Online Spending for the Holidays

As we head into the holiday season, how are Canadians using the Internet to make their purchases? And with an economic crisis rocking the entire world, what are the trends for this season?

Ipsos Reid's long standing Interactive Reid study has found that year over year online spending dropped 13% among online Canadians in the third quarter (Q3) of 2008. The study, which tracks consumer activities on the Internet, also found spending from Q2 to Q3 had dropped by 15%.

In Q3-2007, Canadian online purchasers reported spending an average of $727 over the past year. This figure is down this quarter to $641, a decline of 13%. The actual dollar amount spent is at its lowest recorded level since 2003. Yet another indicator of the downturn in the economy is that median spending online is also down this quarter, at $249 on average for the past three months. This is 15% lower than the same time last year.

The study actually tracked a decline in online spending in the second quarter of this year, but the year over year figures confirms that online Canadians have significantly reduced their discretionary spending on the Internet.

Not surprisingly then, the number of online purchases made by Canadians has also declined correspondingly. The average number of online purchases over the past year was 6.7, compared to an average of 8.4 one year ago, a decline of 20%.

The third quarter typically sees an increase in consumer spending each year. With the approaching holiday season and an increase in disposable income in the second half of the year, (thanks to the elimination of EI and CPP payments), consumers typically loosen the purse strings at this time of the year.

Ultimately, the data points to a challenging environment for retailers--online and offline--in the upcoming holiday shopping season. Online Canadians not only use the Internet to shop, but also use it as a comparison shopping tool. With a recessionary mindset prevalent, many Canadians may be searching around for the best deal for their holiday shopping.

These findings are based on the Inter@ctive Reid Report, an Ipsos Reid syndicated study fielded from October 16 to October 21, 2008. This online survey of 2644 Canadian adults was conducted via the Ipsos I-Say Online Panel, Ipsos Reid's national online panel. The results are based on a sample where quota sampling and weighting are employed to balance demographics and ensure that the sample's composition reflects that of the actual Canadian population according to Census data. Quota samples with weighting from the Ipsos online panel provide results that are intended to approximate a probability sample. An unweighted probability sample of this size, with a 100% response rate, would have an estimated margin of error of +/- 1.9 percentage points, 19 times out of 20.