Despite GST break, retailers see small crowds, cautious spending on Boxing Day

Canadian shoppers emerged from holiday festivities in ever smaller crowds on Thursday for a sales holiday increasingly diluted by month-long promotions leading up to Christmas.

 

Nicole Freedman, owner of Tusk, a Toronto boutique that sells everything from apparel to home goods and accessories, said Boxing Day often attracts families visiting for the holidays looking to stretch their legs. But it’s not their busiest day by any means.

 

“I would say for our business, Boxing Day would be just a little bit less busy than a typical Saturday for us,” she said.

 

While some stores across Canada continued to draw in crowds – Ontario Provincial Police closed down part of a highway around Toronto Premium Outlets – analysts say this Boxing Day mostly revealed lukewarm optimism from retailers and cautious spending on the part of consumers.

 

Faced with higher costs and challenges brought on by the GST holiday, retailers were less likely to offer steep savings.

 

Retail strategist Lisa Hutcheson said recent earnings announcements suggested retailers were already cautious going into the fourth quarter, packing less inventory that they’d need to get rid of through sales ahead of the season’s end.

 

“We’re not seeing as deep discounts because they don’t have the same amount of inventory and they’re definitely trying to preserve their margins,” she said.

With higher costs for raw materials and labour, more than two-thirds of Canadian businesses expect to face cost-related obstacles over the next three months, according to Statistics Canada. Half expect rising inflation to be an obstacle over the same period.

 

The GST break, which kicked off on Dec. 14 and amounts to about 5-per-cent off goods such as toys, books, snack food, beer and wine, could also disincentivize some small businesses from offering more sizable discounts, Ms. Hutcheson said.

 

“They’re saying, ‘Oh we don’t need to give as steep a discount because they’re already getting a tax-free break,’” she said.

 

Business optimism took an overall dip for smaller players in the weeks leading up to Boxing Day, according to a survey by the Canadian Federation of Independent Business.

 

“The GST holiday created a lot of confusion,” said Andreea Bourgeois, CFIB’s director of economics. “[Members] were saying the cost associated with organizing my cash register, training my staff to understand how this works and how to apply it to products will cost more than the actual tax break.”

 

Speculation that consumers would defer purchases to wait for the GST/HST break is not supported in the data shared by Moneris, a payment processing platform. Instead, they showed a significant increase in sales for Black Friday and Cyber Monday, suggesting that consum

 

At The Discovery Hut, a toy store in Calgary, Danny Nguyen echoed how many Canadian retailers were feeling this Boxing Day. The general manager said it’s been one of the slowest he’s seen in six years, despite the GST break that applies to most items in the shop.

 

Black Friday though, “It was crazy!” he said.

 

Some businesses even opted out of Boxing Day altogether because of the success they had on Black Friday. Marion Le Saux has made the decision to keep her furniture store, Socco Living, in downtown Toronto, closed on Boxing Day for the past two years.

 

“Black Friday is a much bigger deal for us,” she said. The store’s sales reflect this, with promotions on Boxing Day geared toward newsletter subscribers only.

 

 

Spend volume data from Moneris show that Boxing Day has generally become one of the quietest days of the holiday shopping season in recent years. When compared with Black Friday, Boxing Day saw less than half the spend volume and the company expects similar results this year.

 

“Black Friday benefits largely from timing. Simply being ahead of key gift-giving moments and extended sales periods allow it to sustain consumer interest far more effectively than Boxing Day, which comes at a time when many consumers no longer have a need to shop,” said Sean McCormick, vice-president of business development at Moneris, in a statement.

 

While the Bank of Canada has brought down its key interest rate to 3.25 per cent in December, consumers are still weathering the effects of years of steep interest rates and higher costs.

 

They are also going through discount fatigue. Black Friday, Cyber Monday and a string of sales ahead of Christmas have blended into one fog of flashy promotions with dubious savings, Ms. Hutcheson said.

 

“They’re getting confused about what a real promotion is,” she said. “It used to be targeted for specific days and now they’re getting diluted over the whole month of December.”

 

Walking around downtown Toronto’s Eaton Centre, where her office is located, Ms. Hutcheson said the sales advertised around Boxing Week no longer appear very compelling.

 

“It’s all ‘up to’ promotions – ‘up to 30,’ ‘up to 40,’ ‘up to 50,′” she said. “Customers are like, ‘Is it really a deal?’”

 

Data shared by Connors Group, a business consultancy, suggest Canadian shoppers are becoming particularly skeptical about post-Christmas promotions. Only 36 per cent of shoppers plan to participate in Boxing Day sales, compared with 50 per cent on Black Friday. And 72 per cent of Canadians believe Boxing Day sales do not offer better deals than Black Friday.

Maria Solovieva, an economist at Toronto-Dominion Bank, said consumers are still recovering from price shocks, compared with several years ago.

 

“What we’re seeing right now is a little better sentiment than earlier in the year, but that’s not to say that consumers aren’t still very cautious,” she said.

 

Still, she said, many will be more willing to spend in certain categories, including auto sales and home-related purchases.

 

Karamjot Bains, a partner at EY Canada, said consumers are spending on things that will last them beyond the holidays. These “lasting” goods include experiences and electronics, which explains why Best Buy reported lineups before dawn on Thursday.

 

Total holiday retail sales in Canada are still expected to increase roughly 2 per cent this year, according to Mastercard SpendingPulse, which measures both in-store and online retail sales.

 

Ms. Solovieva also predicts mild growth for retailers in the final quarter of the year – “but it won’t be spectacular compared to recent years,” she said.

 

 

 

 

 

This article was first reported by The Globe and Mail