Sailing into rough waters at the mall?

Tony Wanless | Image: Jupiter | Published: February 28, 2008

Every January, news operations trot out economic experts' predictions so as to unearth some financial nuggets that might inform businesses about the future.

I love prediction stories as much as the next guy, and so devour them in the hopes of discovering a few nuggets myself. But, like most people, I'm usually overcome with too much high-caloric stuff, and so promptly forget most of it.

Unlike most people, however, I store it and then revisit it later. And so, while recently examining my collection, I found some comments about the B.C. retail industry that made me sit up.

Expert opinion is divided on the future health of this sector.

Some think consumers are going to trim their shopping habits as green thinking starts to flow from the theoretical to the practical and a general feeling spreads that they should be a little careful with their money. Others walk the high economic road and predict British Columbians are going to continue spending like there's no tomorrow, because they're still pretty flush with cash.

I tend to believe the former, because, frankly, that's how I'm approaching the year and I'm egotistical enough to believe that what I think is probably reflected by thousands of others.

Some statistics bear me out. For example, about 45 per cent of Metro Vancouver consumers surveyed said traffic congestion and higher gas prices are prompting them to rethink their shopping habits. They'll shop closer to home, walk or take transit to stores (which mean they can't buy as much because they have to carry it), and generally spend less money. This was reflected in a sharp downturn in consumer confidence at the end of 2007.

More traditional economic thinking led to the prediction that this year will continue to see robust retail sales, which were in the $56 billion range in 2007, because the economy is still humming. Add to this the aging of the BC population into its “high-spending” years (55 to 64), and you have another reason for optimism.

I have a problem with this last point. Yes, 55- to 64-year-olds spend more overall, but it's usually focused on a few things like vacations, housing and pre-retirement preparation. Older people buy fewer consumer goods because their accumulation years are behind them—they have pretty well everything they need and only buy when they need to replace. Sure, this replacement might be more high-end and pricey,

but there isn't as much of it as in the mass-market segment, where younger people are acquiring all the things they need.

So, despite the nice numbers, there are storm clouds gathering on the horizon. Large-scale pullback from get-everything-now thinking, (justifiable) fears of a U.S. slowdown spilling into Canada, and a population bulge that just doesn't want as much stuff, means retailers might want to think about battening down the hatches in preparation for some rough waters ahead.

And because retail health is usually a pretty good barometer of the health of the economy in general, other economic sectors might want to make similar preparations.