The cautious season: holiday shopping could offer bargains

Remember the good old days stock markets were setting record highs almost daily, the value of your house was rising faster than warm, well-kneaded dough and a dollar was worth $1.10 US? Yes, you were richer than you thought.

What a difference a year makes.

On Oct. 17, 2008, the Conference Boardreported that consumer confidencein Canada had fallen to levels not seen since the third quarter of 1982 when the first compact discs hit the market in Germany and Mexico announced it couldn't pay its large foreign debt, sparking a debt crisis that quickly spread through Latin America. And, oh yes, North America was mired in its worst recession since the Great Depression.

In Canada, a one-year mortgage could be had for about 17.5 per cent in September 1982, a relative bargain compared to the 21.25 per cent banks were charging a year earlier.

In October 2008, with markets falling 40 per cent off their peaks, house prices slipping, the dollar back down below 80 cents US, and governments around the world propping up banks, it's no wonder the Canadian consumer is worried.

When consumers worry, retailers fret. And with good reason. Statistics Canada reported on Oct. 22 thatretail sales slipped 0.3 per centin August, driven down mainly by a drop in spending on cars and the fuel that runs them.

'Back to school really didn't happen for apparel retailers' Maureen Atkinson

But more telling was an almost insignificant rise in spending on back-to-school merchandise. It's normally one of the busiest retail seasons of the year.

"Back to school really didn't happen for apparel retailers," said Maureen Atkinson, a senior partner at retail market research firm theJ.C. Williams Group.

An ominous sign for the months ahead?

"Oh yeah," she said.

The worst sales season in two decades?

The International Council of Shopping Centers predicts that sales growth over the holiday shopping period will be the worst since 2002. CIBC World Markets had an even bleaker assessment of the situation, saying that fear of job losses and reduced incomes are rapidly changing consumer behaviour, which could leave retailers facing the worst sales season in two decades.

Diane Brisebois, the president of theRetail Council of Canada, said Canadians are likely going to spend less this Christmas but she doesn't expect the situation to be as dire as it is elsewhere.

"The big difference between us and the United States is that in the U.S., they're not buying, whereas in Canada, they're trading down or just waiting to see if they'll get that item on promotion or on sale."

So there may be a bright side if you're a bargain hunter and you have some income you're prepared to spend.

"We're not totally pessimistic," J.C. Williams Group's Atkinson said. "We're going to be seeing a very cautious consumer. Every retailer is going to be looking at what they can do to unlock the purse strings. Consumers are going to be out there looking for better buys. They're going to be trying to find ways of savings."

Targeted discounts

Don't expect deep discounts on goods right from the beginning, she said.

"The smart retailers are going to be really selective about what they do promotionally. Any time you see 50 per cent off everything, either somebody's made a really bad buy or they're panicking. They will be watching very closely in terms of what's selling and what's not selling and they'll be very quick to act on what's not selling."

Instead, expect retailers to try to appeal to your money-saving senses, she said.

"Creative retailers are going to find creative ways of enticing the consumer to spend their money with them. I think you'll see some things like gifts for a price gifts for under $50 or gifts for under $20. You'll see some of that kind of retailing coming back, retailers saying, 'Hey, I know you're price sensitive; we're going to help find the stuff you can afford.'"

Atkinson noted that despite falling gas prices, the deflated dollar should keepCanadian shoppers close to home this year as there likely won't be any deals to chase at American malls, unless U.S. retailers are forced into fire sale mode.

She suggested that Canadian retailers will think long and hard before raising prices to pass on some of the costs they incur in buying goods with a cheaper currency.

"Not at this point in time. I don't think that any retailer is thinking that they're going to grow their margins [by raising prices]."

A lower dollar could also mean a tighter squeeze on Canadians' food budgets. Canada was mostly protected from surging food prices in the fall and winter of 2007, as the dollar shot past parity. But with that advantage gone, expect the price of imported fruits and vegetables to head north in time for the holidays.

The consumer mood may be just as somber as it was in late 1982 but that economic downturn did give way to one of the largest economic expansions of modern times. Before the year was out, things were already looking up.

On Nov. 3, 1982, the Dow Jones Industrial Average surged by 4.25 per cent to close at its first record high in nine years. That day the Dow gained 43.41 points the biggest one-day jump to that point to close at the lofty level of 1,065.49.

Those were the days.