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The Globe and Mail

Canadian shoppers headed to U.S. putting pressure on domestic retail

Sales among Canadian retailers were nearly flat in September, according to the latest measure released Thursday, weaker than expected and evidence of the pressure among merchants to push aggressive U.S.-style promotions to stanch the loss of customers to the United States.

Fernando Morales/The Globe and Mail

Retailers are feeling the pinch as Canadians surge to the United States armed with a strong dollar and higher duty-free limits, with the Black Friday shopping frenzy south of the border threatening to further squeeze sales in this country.

Sales among Canadian retailers were nearly flat in September, according to the latest measure released Thursday, weaker than expected and evidence of the pressure among merchants to push aggressive U.S.-style promotions to stanch the loss of customers to the United States.

While those data are two months old, retailers are sensing the leak of shoppers across the border, even while competitive forces intensify in a sluggish economy.

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Federal changes in duty-free rules in June have heightened worries about the cross-border shopping squeeze. Ottawa allowed people taking a cross-border trip of between two and seven days to bring back $800 worth of goods duty free, twice the previous limit. In September, Canadians flocked across the border in record numbers: Overnight travel to the United States hit 1.95 million, the highest number since Statistics Canada began record-keeping in 1972.

As the economy slows, retailers are counting heavily on getting cautious consumers into the holiday spending mood, gearing up for a period that can generate 50 per cent of annual revenue. Now merchants and malls are betting that the added perk of another annual promotional day will help bolster an otherwise lacklustre year of business.

Retailers big and small – many that had never before run Black Friday events in the past – are touting discounts that are spilling over into the preceding week. Shops and malls are opening early on Friday while some e-commerce sites started their sales on Monday.

Lita Yu, owner of Set Me Free fashion boutique in Toronto, said her sales have been flat this year but slowed this month, prompting her for the first time to run a Black Friday promotion, which knocks 20 per cent off most merchandise.

After having noticed neighbouring shops preparing to offer Black Friday deals, she started her discounting on Thursday for her regular customers to whom she e-mailed coupons. "I'm a bit worried," Ms. Yu said. "Consumers are just not very confident. We should be busier heading into Christmas."

Some executives already are predicting that the event could start rivalling Boxing Day as a domestic discount shopping tradition. "I don't think you could replace Boxing Day but I think Black Friday could eventually become a second Boxing Day," said Anna Alfonso, senior marketing manager at West Edmonton Mall.

Its stores are opening as early as 6 a.m. on Friday rather than the regular 10 a.m., while the mall and other businesses are marketing Black Friday deals more than ever to help kick off the festive shopping season.

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An American staple, Black Friday falls on the day after U.S. Thanksgiving and is known for deep discounting to mark the beginning of the holiday shopping time. It is so named because it was traditionally the day that retailers' bottom line went from red to black.

Domestic retailers in Canada generally ignored Black Friday until a few years ago, when U.S.-owned chains such as Sears Canada Inc. began to offer deals on that day to discourage shoppers from heading south to benefit from a stronger loonie.

The urgency this year is as strong as ever. In September, retail sales inched up 0.1 per cent, Statscan reported Thursday, missing analysts' forecast of a 0.5-per-cent increase. "With Canadians seeking better deals stateside, retailers in September struggled to eke out gains," said Emanuella Enenajor, an economist at CIBC World Markets.

Other retailers are branching out in their Black Friday efforts. Last year, Indigo Books & Music held a promotion that focused only on its books, while this year it extended the "buy three get the fourth free" deal to all its products, including gifts, toys and housewares, including free gift wrapping.

"We think it's a signal that the holidays are here," said Vanda Provato, Indigo's vice-president of marketing.

Retailers' next big U.S-modelled promotions come on Cyber Monday, which is the Monday after the American Thanksgiving when online sellers peddle top deals. Last year, Indigo enjoyed its single biggest shopping day on Cyber Monday, Ms. Provato said.

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On Cyber Monday, Sears will e-mail subscribers offers during the day, while extending its Black Friday specials into Monday for major appliances, electronics and furniture/mattresses, said spokesman Vincent Power.

At West Edmonton Mall, 120 of its retailers are participating in Black Friday deals compared with just 20 a year earlier, Ms. Alfonso said. "We noticed traffic increased throughout our shopping centre."

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