This holiday season, consumers only plan to allocate 26 per cent of their holiday spending on gifts for others. The rest of their purchases will be on items for themselves and their families: 21 per cent on home improvements, which could be attributed to the 2009 federal home improvement tax credit; socializing and entertaining will account for another 28 per cent. The remaining spending goes to nongift clothing (9 per cent), home/holiday furnishings (8 per cent) and charitable donations (8 per cent).

“All year long, retailers have been reducing inventories, and it’s quite possible that the most desired items will be sold out early in the holiday season,” says Brent Houlden, national retail practice leader at Deloitte. “Based on this year’s results, retailers should brace for a wave of shoppers later in December, as Canadians will delay purchases until there are substantial markdowns,” concludes Houlden.

Canadian retailers to compete with their American counterparts

Consumer confidence has risen steadily in Canada for the last six months, according to the Conference Board of Canada Consumer Confidence Index, which reached the 90-mark in September, a level not seen since April 2008. By contrast, the US Conference Board Consumer Confidence Index has been hovering around the 50-mark for the last five months. Despite this gap between the two levels, Canadian retailers will have to work hard to drive holiday sales while facing intense competition from U.S. retailers.

As the Canadian dollar flirts with parity and some American retailers advertise deeply discounted prices directly to Canadians, we can expect a reopening of cross-border shopping. In the Greater Vancouver Area, for example, more than 30 per cent of respondents indicated they were likely to cross the border for their holiday shopping.

Regional differences impact spending

Regional differences will likely play a role in how retailers do this coming holiday season.  Job security, always a factor in shoppers' spending decisions, varies significantly from coast to coast, with 81 per cent of respondents feeling at least somewhat secure in the Greater Vancouver and Greater Toronto Areas, 89 per cent in the Greater Montreal Area and 93 per cent in Atlantic Canada.

However, some regional differences about holiday spending may offset economic factors, as Torontonians plan to spend slightly more than the national average while Montrealers plan to spend 25 per cent less. Of note, Atlantic Canadians plan to allocate more of their holiday spending to gifts (33 per cent) than other Canadians and more than any other category.

Toronto and Montreal residents plan to allocate (25 per cent and 28 per cent respectively) more to home improvements than other Canadians and more than any other category. Vancouver residents plan to allocate 32% of their holiday spending to socializing and entertaining.

Strategic social media use still emerging among retailers and younger shoppers

Although a growing number of respondents (20 per cent) will be using social media for their shopping this season, the full potential of this new medium is yet to be seen. In fact, the top four reasons given for using social media tools are, in order: researching gift ideas (62 per cent), finding discounts, coupons and sale information (55 per cent), checking with friends or family on gifts they want (45 per cent), and researching product reviews and recommendations (44 per cent).

Top gifts for 2009

1. Gift certificates/cards
2. Clothing
3. Food/liquor
4. Books
5. CDs or DVDs
6. Traditional toys
7. Money (cash or cheque)
8. Cosmetics and fragrances
9. Computer/video games
10. Jewellery