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Once a quarter, Euromonitor’s Canada research team meets to discuss the biggest trends affecting consumers and consumption. Find out what Euromonitor analysts are watching in Canada in the first quarter of 2018, including experiential beverages, ethical beauty and fashion, and changing department store dynamics.
According to Food & Drinks Research Manager Mark Strobel, consumers are putting much more “emphasis on experience with the product” when it comes to beverages at the end of 2017 and early 2018. Consumers, he says, are more adventurous and demanding more from their drinks purchases. In beer, for example, Canadian shoppers are spending more on beer even as they consume less volume, reflecting the fact that beer drinkers are looking for higher quality craft beers. He observes parallel tendencies when consumers purchase non-alcoholic drinks: ready-to-drink coffee and carbonated and flavored water are performing well, while categories where innovation is less prevalent such as non-water carbonates and juice face a tougher outlook. Ready-to-drink coffee presents itself to consumers as premium yet affordable purchase that offers a functional option for consumers on the go. Carbonated and flavored waters add a bit of novelty to the beverage, and also touch on high levels of interest in health and wellness by Canadian consumers.
Interest in the environment and ethical business practices is high amongst Canadian consumers compared to other geographies, and according to Beauty & Fashion Research Associate Evelyn Rodriguez, this interest is increasingly relevant in beauty and fashion consumption. While fast fashion remains popular in Canada, there is also a growing interest in ecologically-friendly fashion habits. Millennials, in particular, Evelyn highlights, are expressing interest in buying fewer, more expensive items but that will last for longer. The secondhand market for apparel in Canada is also growing, evidence by the entrance of ThredUp to Canada, as recycling and reusing is another component of this trend of environmental awareness.
There is also a push amongst consumers for beauty and personal care products with fewer artificial ingredients, Evelyn says, for example scents. Some Canadian consumers are becoming wary of the uncertain health effects from the chemicals used to create scented products, including fragrances, soaps, lotions, and laundry detergents. The Canadian Centre for Occupational Health and Safety even provides suggestions and guidelines for companies seeking to enact scent-free workplace policies. According to Evelyn, this has led to companies focused on fragrances, to invest in new products to maintain consumer interest, while other companies are growing investment in scent-free and lower chemical formulations of beauty and personal care products.
Sears Canada closed its remaining stores in January 2018, and while the company had formats across a variety of channels including homewares and home furnishing specialists, internet retailing, and travel intermediaries, it is department stores where the impact of the company’s bankruptcy will be most apparent. The department store channel in Canada has seen sales declines for seven of the last ten years as struggles at Sears dragged down the channel as a whole. Euromonitor expects the department store category to see sales decline another 22% in constant terms in 2018 due to Sears’ closure. After 2018, however, Services & Payments Consultant Amanda Bourlier says, the channel is expected to return to growth as newcomers to the market like Nordstrom, Saks, and their respective off-price brands continue to open new stores in Canada. Euromonitor expects that many former Sears shoppers will migrate to other channels, such as variety stores, rather than bolster sales at other department store players in the short-term.
Not all categories will be affected evenly from Sears’ closure. Euromonitor expects sales of beauty products through department stores to remain relatively stable, as beauty was not a major driver of traffic to Sears despite being a core category at other department stores in Canada. Products for the home, however, such as large appliances, furniture, and outdoor equipment were important categories at Sears and are underrepresented or not sold at all at other Canadian department stores. Holt Renfrew, Ogilvy, and to a lesser extent Saks Fifth and Off Fifth are intensely focused on apparel, footwear, accessories, and beauty products, and also attract higher income consumers than Sears.