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Housing starts, sales and prices to fall, new CMHC forecast says

5 June 2020
By the Numbers

OTTAWA – Economic uncertainty stemming from government actions taken to contain the spread of the COVID-19 pandemic, falling oil prices and other factors will negatively impact this country’s housing market over the coming 24 months. In its latest Housing Market Outlook, the Canada Mortgage & Housing Corporation (CMHC) says housing starts, sales and prices are likely to say below their pre-pandemic levels well into 2022.

“Following large declines in 2020, housing starts, sales and prices are expected to start to recover by mid-2021 as pandemic containment measures are lifted and economic conditions gradually improve,” CMHC chief economist Bob Dugan said in a statement. “Sales and prices are likely to remain below their pre-COVID-19 levels by the end of our forecast horizon in 2022. The precise timing and speed of the recovery is highly uncertain because the virus’s future path is not yet known.”

This isn’t good for Canada’s furniture, mattress and major appliance (FMA) sector as housing remains one of the key drivers in its performance. Indeed, past studies conducted by organisations such the Canadian Real Estate Association (CREA) have suggested housing market activity accounts for between 30% and 35% of FMA sales in any given year.

In its report, CMHC notes the severe disruptions to the economy rising from the COVID-19 pandemic have placed unprecedented pressures on employment, incomes, migration and financial markets, while lower oil prices are likely to exacerbate declines in Canada’s oil-producing provinces. In recent months, for example, Canada’s unemployment rates (pegged at 13.7% in May) have risen to heights not seen in decades. Overall retail sales sank 10% in March while Canada’s gross domestic product (GDP) slid 2.7% for the first quarter of 2020.

Total housing starts – both single family homes and others – in 2019 numbered 197,000 units, essentially changed from 2018. Despite posting a 7% gain for the first quarter, CMHC believes they will decline to between 109,500 and 147,100 units this year, a fall of between 25% and 44% over last year.

In a note to Home Goods Online, CMHC communications specialist Angelina Ritacco noted the outlook covers a range of plausible scenarios and “incorporates a wider range for housing indicators than we normally publish, reflecting the heightened risks and uncertainties of the current context.

“The high end of the forecast depicts a more optimistic scenario while the low end shows a more significant and protracted downturn in the economy and housing market,” she continued, adding, “Our framework is based on key drivers of the housing market activity, including gross domestic product (GDP), trends in the labour market, demography, incomes and mortgage-lending conditions.”

Meanwhile, sales via CREA’s Multiple Listing Service (MLS) are expected to fall from the 488,828 units recorded in 2019 to somewhere between 450,500 to 416,000 units this year – a decline of between 7.8% and 14.9%. By the end of 2020, the average price will range from $518,400 to $493,000, which translates into a year-over-year decline of between 7.8% and 14.9% depending on whether the optimistic or pessimistic scenario comes true.

CMHC is of the opinion, prices should begin to recover in 2021 and return to their pre-pandemic levels by the end of 2022.

However, the regional disparities seen in the housing market in recent years will continue. This is especially true in the oil producing provinces of Alberta, Saskatchewan and Newfoundland & Labrador where housing prices could experience as much as a 25% decline from pre-pandemic levels.

“Restrictions on construction activity are leading to a sharp decline in housing starts,” CMHC’s outlook said. “Our forecast indicates that housing starts could decline by as much as 75% from the Q1 2020 level before starting to recover by the second half of 2021. 

Click here to find and download the complete Housing Market Outlook published by CMHC.

IKEA nixes London store

4 June 2020
Furniture, Retail

LONDON, Ontario – IKEA Canada will not proceed with plans announced two years ago to open what would have been its 15th full-size store here, citing a rapidly changing retail environment that has prompted this country’s second largest furniture retailer to seek different ways to grow its business.

“We had previously announced that we would delay the London store project as we evaluated the best solution for the site. We have now made the difficult decision to no longer pursue the acquisition of land in London. As such, we will not move forward with plans to build a store in the region,” IKEA Canada public relations leader Kristin Newbigging said in a statement published by local media including the London Free Press and the city’s Global TV station earlier this week.

