Business

Low loonie expected to boost back-to-school spending

The falling loonie is expected to help boost the bottom lines of Canadian retailers heading into the back-to-school season.
There will be a four per cent increase in back-to-school spending in Canada this year, according to Ernst & Young, as a low Canadian dollar keeps Canadian shoppers at home. (Michelle Siu/Canadian Press)

The falling loonie is expected to help boost the bottom lines of Canadian retailers heading into the back-to-school season.

There will be an expected four per cent increase in back-to-school spending in Canada this year, according to global professional services firm Ernst & Young.

The lower Canadian dollar likely means consumers will be making their purchases closer to home, said Daniel Baer, Ernst & Young's Canadian retail and consumer products sector leader.

"We do expect fewer dollars to be spent cross-border. And when we say that, (we are referring to) people who physically go cross-border, but also people who shop on U.S. sites," he said in a phone interview from Montreal.

The Canadian dollar closed at 75.87 cents US Tuesday, which means that that a U.S. dollar now costs about $1.32 Cdn to buy. 

Recent universal child-care benefit payments from the federal government will also likely translate into additional disposable income for consumers to devote to back-to-school spending, said Baer. On the flipside, inflation, higher housing costs and economic uncertainty may curb the appetite among consumers to spend.

Regional differences

British Columbia and Ontario will lead sales, while the Maritimes and Quebec will continue to lag behind the national average, with little growth expected.

Meanwhile, Alberta and Saskatchewan, who are typically leaders in the category, are expected to post back-to-school sales in the red.

Baer said the changes are a "big function" of how the province is performing economically. He pointed to Alberta, which previously saw a retail sales growth higher than the national average due in part to employment levels and oil prices.

"Their economy was growing that much faster because of economic activity, influx of people into the province and a very low unemployment rate," Baer said.

Since the price of oil has declined, it's certainly had an impact in terms of the disposable income that the Alberta consumer has- Daniel Baer, Ernst & Young

"Since the price of oil has declined, it's certainly had an impact in terms of the disposable income that the Alberta consumer has; but it also has an impact in terms of the economic stability that the Alberta consumer feels."

A recent Ernst & Young report on redefining retail loyalty looked at the shopping habits of those born between 1997 and 2000 and found a distinction among this segment of Gen Z compared to older generations.

"Coming out of the 2008 recession, I think most people had been living in an economy that's relatively uncertain," said Baer.

"That's kind of driven their experience so they are quite value-driven. So they look for things like free shipping, they look for special sales and discounts more than a baby boomer that may be more economically secure.

"I think it's just a function of when they've grown up and what they've seen going on around them that has made them more value-conscious in that way."

In their hunt for deals and use of technology to comparison shop, those among the Gen Z cohort are less likely to be devoted to one brand, Baer noted.

"They're also influenced a lot by social media, and then again, that makes them less brand loyal. Because if they are influenced by their friends, what they see on social media, it is a bigger influencer than it would have been for baby boomers and then millennials."

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