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EXECUTIVE SUMMARY
- What you need to know
- What consumers want and why
- Outlook for retail and ecommerce
- Opportunities
- Prioritize the smartphone
- Adapt to current market conditions
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THE MARKET
- Snapshot – retail sales outperformed last year but show signs of slowing
- Graph 1: total retail sales, 2023-25
- Canadians are navigating economic uncertainty
- Trade tensions with the US are one underlying concern for the retail industry
- Canada’s unemployment rate has been increasing for the past three years
- Graph 2: unemployment rate, 2022-25
- Youth unemployment has climbed fastest, meaning less disposable income
- Graph 3: unemployment rate, by age, 2022-25
- Inflation has slowed, but prices continue to climb
- Graph 4: Consumer Price Index, 2022-25
- Even for those who are employed, wages are still catching up to prices after 2022 inflation
- Graph 5: year-over-year percentage change in wages*, 2022-25
- Graph 6: year-over-year inflation rate, 2022-25
- Market factors
- Market-level factors manifest into consumer attitudes
- Graph 7: very concerned about…, 2025
- Tariffs put a spotlight on prices
- Graph 8: any agree), 2025
- The labour market is a growing concern for Canadians
- Graph 9: probability of losing my job in the next 12 months, 2014-25
- Youth unemployment is affecting Gen Z’s view of the market
- Canadians aren’t very confident in the direction of the economy
- Graph 10: expectations about Canada’s economy, 2023-25
- Consumers see the warning signs in the market
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THE CONSUMER
- How shoppers react to tighter budgets
- Tight budgets put certain categories in a vulnerable position
- Graph 11: how shoppers’ purchase decisions would change if their budgets tightened, 2025
- Personal care and groceries are important categories to shoppers, regardless of the economy
- Graph 12: if my budget got tight, I would not make any changes, 2025
- Skincare products are an important part of routine
- Groceries are important, but shoppers will find ways to adapt
- Graph 13: if my budget got tight, I’d find ways to spend less but buy the same amount, 2025
- Grocery shoppers have a number of tricks up their sleeve
- Graph 14: ways of saving money at grocery stores, 2023
- Certain categories are especially vulnerable to an economic downturn and tighter budgets
- Clothing, footwear and foodservice are vulnerable
- Graph 15: if my budget got tight, I would buy less of it, 2025
- Restaurant vulnerability is more pronounced among moderate users
- In the home décor category, style refreshes will fall victim to budget cuts
- Graph 16: home décor and furniture purchase occasions in the past 12 months*, 2024
- Graph 17: if my budget got tight, I would stop buying it entirely, 2025
- The secondhand market will gain relevance in a tough market
- Use the past to predict the future
- Graph 18: 12-month % change in consumer expenditure (chained 2017 dollars), 2008-11
- Companies need to make plans with their categories in mind
- The importance of buying Canadian
- Most consumers believe it’s important to buy Canadian, though Gen Zs aren’t as convinced
- Graph 19: importance of buying Canadian – very important, by generation, 2025
- Older consumers were more locally-focused even before the trade dispute
- Connect with Gen Z by making it about them
- Buying Canadian is a privilege not all consumers have
- Graph 20: importance of buying Canadian – very important, by financial situation, 2025
- Buying Canadian comes down to priorities
- ‘Buy Canadian’ factors that matter to shoppers
- When it comes to buying Canadian, made in Canada and product of Canada are top factors
- “Made in Canada” and “Product of Canada” lead the way
- Graph 21: very important in ‘Buy Canadian’ efforts, 2025
- “Packaged in Canada” doesn’t move the needle in the same way
- Graph 22: very important in ‘Buy Canadian’ efforts – Made in/product of/packaged in Canada, 2025
- Canadian is good enough for a lot of consumers
- Efforts are more pro-Canada than anti-US
- Graph 23: very important in ‘Buy Canadian’ efforts – company’s connection to Canada, 2025
- American brands can show Canadians how they support the local economy
- Canadian retailers are important, but not as important as producers
- Graph 24: very important in ‘Buy Canadian’ efforts – retailers, 2025
- Local labour is an equalizer in the retail industry
- A crash course in the supply chain is teaching consumers the spectrum of Canadian-ness
- The role of smartphones in online shopping
- Most online shoppers use a smartphone for at least some online purchases
- 41% of online shoppers make all/most of their purchases on a phone
