Although department and “five and dime” variety stores continued to underachieve, Canadians spent reasonably well in 1984 – mostly for cars.
After discounting inflation, retail sales during the past two years have been the best in several years.
At 8.5 to 9 per cent estimated gains – in dollar terms to $116.5- billion – profit margins are skinnier than before the recession because of more competitive pricing.
But Toronto researcher Len Kubas estimated that real growth among retailers, including auto- related and grocery sales, is significant at 5.3 per cent, following a 4.6 per cent hop in 1983.
Not bad for a 1 per cent yearly population growth, said the president of Kubas Research Consultants, considering the stiffer competition from the financial services and travel industries for disposable dollars.
During 1982, there was a 5 per cent real drop in sales following a 0.5 per cent gain the year earlier. Before the recession, higher dollar gains were illusory because the retail price index was running at 9 to 10 per cent, compared with 4.1 per cent in 1984.
Department-store-type merchandise (DSTM) is expected to end the year 6.9 per cent higher, for a real rise of about 2.8 per cent. This $49- billion category accounts for 42 per cent of the total retail trade.
But department stores, which are expected to show a sales rise of 5.1 per cent to $11.5-billion, are expected to make a real gain of only 1 per cent. Worse off are the variety stores, such as Woolworth, Kresge and Stedman’s, which are expected to have a total rise of 1.3 per cent to $5.4-billion – losing in real terms.
Specialty retailers in the DSTM category, including pharmacies, are expected to have captured further market share from the department and variety stores. Canadians are estimated to have spent about 8 per cent more, $17.4-billion, in specialty shops that sell sporting goods, jewelry, flowers, records and tobacco.
They are estimated to have spent 7.3 per cent more ($30.4-billion) in stores that sell groceries, 15.5 per cent more ($37.1-million) in car dealerships and auto-related outlets, 3.8 per cent more ($16.9-billion) in general merchandise stores, 12 per cent more ($7.7-billion) in clothing and footwearshops, and 6.5 per cent more ($7-billion) in household furniture and appliance outlets.
Mr. Kubas predicted Canadians would spend 9 per cent more in 1985 for a total $127-billion, with new car sales rising 11.7 per cent.
Frugality, practicality and skepticism have become the watchwords among many consumers, say retailers and consultants. Confidence in the economy has yet to be restored. The recession, in real terms, is not over in the West and remains a bleak memory for other Canadians. “The Canadian consumer exercised thrift in spending” in the third quarter, said Toronto- based investment dealer Moss Lawson and Co. Ltd. in early December.
It expected the “fourth quarter in 1984 to record an annualized growth rate of about 3 per cent in real terms. For the entire year, 1984, Canada’s real growth rate will be 4.5 per cent over 1983.” A more aggressive financial services industry is capitalizing on the widespread insecurity and the growing inclination to save – particularly during retail’s vital fourth quarter.
The institutions are snagging much of the public’s disposable income into such tax savers as registered retirement savings plans and registered home ownership plans.
Winter trips south are considered an inalienable right by many middle- income Canadians and currency devaluations in several sunny countries add to their attractiveness.
Adding to the public’s inclination to save rather than spend may be the debate on the universality of social benefits in the House of Commons, tied in with Ottawa’s aim of raising more revenue through taxes. Middle- income earners, who have been saving for their retirement, still depend to some degree on the pensions that have been promised by past governments.
As well, the fact that 1.4 million remain unemployed undermines the confidence even of those with jobs. Insecure people do not spend freely. Hardly reassuring are economists saying that inflation is being tempered by an economy just stumbling ahead, and that if prosperity explodes on the scene, it could re-ignite double-digit inflation.
Also confusing to the layman is Ottawa’s contradictory message that it is cutting its own deficit while urging consumers to spend freely.
Although innovative marketing has brought more people into the shops, many retailers still fail to use their most important sales tool, surveys show. Most retailers do not have their sales staff question prospective customers who walk out of their stores empty-handed.
It is estimated that 68 per cent of potential sales dollars walk out simply because customers are not asked what they are looking for. More than 50 per cent of sales people do not ask any questions of customers, said Mandev Ltd., a Toronto-based retail consulting and training firm.
Commissioned sales people are viewed as knowledgeable, but often the consumer is put off by their hard sell.
In 1983, appliance maker Whirlpool Corp. of Benton Harbor, Mich., which controls Inglis Ltd. of Mississauga, Ont., found that 68 per cent of consumers consider sales people an important information source. However, when asked what source they trust the most, only 4 per cent said they believed they could rely on salespeople.