“We are in a rapidly evolving retail landscape and to ensure we are fit for long-term growth, we have had to re-evaluate some of our expansion plans,” Newbigging added.

In 2015, under then-president Stefan Sjöstrand, IKEA Canada unveiled an ambitious expansion plan that would see it double both its store count and annual revenues over the ten-year period ending in 2025. Since then, it has opened two new full-sized stores in Halifax and Quebec City. London was the next city targeted under that plan.

Seen here is the exterior of the new concept IKEA city centre store in the Tottenham Court Road district of London. The retailer plans to open a similar store in downtown Toronto.Although the company confirmed it was planning to purchase property not far from London’s Costco store south of Highway 401 near Wellington Road in 2017, it announced a delay in the process the following year.

Earlier this year, IKEA closed its Pick-Up and Collection Point in London, one of five smaller-scale units opened in 2015 as part of a trial organised by its parent company, which is headquartered in The Netherlands.

In response to an inquiry from Home Goods Online, Newbigging confirmed the retailer is re-evaluating its expansion plans and not simply because of the COVID-19 pandemic as other factors are also at play, mainly the growing popularity of e-commerce which while accelerated by the crisis was evident long before it was declared.

“Today, we know that our transformation to meet our customers wherever and however they choose to shop is more important than ever. We are in a rapidly evolving retail landscape and to ensure we are fit for long-term growth we have had to re-evaluate some of our expansion plans and focus,” she told HGO.

“Looking forward, we are enhancing our digital experience and online channels, optimizing our fulfilment and services and exploring new ways to meet customers in the city centre, all to make IKEA more accessible, affordable and sustainable,” she added.

Late last year, Michael Ward – the Canadian who was named IKEA Canada’s chief executive and sustainability officer in January 2019 – said the company is planning to open a new concept ‘city centre’ store somewhere in downtown Toronto. Newbigging said the company will move forward with that project, although it may take a little longer than originally planned.

“Last year, IKEA Canada announced its ambition to open new customer meeting points in Toronto’s city centre. Given the unprecedented situation with the COVID-19 pandemic, our top priority right now continues to be the health and safety of our co-workers, customers and communities,” she remarked, adding, “We are also focused on securing the longevity of our business. We remain committed to expanding our operations in Toronto and want to ensure that we move forward with a solution that best meets the evolving needs of our customers and reflective of the new retail environment.”

Newbigging also stressed the company’s current priorities are readying itself for retail after the COVID-19 pandemic. IKEA closed all its stores on 18 March followed by its Click & Collect service a week later. Two weeks ago, it re-opened it stores in Alberta, Winnipeg and Quebec City while rolling out a contactless, curbside pick-up service.

“We are happy to share that we have now reopened all locations nationwide with new safety measures in place,” she added.

Related Story: IKEA re-opens stores in Winnipeg, Quebec City and Alberta

Related Story: IKEA shutters pick-up points

Related Story: IKEA Canada sales up 6.1% 

Flexiti signs Visions Electronics

4 June 2020
Electronics, Retail

TORONTO – Flexiti Financial, a provider of point-of-sale consumer financing solutions for retailers based here has signed an agreement to provide its technology to consumer electronics specialist Visions Electronics. Its financing solution is now available in all 43 retail locations in addition to the retailer’s e-commerce site, which launched Flexiti’s online financing product in the last fall.

“Since 1981, we have been dedicated to providing 100% customer satisfaction while offering the most competitive prices in the market,” Visions Electronics president Maurice Rouleau said in a statement. “Since launching Flexiti online, we have seen a great appetite from our customers for more payment options at checkout. We are thrilled to expand the financing option to our store locations to offer the best payment options for our customers.”

The Calgary-based Visions Electronics has signed on with the point-of-sale consumer financing solution provided by Flexiti. Flexiti’s mobile, automated and paperless solution enables customers to apply once and take advantage of various consumer financing options, including 0% interest promotional financing both online and in-store. The company has designed a frictionless application process, with ID scanning technology that auto-populates the application, allowing customers to be approved and transact in minutes.

