Canadian holiday retail sales are expected to grow 4% over last year, with millennials driving holiday spending, finds EY.

“Retailers’ wish for a more enthusiastic consumer may come true this holiday season. People are optimistic about the expected tax relief for the middle class, promised by the newly elected government,” says Daniel Baer, EY partner and National Retail and Consumer Products Industry Leader.

Other factors that are contributing to consumers’ joyful spirits: gas prices are down about 19% year over year, new federal child tax payments are more generous, and employment growth and consumer confidence remain healthy.

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On the other hand, the value of the Canadian dollar means less of a drain on sales from cross-border shopping, but higher prices for consumers.

“While Canadians may have a little more money in their pockets, retailers must realize that ways to engage consumers are multiplying rapidly,” explains Baer. “To thrive in this omni-channel environment, retailers must be quick and agile to deliver the integrated experience consumers want.”

And the experience, both online and in-store, will be important for millennials. According to the report, millennials would rather receive exclusive invitations to special events than discount offers.

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“Millennials seek experiences, fun and personalized indulgences, and they’re willing to pay a premium for them,” says Baer. “But for purely functional items, millennials seek convenience, selection and low prices. Millennials are also social-media savvy and digitally connected, meaning the smartphone and tablet will be key interactive tools for retailers.”

While online sales will continue to grow, traditional retail channels continue to be relevant. Baer explains, “The fact remains that brick-and-mortar stores is where the vast majority of shopping takes place. Retailers need to adopt the right technologies and the right attitude to leverage their real estate if they want to delight consumers.”

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The 2015 holiday sales forecast throughout Canada is expected to vary by region and timing. EY notes several trends.

  • Canadian retailers will need to focus on promotions for American Black Friday if they want shoppers to spend their limited discretionary budget on this side of the border, and use this day to drive December traffic.
  • B.C. will lead Canadian retail sales.
  • Resources will drag results in Alberta and Saskatchewan to a slight year over year drop in sales.
  • Ontario sales gain will mirror the national average, as employment and exports strengthen.
  • Quebec sales will show little, if any, growth.
  • Sales in Atlantic Canada will be flat.

In terms of product popularity, clothing, toys, electronics and gift cards remain the top choices. Given millennials’ thirst for experiences, more gift cards purchases will be directed towards restaurants and travel.