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Christmas shoppers hit the Pacific Centre mall in Vancouver, BC, December 21, 2009
Christmas shoppers hit the Pacific Centre mall in Vancouver, BC, December 21, 2009

Retailers making more money, less profit Add to ...

Holiday shoppers are returning to the stores, but they're armed with the tricks they learned during the recession.

Extensive discounting appears to be paying off for retailers in the final days before Christmas as consumers crowd the malls searching for bargains, an optimistic sign compared with last year at the height of the slump.

But it's a different type of consumer in this crucial season compared to the prerecession shopper of a few years ago.

Now extremely cost-conscious, consumers are using mobile devices to check prices at competing stores, and looking out for deals that retailers are touting on Twitter and Facebook.

"It's good but not great," said Maureen Atkinson, a partner with retail consultancy J.C. Williams Group in Toronto. "It's better than last year - but last year was not good at all."

Policy makers are banking on shoppers to fuel the recovery, given that consumer spending represents about 70 per cent of economic activity, while export markets remained tempered.

There are reasons for optimism. Early figures point to the start of a retail recovery this fall, with sales jumping 0.8 per cent in October from September, the eighth increase in 10 months, Statistics Canada said yesterday. For the holiday season, sales are projected to rise between 1 per cent and 2 per cent, compared with last year's decline of about 1.5 per cent, according to J.C. Williams.

This year, however, the business may come with lower profit margins as merchants are forced to drop their prices to lure consumers.

Anticipating a tough holiday season, retailers started to pitch their holiday promotions earlier than ever in 2009. At the same time, they trimmed their inventory levels by about 5 to 10 per cent, industry officials said.

Still, consumers are out shopping, and that's the main thing.

"It's definitely more cheerful," said Christine Diemer, who was among the throngs of holiday shoppers hunting for deals in downtown Vancouver. "It's more festive. There's a better feeling." The recent retiree said she would spend more this year than she did last December.

After suffering one of their toughest years in decades, retailers are counting on a lift in the holiday period. Many retailers generate the bulk of their annual sales and profit in the last two months of the year. Some even remain in the red until the holiday season arrives.

Wal-Mart Canada Corp. and Sears Canada Inc. are among the big chains to launch Boxing Day sales more than a week before Dec. 26.

"People are comparison shopping and looking for not just a good deal but the best deal they can get today," said Jim Thompson, a senior vice-president at Wal-Mart Canada Corp. "Our pre-Boxing Week blow-out event is our response to this trend."

Retailers are partly responding to consumers having delayed their holiday shopping later than ever this year, said Vincent Power, a spokesman for Sears. "Because of the recession, there's probably more deals and lower prices before Christmas than there were in the past."

For example, retailers are now trumpeting 50- to 60-per-cent markdowns on holiday decorations - compared with 30- to 40-per-cent off those goods in the week before Christmas in the past, he said.

Last week, Best Buy Canada pitched on Facebook a 52-inch flat panel Toshiba television for about $1,700 - a $700 saving - plus free installation by its Geek Squad, worth another $159.

The deals are drawing customers, said Richard Laniel, a vice-president at Best Buy Canada in Burnaby, B.C. "We're feeling pretty good about the numbers and where we'll end up," Mr. Laniel said.

Over the weekend, Best Buy's overall unit sales jumped 5.9 per cent from a year ago - up 8.8 per cent at the retailer's namesake Best Buy chain and 4.4 per cent at its Future Shop stores, officials said.

Recession-struck retailers need some cheer. At Best Buy Canada, third-quarter sales at stores open a year or more fell in the "high single-digit" range. Sears Canada's same-store sales dropped 6.3 per cent in its third quarter.

Still, the October retail sales from Statscan are encouraging. Sales of clothing and accessories - discretionary purchases that suffer in a downturn - rose 1.9 per cent. Shoes and jewellery were among other strong categories.

"The recovery in recent months has been particularly impressive," Douglas Porter, economist at Bank of Montreal, wrote in a note. (Nevertheless, excluding the automotive sector, retail sales slipped 0.2 per cent in October.)

In another positive sign, spending at retailers over the first two weekends this month increased about 5 and 6 per cent from a year earlier, according to Moneris Solutions, which processes credit, debit and online payments for merchants.

Department stores were the clear winners in the first weekend, with a 12.8-per-cent gain, while clothing stores saw a 5.4-per-cent jump in the first weekend and 11.4 per cent in the second.

"The increase in preholiday spending is a clear indication of renewed consumer confidence," said David Ades, senior vice-president of sales at Moneris.

With files from reporter David Ebner in Vancouver

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