With the holiday shopping season underway, many Canadian consumers are looking to check boxes on their gift list while also keeping their household budgets in check.
Shoppers may be feeling more cautious about opening their wallets for fear of what the future may hold and are looking for opportunities to save money wherever they can.
The trade war — especially the ripple effect of leading to a — has led to cost concerns among consumers.
“Consumers are cautious heading into the holidays because there’s a number of headwinds they’re facing. Particularly the fallout effects from the trade war, and as trade issues relate to companies really being cautious about hiring right now,” says retail analyst Bruce Winder.
“Consumers feel that and they’re in the same boat. They’re being very choiceful with what they spend on right now. They’re very careful because they’re nervous they might lose their job.“
A report by PwC released last month showed, on average, Canadians said they were planning on spending 10 per cent less than they did a year ago, with 81 per cent of respondents saying they planned on spending less.
Some retailers have noted customers are looking for value, discounts and lower prices overall.
Dollarama has seen its stock surge in recent years, with the company highlighting in its quarterly earnings report that “consumables” were driving the sales growth.
This means some customers may be skipping visits to the grocery store in favour of a visit to retailers like Dollarama that potentially offer lower prices for food and other items.
Citing customers prioritizing “necessities,” Costco has also made adjustments by scaling down their in-store holiday displays to make more room for essential items like food rather than non-discretionary items like Christmas trees, lights and toys.
Get weekly money news
Get expert insights, Q&A on markets, housing, inflation, and personal finance information delivered to you every Saturday.
If customers are prioritizing buying essentials, that may mean a different approach to shopping for the holidays and gift buying.
“Loyalty programs can definitely help Canadians on tight holiday budgets, but how and where you redeem rewards matters. Make a list and stick to it,” says personal finance expert Shannon Terrell at NerdWallet Canada.
“The way to make points work for you this holiday season comes down to using the resources you have at your disposal as strategically as possible.”
Loyalty programs could be a good way to save money, but it’s important to choose the right ones, have a good strategy and be consistent to make the most of them.
Whether loyalty programs lead to savings depends on a wide variety of factors because each consumer has different needs and preferences when it comes to shopping for essentials and other items — including gifts.
“Consumers, whether they are part of a loyalty program with a retailer or whether they sit outside that program, don’t show any discernibly different level of loyalty to the retailers, surprisingly,” says Doug Stephens, founder and CEO at Retail Prophet.
“Most of the time we pick a grocery store because it satisfies our needs and it’s relatively convenient to get to. Loyalty programs don’t actually foster much more than transactional loyalty at best. In many cases, retailers are giving people incentives that they probably didn’t need in the first place.”
Some loyalty programs offering cash-back and points systems can translate to money back into the pockets of consumers provided they are used consistently and redeemed effectively.
“Cash-back programs are especially handy this time of year, as many allow accumulated cash-back dollars to be applied directly to outstanding credit card balances: a potential game-changer for those already in debt,” says Terrell.
“Avoid cashing in rewards for something you never intended to purchase just because it seems like a ‘good deal,’ and be aware of any redemption offers that require you to spend more to redeem.”
For many consumers, loyalty programs that require paid memberships may also offer more value versus free programs.
“Often times paid loyalty programs are much more effective. When the program is free, the inference is that there isn’t really a significant value to the program in the first place,” says Stephens.
“If I’m paying for an Amazon Prime membership, there’s an implied value to that, so I’m more inclined to go and shop on Prime Days. Costco memberships have about a 90+ per cent renewal rate, so people clearly feel that they’re getting value from their paid memberships.”
Whether retailers offer paid or free loyalty programs, it’s essential to stay consistent with those retailers to see the most savings over time.
“Here’s the problem with loyalty: If it’s a one-off thing, if you’re buying something once a year or once every two years, and you’re not really frequently buying there, then loyalty isn’t going to work,” says Winder.
“Loyalty works well when there’s high shopper frequency in a category, and when you add a few of those categories together and make an ecosystem, that’s when loyalty offers good value. Outside of that, it doesn’t necessarily offer good value.”
Winder says the “ecosystem” could be creating a lifestyle and routine that works for an individual that takes advantage of multiple locations and a family of stores.
“I’ll use my living life as an example. I’m part of the PC Optimum program with Loblaw, and for me it works because I can buy my food at No Frills, I can get my gas at Esso, and I can buy my drug, health and beauty needs at Shoppers Drug Mart,” says Winder.
“When I get in that rhythm of going through all three of those, I can start to build up meaningful savings on things — I can see the savings and the points rack up.“
Winder adds that these examples may not work for everyone and that it’s only worthwhile if it makes sense for an individual or family to join a particular loyalty program they plan on using regularly.
“Try to find a loyalty program that fits with your lifestyle wherever there’s high shopper frequency. It gets a little cumbersome if you have too many loyalty programs that may or may not push you in a direction that you don’t need to go in,” says Winder.
“If you’re buying a gift for a loved one and it’s a one-off, you probably don’t need a loyalty program. Just find the best overall value for you in the marketplace.”
