What Does The Canadian Consumer Spending Downturn Mean For You?

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It’s no secret that Canadian consumers have started spending less in 2022.

It’s also no secret that this trend looks set to continue into 2023.

Whether you’re unsure what this means for you or you’re looking to close or relocate your store amid next year’s financial uncertainty, we can help.

We’re Silverman Consulting and Retail Services, a retail store closing consultant Canada.

Let’s take a look at what the consumer spending downturn could mean for your store, and what you can do to help your store survive.

What’s Causing Canadian Consumers to Spend Less?

For many Canadians, the financial impacts of the COVID-19 pandemic are still being felt.

We’ve all been hearing the word “recession” being used quite a bit recently, and this is making Canadian consumers feel anxious about the future.

Canadian consumers are feeling both inflationary pressure and economic uncertainty as they enter the holiday season, which will affect spending across many industries.

Additionally, Canadians have been exposed to a lot of negative news in the past year, including things like high inflation, rising interest rates, new diseases, economic uncertainty, and even geopolitical upheaval.

How Do Canadians Feel About the Coming Year?

It seems that Canadians are feeling pessimistic about the coming year and are ready to hold on to their money rather than spend it.

About half of Canadians expect the economy to get worse in 2023.

About 40% of Canadians have also had worsening household finances in the past year.

That’s not surprising.

In January 2022, inflation in Canada passed 5% for the first time since 1991.

As well, the Consumer Price Index rose 6.8% in 2022.

That means Canadians paid an average of 6.8% more for their goods than they did the previous year.

In particular, grocery prices rose by 9.8%, shelter costs rose by 6.9%, and energy prices climbed by a whopping 22.5%.

That’s a tough time to be in an industry that depends on disposable income.

How Are Canadian Spending Habits Predicted to Change?

Despite pessimism about the upcoming year, more Canadian consumers are looking to shop in-store for the holiday season than last year.

Those who will shop in-store plan to visit more stores than last year, though not quite as many as the average in pre-pandemic years.

Those are both good signs when it comes to getting customers to come back to your retail store.

It means those eye-catching window displays might draw more traffic than they did last year.

However, it’s anticipated that holiday spending will fall this year, and Canadians will be more likely to shop early and hunt for deals.

Additionally, Canadians are more likely to shop online this year than in previous years.

Because Canadians are more likely to shop around for deals this year, it also means that they’ll be willing to find substitutes for preferred brands if they’re cheaper or if what they want is out of stock.

That means you’ll need to be prepared to recognize and convert this different type of retail shopper – the bargain hunter – more so than usual.

There are layers to this, of course.

Bargain hunters are looking for a deal, whether real or perceived.

If you can make them feel like they’re getting a good deal, they’ll walk away happy.

This might include offering bundled products, drawing on their retail therapy instincts, or considering a retail store customer loyalty program.

How Can Your Retail Store Survive?

With all these changes in consumer spending, it may start to feel like it’s impossible for your business to survive.

But that’s not necessarily the case.

True, retail hasn’t had the easiest time so far in the 2020’s.

But retail stores are still operating across the country.

Will yours be one of them?

There are a few strategies you can put in place to keep customers shopping with you and to maintain customer loyalty and support, without changing your prices.

Let’s take a look.

1. Connect With Your Customers

It’s important to create moments of shared intimacy with your customers to improve their shopping experience.

Customers want to know that your store and employees understand and relate to them.

It’s what keeps them coming back.

So, what might this look like in your store?

Recommendations are one of the best ways for you and your staff to connect with your customers.

Recommending items based on what your customer is shopping for or has purchased shows you understand them and know what they might like.

It also shows your customers that you’re more focused on helping them find what they need than on selling for the sake of selling.

It’s even better if your employees have experience with the product they’re recommending.

That way, they won’t come across as pushy salespeople.

2. Resist The Urge to Discount Everything

While the uncertainty around money for many Canadians may make you feel like you need to offer discounts to encourage purchases and retain customers, this isn’t always necessary.

Instead of discounting everything, you should focus on offering the right items for your customers in your store.

Why?

Well, discounting may ensure that you make a sale in the moment, but if you don’t have the right items, it may not ensure customer retention.

This means, while your customers may buy something when they’re at your store, they also might not come back.

True, sometimes it’s helpful to offer deep discounts as a way to liquidate your aged inventory.

But doing that to higher-quality goods will reduce your retail cash flow.

This can decrease your ability to stock a variety of items people are actually looking for.

It can also reduce your ability to have the staff you need to provide a good customer experience.

In essence, it’s borrowing from your future to pay for your present.

So, rather than competing on price, focus on competing by delivering a great customer experience.

At the end of the day, that’s what will keep people coming back.

3. Make Gentle Suggestions

Making gentle suggestions to your customers is an important way to alter people’s behaviour in ways that benefit your store.

Online stores have algorithms to suggest this.

But you can train your staff to do this as well.

One example of this is when you select an item on Amazon, it always suggests, “Other people who looked at this item also looked at _____.”

This gently guides the customer on how to respond, without outright telling them how to choose.

It also helps by suggesting accompanying items.

For example, consider how frustrating it is when you buy an electronic product that doesn’t come with batteries.

Don’t you wish you’d noticed the “batteries not included” label on the package?

Even better, don’t you wish they’d told you about it at the store?

From a retail perspective, this is an easy upsell.

But it’s also great customer service.

Similarly, if they’re buying a printer, let them know if they need to buy ink cartridges separately.

In a jewellery store, let your customer know about the matching pendant that goes great with their new earrings.

Be sure to show it as well.

In a retail environment, you may remerchandise your store by displaying certain items together to suggest how well they complement each other.

This guides your customer in the right direction without forcing them to purchase more products.

No matter what kind of establishment you operate, subtlety is the most important factor.

Your customers need to be guided, not told what to do.

Nobody likes a pushy salesperson.

4. Focus On Customer Happiness

The best way to make your retail store more appealing to customers is to focus on keeping your customers happy.

Customer happiness is an important part of customer retention, which leads to making sales and generating revenue.

It’s not just important to make your customers happy, though.

What’s really important is to pay attention to what makes them happy and why.

Once you can answer those questions, you can focus on creating an experience that makes every customer who enters your store feel happy.

Book Your Consultation with Silverman Consulting and Retail Services Today

If you’ve decided it’s time to throw in the retail towel, we can help.

Here at Silverman Consulting and Retail Services, we can help with a variety of different store closing sales, including:

Whatever step you’re on in your retail journey, we can help.

Book your consultation with Silverman Consulting and Retail Services today.

Silverman Consulting & Retail Services
229 Yonge St suite 400,
Toronto, ON M5B 1N9, Canada
1 (888) 955-1069