Flexiti founder and chief executive officer Peter Kalen noted the solution provides retailers with a quick and easy way to drive increased sales, make purchases more affordable for their customers and build brand loyalty.

“Visions Electronics has been a leader in retail customer experience since they opened their very first store,” he said. “We are excited to be able to provide their online and brick and mortar stores with flexible financing to improve their customer experience.”

The Flexiti network has more than 5,000 retail locations across the country including furniture retailers such as The Brick, Leon’s and Wayfair.ca, among others.

Founded in 1981 by Richard (Rick) Stewart with a single store in Calgary and a staff of two, Visions now has 43 locations across the country with a complement of over 1,000 employees. In addition to consumer electronics, the privately held retailer is also a player in Canada’s major appliance market.

Robert Betty closes agency

2 June 2020
Furniture, Mattresses, People

EDMONTON, Alberta – Veteran road warrior Robert Betty has begun writing the next chapter of his life, shuttering Robert Betty Furniture Sales, the agency he has operated from his home base here for the past 33 years.

The business, which for the past three years was operated in partnership with his daughter, Arielle, ceased operations on 01 June 2020. He explained why in a letter to retailers and other industry members posted on the agency’s web site.

“The last decade has brought many changes to our industry,” Betty wrote. “As a sales agent, I have had to add geography and brands to my portfolio to maintain revenues. The last two years have seen revenue challenges due to economic challenges. With recent developments in the energy sector and the arrival of the COVID pandemic, it appears that challenging rebuilding years lie ahead. I have always managed my partnerships with long term growth as my primary goal. But with my 57th birthday approaching, my definition of ‘long term’ has shifted a bit!

Robert Betty“Last month. I came across a strong job opportunity in the technology sector,” he continued. “I invested significant energy in ‘pivoting’ my resume and leveraged my network to get an interview. Eight interviews and four weeks later, I received a job offer last week which I have accepted. As of the first of June, I am excited to be starting my new role as Field Sales Manager in Alberta for Citrix, a large software company whose flagship product increases productivity and engagement for remote workers.  Talk about a timely product!”

Betty represented the Bermex, Bertanie, Dinec and Shermag divisions of the Louiseville, Quebec-based full-line manufacturer BDM Furniture in Manitoba, Saskatchewan and Alberta. He also represented Dubuque, Iowa headquartered upholstery maker Flexsteel and bamboo furniture specialist Greenington in those provinces as well.

He represented Canadian upholstery specialist Brentwood Classics; wall art purveyor Canvas Candy of Montreal; the Toronto-based bedroom and dining room producer Geovin; and Italian mattress maker Magniflex in Manitoba, Saskatchewan, Alberta and British Columbia.

Betty told HGO that David Darveau has assumed his responsibilities for BDM while Alexis Koscielny, a sales rep based in Edmonton who also carries Uttermost will take over his territory for Brentwood Classics.

Meanwhile, the Airdrie, Alberta-based sales rep Greg Sebastien will take over Betty’s responsibilities for Magniflex. Sebestien also represents Samsung Home Appliances and the Surrey, British Columbia-based Urban Cultivator.

In his note Betty said Arielle was also leaving the industry having returned to her original career working with troubled young people in the Edmonton area.

“I want to thank each of you for entrusting me with part of your valuable retail real estate,” Betty concluded. “Some of you have been partners for 20, even 30 years! I hope we can agree that it has been a positive and profitable partnership, but I feel equally blessed to have worked with such wonderful people – you will be missed.” 

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Home Goods Online.ca and its accompanying newsletter - HGO This Week - covers the furniture, bedding, appliances, consumer electronics, accessories, lamps and lighting and floor coverings product sectors of the big ticket home goods market in Canada. HGO is also a forum for the dissemination of market research and hard-hitting articles on best practices for Canadian retailers.

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