Prices are climbing for a wide range of products and services, triggering economic fears for business owners and patrons alike. But have those fears influenced the way Canadians shop? Read our survey analysis about inflation’s impact on consumer spending to learn more.

survey on inflation impact on consumer spending in Canada 2023

Inflation in Canada has been steadily increasing, and consumers are feeling the strain of higher living costs. The Consumer Price Index (CPI) continues to rise, and while it hasn’t happened yet, representatives of major Canadian banks have predicted a downturn for Canada’s economy, which could lead to a recession.

Bank officials aren’t the only ones with recession on their minds. In a recent Capterra survey of over 1,000 Canadians in charge of household expenses (find a full methodology at the bottom of this article), 85% said they’re worried to some degree about an incoming recession. Business owners may also be concerned about inflation’s impact on consumer spending and what they can do to encourage and engage customers during difficult economic times. 

To get the full picture of current spending habits and how to best address financial fears, we’ll analyze changes to spending, saving, and discount-seeking behaviours in this article. 

Are consumers reducing their spending due to inflation?

In part one of this survey, we saw how customers across the country took note of increasing prices. In the face of a distressed economy, almost 9 out of 10 Canadians surveyed (86%) have changed their spending habits.

Consumer reactions to economic downturn are widespread, but where specifically does inflation impact consumer spending most? Of the respondents who’ve changed the way they spend, the biggest impact was on their grocery bill. Nearly three quarters of them (71%) say they’re either purchasing or using less grocery store items than before. 

Statistics Canada found earlier this year that Canadians were feeling the sting of higher prices, most of all in grocery store goods, showing a continuing trend of difficulty meeting day-to-day expenses. Food isn’t the only product or service that shoppers who’ve changed their habits are purchasing less of. They also reduced their spending on the following items:

  • Clothing (69%)
  • Bars and restaurants (67%)
  • Entertainment and cultural activities (streaming services, cinemas, museums, etc.) (60%)
  • Beauty and sanitary products (57%)

Although the slowing of consumer spending may cause some concern, attention should also be paid to the industries where consumers are completely stopping their spending. The top three areas where consumers who changed spending habits no longer spend their money are in domestic appliances (reported by 22%), electronics (21%), and fitness (20%).

Tip for retailers: Companies focused on customer retention in hard economic times should look beyond offering value with their product or service, and also pay attention to their brand value. According to Gartner, retailers can try to reduce customer uncertainty by providing consumers with targeted expertise and building a reputation as a trustworthy brand.

To get a picture of the topics and areas where brands can build customer confidence, social listening tools can track public conversations about their brand, competitors, and new market trends for use towards a future brand strategy.

How has inflation impacted consumer spending and behaviour?

In reaction to rising prices and shrinkflation, what shopping habits have consumers in Canada adopted? Though 14% of survey-takers haven’t switched up their spending habits just yet, most of the respondents who have done so (66%) are opting to buy cheaper products. Many have taken other measures to make their dollar stretch further, as well.

inflation impact on consumer spending habits

The majority of those who’ve adjusted their consumer behaviour to cope with inflation have also adopted new deal-hunting habits. Four out of five (80%) say they look for discounts more now than they did before and over half (54%) are doing more research before making a purchase, such as product and price comparisons. Amongst other measures taken by those adopting new habits:

  • 40% are participating in customer loyalty programs more often
  • 38% are doing more couponing
  • 27% are buying more second-hand products

Frugal habits are being picked up by those who haven’t necessarily changed their spending habits, as well. Nearly a quarter of all respondents (23%) started using discount-finding platforms due to tough economic times, followed by a flock of first-time users accessing second-hand product apps (22%), and product comparison platforms and apps (21%). 

Tip for retailers: Customer loyalty programs and apps are currently used by 75% of Canadian respondents, and second-hand shopping is a widely held habit in Canada. Regardless of the types of measures your company takes to boost sales, be sure to raise awareness and communicate with customers directly about them. Efforts to reach out to customers can also help build relationships that last between your brand and its shoppers.

How does inflation impact consumers of different ages?

Expectedly, consumer behaviour changes to cope with difficult circumstances, but those changes often depend on certain demographic aspects of the consumer. 

