Back-to-school spending to increase 2.5%: Ernst & Young

Back-to-school spending is set to climb only 2.5% over last year in Canada despite the early start to the shopping season, according to Ernst & Young.

"Back-to-school sales started on July 1 south of the border, stimulating demand and forcing Canadian retailers to follow suit and get in step earlier than ever," explains Daniel Baer, Ernst & Young partner and national retail industry leader, in a press release.

"Consumers' low confidence level means they are careful, looking for bargains despite brand loyalty, and aren't hesitant to compare prices before buying, whether shopping in stores or online from home or by mobile."

Along with more Canadians shopping online for low U.S. retail prices, cross-border competition is also being stimulated by new traveller exemptions for Canadians to import products without duty or taxes.

Losing ground to U.S. retailers isn't the only challenge facing Canadian consumer products companies.

According to a recent global publication by Ernst & Young, Disrupt or be disrupted: creating value in the consumer products brand new order, 74 per cent of consumer products company leaders believe they need to make significant changes to sustain historic margins.

The survey also shows that 68 per cent of responders are under pressure to reappraise their operating models.

Baer says in the release: "Thanks to technology and new modes of communication, consumers are taking control of the conversation and demanding better value."

He expects that back-to-school spending will vary across Canadian regions, mirroring 2011 trends: Alberta and Saskatchewan will continue to lead, and spending in Québec and Ontario will be below the national average.