Retail Trends to Watch This Holiday Season
December 15, 2023 4 Minute Read
Santa is suiting up as shoppers are tightening their belts. Holiday retail sales growth is expected to moderate in 2023, but there is still a lot of excitement in the retail sector.
Persistent inflation, rising credit card debt, and higher interest rates are taking their toll on consumer confidence, causing year-over-year retail sales to increase by 3% compared to 7.5% last year and 14.6% in 2021, according to CBRE’s new Holiday Retail Trends Guide.
However, retailers are finding creative ways to capture consumer dollars and increase sale volumes this holiday season.
And on the real estate side, Alex Edmison, Senior Vice President on Toronto’s Urban Retail Team, is optimistic about the state of retail. He tells us about the trends shaping the retail market as we put a wrap on 2023 and head into the new year.
New Retail Nodes
Three years ago, during the holiday season, Toronto’s retailers were facing serious challenges. Today, the situation could not be more different.
Retail spaces are leasing like hotcakes and tenants are competing for prime locations. Demand for retail space in Toronto is so strong that it’s expanding into new neighbourhoods.
“There’s virtually no availability in established retail nodes,” says Edmison. “Retail tenants are looking at alternative options, so we’re seeing interest in unexpected places.”
Toronto’s Yorkville neighbourhood is primarily known for its luxury stores along Bloor Street. But some of its quieter side streets have recently seen a rise in demand for retail space. There’s also been strong interest along Ossington Avenue, while new food and beverage venues have popped up in the financial district.
Over at The Well, which opened in November on the outskirts of the downtown core, the retail mix includes Groovy Shoes, Bailey Nelson, Le Creuset and New York-based Prince St. Pizza. Canadian-grown brands such as Indigo, Bone & Biscuit Co., Suetables and Sweat & Tonic are also among the new tenants at The Well, whose retail spaces are over 90% leased, according to Edmison.
“That area of Toronto wasn’t historically an established retail node but it’s quickly becoming one of the top shopping destinations in Canada,” he says.
A Tale of Two Shops
New consumer habits are creating a growing bifurcation between high and low-performing retail properties.
Despite there being fewer people visiting downtowns during the week than there were pre-pandemic, top food and beverage locations have seen sales increase.
“If you’re on a hybrid work schedule and only come downtown one or two days a week, you’re more likely to go to your favourite restaurants than try new ones every time,” Edmison says. “So a number of leading restaurants have seen sales soar while less popular spots are negatively affected.”
Long-time favourites such as Earls, for example, have had a strong recovery from the pandemic as hybrid workers shape their visits around client meetings and lunches.
“There’s intense competition in the food and beverage space right now,” Edmison says. “It’s not just about the quality of the food, it’s about creating a whole experience that makes customers want to come back.”
Bricks and Clicks
Foreign brands often test new markets through temporary holiday retail pop-ups. Expect to see fewer of these than usual this year as high demand for retail space enables landlords to prioritize high-quality tenants with longer-term leases.
“Most desirable spaces have already been leased,” says Edmison. “The demand is there, but there’s just not enough space and little new supply on the way.”
So retailers are redirecting their efforts to omnichannel marketing, integrating various marketing channels to reach consumers across the retail ecosystem. By creating customer profiles, retailers can personalize touchpoints based on a customer’s interests and preferred method of interaction.
“Retail is everywhere these days,” says Edmison. “Brands are using social media, targeted ads and the in-store experience synchronously to create positive consumer experiences.”
One way retailers have integrated brick-and-mortar with the digital world is by offering in-store pick ups – known as click-and-collect – and returns of online purchases.
According to CBRE’s Live-Work-Shop survey, nearly half of respondents would rather return items in-store rather than through mail, and more than half of shoppers prefer to see a product in-store before ordering it online. Both trends have boosted in-store foot traffic while enabling retailers to grow their online sales through a local customer base.
Retailers are also crafting in-store experiences to draw people back in. Indigo’s new concept store at The Well in Toronto is pushing the boundaries of traditional brick-and-mortar. A dedicated vinyl record section features a jukebox, a plant corner caters to shoppers with green thumbs, and engaging product displays enhance the shopping experience.
A community space at the Indigo store hosts book clubs, readings and other events advertised through social media. And a gourmet coffee truck serves up hot beverages, alcoholic drinks and baked goods.
“It’s already made a splash with a strong opening,” Edmison says. “It’s proving that creating immersive experiences and catering to consumers across the retail ecosystem is a winning strategy.”
Edmison is optimistic about the outlook for the Canadian retail market. Canada is positioned for success with strong wage and employment growth, record immigration and a softer dollar that is bound to appeal to international travelers in 2024.
“The shopping experience, store design and brands themselves are evolving and innovating faster than ever. Whatever shoppers decide to spend this holiday season, they’re going to have a more fulfilling and increasingly exciting experience. A potential, ho ho whoa!”
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