Before economic difficulty arose, older respondents were more likely to have been joining loyalty programs. Those in the 26 to 45 years old age group were most likely to have used product comparison platforms before inflation,  while those between 18 and 35 years old were most likely to practice frugal habits such as using ride-sharing and second-hand platforms pre-economic difficulty.

use of money saving technology before inflation by age groups in Canada

Although their use of such tools wasn’t the most common before prices began to rise, Canadian respondents in the 18 to 25 years old age group are leading the pack in adoption of economically savvy technology since inflation started surging. Since the arrival of financial fluctuation in the country, the youngest survey-takers are the most likely to have started using all of the money-saving habits listed in the above graph.

adoption of technology to face economic crisis by age groups in Canada
Tip for retailers: Finding out more about your customer audience and their preferred practices can help you appeal to them and offer the value they’re looking for. Get in touch with your consumers via online or SMS surveys, or take the hands-off approach of social listening tools, which gather and analyze conversations about your market, brand, and competitors.

Has inflation impacted consumers’ saving and financial tracking habits?

Just as with spending habits, consumer saving habits are also changing. Around one in three respondents who’ve changed the way they spend money (31%) say they’re setting aside more for saving now. Surprisingly, younger respondents were more likely to be putting more money away now than they were before the economic crisis.

When asked how they were keeping track of their saving and spending habits, most survey respondents said they keep a written ledger, either in a digital spreadsheet or physical notebook. Over a quarter (28%) also use different bank accounts to keep control of their finances, while one in five (20%) have turned to budget tracking apps. 

Budget apps are just one aspect of digital finance, which most Canadians seem to be familiar with. Nearly three quarters of respondents (73%) are currently using digital finance and bank platforms (60% who started using such apps before the economic downturn and 13% after).

inflation impact on consumer saving via digital finance

Out of those currently using digital finance, the majority (64%) use traditional banking services. However, nearly the same amount (63%) are turning to digital payment services. A much smaller number of finance app users (27%) are using investment services as well as cash-back programs.

Over half of these digital finance users (55%) say these apps have helped them track their spending, followed by 39% who say they’ve been able to keep their payments organized and on time. Around a third (35%) also say these apps have helped them avoid overspending.

Tip for retailers: Some shoppers may be turning to alternative payment types (such as pay by installment services or PayPal) to manage their financial situation amidst economic uncertainty. Be sure to accommodate the payment processing methods your customers want to use so you don’t miss out on sales.

How and where do Canadian consumers shop during difficult times?

The increase in prices is nationwide; both in-person and online stores have been affected by the rising CPI. However, some consumers are developing preferences for certain types of shopping, as it may help them be sure they’re getting the best bang for their buck. 

As shown in the graph below, Canadian respondents found shopping online better than visiting brick-and-mortar stores in some aspects, such as comparing brands, products, and retailers for the cheapest deals. More respondents also thought online shopping was better for finding promotions, getting the best deals, and making flexible payments. 

While the latest numbers show eCommerce is still on the rise, in-person shopping is still regarded as valuable in many aspects. A higher percentage of respondents thought buying products in person better allowed them to buy exactly what they need, compare product quality, and see the full range of products.

physical stores and ecommerce stores during inflation

Regardless of where they do their actual shopping, many consumers check the internet for the best deals first. For respondents who use customer loyalty or coupon-finding platforms, the majority (60%) check online marketplaces for the best offers. They also go to the following online checkpoints to find discounts:

  • Deal/coupon-finding websites (46%)
  • Vendor websites (46%)
  • Email newsletters (32%)
  • Brand-specific mobile apps (27%)
  • Social media accounts of stores (26%)

Tip for retailers: Whether your store operates online, in the real world, or both, it’s important to create spaces in both realms to communicate with customers. Catch the attention of in-person shoppers using display advertising, and reach customers on all digital channels using marketing automation software

Not sure which one to invest in? Take a look at marketing attribution tools to help give you a more detailed picture of the best performing marketing channels for your organization.

How to reach and engage customers during economic downturn

With so many consumers feeling squeezed by rising prices, inspiring customer loyalty and return shoppers is no easy feat for SMEs. Regardless of whether your company operates on- or offline, customers are increasingly gravitating towards digital touchpoints. 

To boost and maintain customer loyalty, try these techniques:

  • Invite customers to sign up for newsletters, follow your brand on social media, or download a mobile app to create new channels of communication
  • Incentivize customers to increase their contact with you by offering discounts through those channels
  • Strategize about how to reach your customer base using the technology that they’re most familiar with
Looking for customer engagement software? Check out our catalogue!

Survey methodology:

To collect the data for this study, Caperra conducted a survey from March to April 2023. To do this, a sample of 1,010 people were selected. The sample of participants is representative of the population of Canada regarding aspects of age, gender, and provincial residence, and the criteria for selecting participants are as follows:

  • Between 18 and 65 years old
  • Must be at least partially in charge of paying for home expenses and goods