sales will vary across the country. Alberta and Saskatchewan, who are normally perennial leaders, are expected to post negative back-to-school retail sales. British Columbia and Ontario will lead sales, while the Maritimes and Quebec will continue to lag behind the national average, with little growth expected.

Other highlights of EY's back-to-school retail trends forecast include:

• Free shipping or delivery continues to be important to shoppers
• Use of video will increasingly be used to attract shoppers' attention to fashion trends
• Special sales or discounts will attract Gen Z shoppers
• Flexible return policies are important for parents
• Receiving special offers by email/text message will be more attractive to consumers
• Possibility of ordering online and picking up in the store is appreciated by parents and Gen Z alike.

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SOURCE EY (Ernst & Young)

Erika Bennett, [email protected], 403 206 5157; Julie Fournier, [email protected], 514 874 4308; Sasha Anopina, [email protected], 416 943 2637