Retailers say promotions, lower price points necessary to lure consumers

TORONTO — Some of Canada’s major retailers say the second half of the year is shaping up to be a positive one, and those companies that focus on promotions and lower price points are well positioned to take advantage of recession-weary consumers.

TORONTO — Some of Canada’s major retailers say the second half of the year is shaping up to be a positive one, and those companies that focus on promotions and lower price points are well positioned to take advantage of recession-weary consumers.

The president of Loblaw Companies Ltd. (TSX:L) said Canada’s largest grocery retailer has cut prices and introduced savings programs because of a “flight to value” among consumers.

“We have sharpened our prices up, we’ve introduced programs around the country. Why? Because value will drive the volume, and that’s where you’ve got to be,” Allan Leighton said Tuesday at a Scotia Capital conference on consumer trends.

“People are trading down,” he added.

Jurgen Schreiber, the president and CEO of Shoppers Drug Mart Corp. (TSX:SC), said the drug store chain has taken advantage of its Optimum rewards program to lure price-conscious customers during the economic downturn.

“Customers love Optimum, and in a recession they love it even more,” Schreiber said.

Shoppers has increased the number of active Optimum cardholders by two million to 9.7 million over the last two years, and 65 per cent of in-store transactions are now done using the card, he added.

Meanwhile, consumer product manufacturer Dorel Industries Inc. (TSX:DII.B) said the company’s main products — which include child car seats, home furniture and bicycles — have proven resilient in the economic downturn.

“Our price points fit the times,” said Dorel chief executive Martin Schwartz.

The Scotia Capital conference came as Statistics Canada reported Tuesday that Canadian consumers went into hibernation in July as the value of retail sales fell 0.6 per cent during the month, defying analysts’ expectations of a strong pick-up.

The data suggest that it may take some time before nervous Canadian consumers gain enough confidence to begin opening up their wallets again and give the economy a badly needed kickstart after three quarters of recession.

Economists said the weak July retail numbers may reflect weakening pent-up demand for big ticket items, the impact of continued job losses in the economy, and the fact that many retail products are selling for less because of increased competition and a drop-off in demand.

However, anecdotal evidence suggests sales may be improving.

The Forzani Group Ltd. (TSX:FGL) said Tuesday this year’s back-to-school period got off to a weak start in August but the national sporting goods retailer recovered and ended up with slightly higher sales volumes than last year.

The Calgary-based company said consolidated same-store store sales increased 0.1 per cent for the seven-week period ended Sept. 20. For the first five weeks ended Sept. 8, sales were down 1.1 per cent from their year-earlier comparisons but picked up by 3.6 per cent in the final two weeks.

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