- Graph 25: all/most, by generation, 2025
- Canadians spend more time on their phones than they do on computers or watching TV
- Smartphones (and smartphone purchases) are always within reach
- Smartphones are convenient – and for some, already a primary device
- Graph 26: reasons for online shopping on a smartphone instead of a computer, 2025
- Convenience skews to older shoppers, while habit skews younger
- Graph 27: reasons for online shopping on a smartphone instead of a computer, by generation, 2025
- Retailers need to prepare for a smartphone-driven ecommerce market
- Smartphones as an in-store shopping tool
- Smartphones are also convenient in-store – and create smarter shoppers
- Graph 28: ways of using smartphones in-store, 2025
- Most shoppers use their phones as a research tool in-store
- Smartphones help make loyalty programs more seamless at checkout
- In-store shopping is becoming more like the online experience
- Consumer interest in AI innovations in retail
- Consumers aren’t entirely sure about how AI should integrate into retail
- Graph 29: AI innovations shoppers would like to see in their shopping experience (respondents could select up to three), 2025
- AI has piqued the interest of most consumers
- Younger shoppers are the most interested in AI-based innovations
- Graph 30: AI innovations shoppers would like to see in their shopping experience (respondents could select up to three), by generation, 2025
- Retailers need to know their audience
- At this point, it’s about alternatives rather than replacements
- When it comes to AI, optics matter
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INNOVATION AND MARKETING
- Launch activity and innovation
- Take advantage of the situation to gain ground in the market
- Aisle 24 uses automation to stay open 24/7 without any staff
- Instacart brings AI to online grocery shopping
- Google Labs is advancing virtual-try on tools
- Google tech will impact in-store shopping too
- Poshmark uses AI to streamline the secondhand selling process
- Cross-brand partnerships create something new
- Marketing and advertising
- Some companies are addressing the elephant in the room: higher prices
- Sobeys goes behind-the-scenes with some Canadian producers
- MEC uses social media to tell consumers about the Canadian brands it carries
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APPENDIX
- Consumer research methodology
- Consumer research questions
- Consumer research questions: crosstabs
- Consumer research questions: curated tables
- Generations
- Abbreviations and terms
- Base sizes by category
The constant evolution of retail is illustrated by the fact that not only do 95% of consumers shop online – but now 41% of those online shoppers make all or most of their online purchases on a smartphone; among Gen Z, it’s 58%. Smartphones have become common tools inside of stores, too. Many shoppers conduct real-time research with their mobile devices (eg comparing prices, checking reviews) so they can make a more informed purchase decision. The role of the smartphone in retail will only grow as Gen Z ages and AI innovations make those tools more powerful.
It’s not just tech that’s shifting this market. While sales have been stable, there are storm clouds forming over the Canadian economy. Unemployment (and fears of unemployment) is up while Canadians still face high prices after rapid inflation forever-altered the market. Tariffs and trade disputes with the US also create uncertainty in the broader market. If shoppers tighten their budgets, certain categories will face a steep uphill battle.
Change creates opportunity, though. The market will get rocky, but the stakeholders who strategize effectively can outpace their competition. Whether that’s through value, tech innovation or connecting with Canadians in a period of national pride, changes in consumer behaviour offer an opening for opportunistic companies to capitalize on.
This report looks at the following areas:
- An overview of recent retail sales and economic indicators signaling tighter budgets
- A category-level look at consumer purchase adjustments under budget constraints
- Analysis of consumers’ attitudes towards buying Canadian and the key factors they believe contribute most to supporting Canada’s economy
- Assessing the role of smartphones in both ecommerce and in-person shopping
- Measuring consumers’ attitudes towards AI in retail and examples of current AI applications
A vulnerable economy, newfound inspiration to buy local and accelerated AI innovation are all converging to create disruption in the Canadian retail industry.
Scott Stewart, Associate Director, Lifestyles & Retail
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