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CHHMA NEWS

 
   
 

     Volume 11, Issue 03, January 19, 2011

                         
                               Association News


2011 Spring Conference & AGM 
In last week’s Eye On Our Industry, we announced that Craig Alexander, Senior Vice President & Chief Economist, TD Financial Group and Professor Ken Wong, Queen’s School of Business will be speakers at this year’s CHHMA Spring Conference & AGM taking place on Tuesday April 5 at the International Centre Conference Facility in Mississauga, Ontario.

We are pleased to report this week that Robert Kozinets will be a keynote speaker at this year’s conference.

Mr. Kozinets is an Associate Professor of Marketing at York University’s Schulich School of Business in Toronto where he teaches courses on brand management, consumer behaviour and organizational buying behaviour.  Robert also previously taught marketing at the University of Wisconsin-Madison and Northwestern University and has consulted for over 300 companies.

Mr. Kozinets presentation topic will be on marketing using social media and will incorporate actual case studies from CHHMA member companies that have been working with York MBA students.

More speakers and topics to be announced in the coming weeks.


                                     Industry News

Target Names Canadian President
Target Corp. announced yesterday that Tony Fisher has been named president of Target Canada. In his position,
Fisher will be responsible for building the team, establishing headquarters and leading day-to-day operations of the
corporation’s recently announced expansion into Canada.

Mr. Fisher joined Target in 1999 and has held a variety of leadership positions in the company. He was most recently promoted to vice president of merchandise operations in 2010 where he led the corporation’s efforts to enhance guests’ in-store shopping experience through technology advances and process improvements.

“Tony has a strong sense of Target's unique culture, merchandising strategy and brand and a proven record of delivering results," said Michael Francis, chief marketing officer of Target Corporation and executive committee sponsor of Target Canada. "His positive energy, broad merchandise experience and keen understanding of what differentiates Target in the retail industry make Tony well-suited for this new role and position Target for success in Canada."

Gregg Steinhafel, president and chief executive officer of Target Corp., remarked last week in an interview that they are “very excited to be part of the Canadian retail community and they “want to be the best, most relevant retailer that operates in Canada.”

Target’s plans for Canada are still very much in their infancy, Steinhafel said at the time. One of their first tasks over the next
240 days is to evaluate which of 220 Zellers sites it wants to keep, while also building its Canadian management team. Steinhafel said the retailer plans to bring its trademark “value proposition” to Canada. That includes an innovative new loyalty card program that gives Target cardholders an extra 5% off most merchandise in the stores.

The ideal Canadian store will be 130,000 square feet in size (Zellers stores are closer to 100,000 square feet) with a tightly edited assortment of merchandise, including clothing, housewares and food, Steinhafel said. The amount of food in Target’s Canadian stores will depend on the size of the store and the terms of the lease, Steinhafel said. Target stores strive to be slightly more upmarket and more style-conscious than Wal-Mart stores.

Target estimates it will make an aggregate investment of more than $1 billion updating and renovating Zellers locations.

Target already generates 50% to 200% more sales in each of its stores, compared with a Zellers outlet, Mr. Steinhafel said. He is betting that he can run better stores than Zellers by putting more staff into them. Each Target store has 50-100% more employees than a Zellers, he said. More staff help keeps the stores tidier and easier to shop, he said. Over the next decade, he envisions more than 200 Target stores in Canada.

There are currently 279 Zeller outlets across Canada and Zeller’s owner, U.S. real estate investor Richard Baker, will keep operating many of the remaining locations as Zeller outlets until Target decides over the next few months which ones it wants to keep. Industry experts predict Zellers will likely disappear in the next five years and predict Mr. Baker will negotiate the sale of the remaining leases to parties who want to cherry-pick locations. That could include established Canadian retailers such as Dollarama and Giant Tiger; parties that have been expanding and looking for real estate, such as Lowe’s or Marshall’s; or other U.S. retailers that have reportedly been eyeing the Canadian market, such as discounter Kohl’s or department-store chain J.C. Penney.


                                  Stewardship News

Webinar on BC Small Appliance Recycling Program
The Canadian Electrical Stewardship Association (CESA) will be hosting another webinar on the BC Small Appliance Recycling Program tomorrow, January 20, 2011, from 11:00am – 12:30pm EST (8:00am – 9:30am PST). The webinar will provide information to members and potential members about the program and reporting requirements as well as answer any questions you may have.

The BC Portable Appliance and Floor Care Stewardship program is scheduled to commence April 1, 2011. If your company is a manufacturer and/or brand owner of portable appliances, floor care and personal products that fall under British Columbia Waste Electronics and Electrical Equipment Regulations, and you have not been involved with the program design, then we recommend someone from your company join the webinar to get updated and get answers to any questions that you may have.

To sign up for the webinar, simply send an email to memberservices@cesarecycling.ca with your contact information.

For further information see www.cesarecycling.ca, or contact Jenny Gosal at memberservices@cesarecycling.ca or 1-877-670-2372 extension 205.
 

                                        Best Business Practices

Recessionary Thinking: Smart Marketing Tips for Tough Times
Continuing on from the past three issues, here are the seventh and eighth tips (of twelve) for effective marketing in a down economy:

7. Keep Market Share.
Use a public relations campaign to create venues for informing consumers about changes in the market or other important issues they may be facing. Positive presence is essential to positioning your organization for success when the economy turns around. As a result, you will be ahead of other businesses that decreased marketing efforts, giving you the competitive edge.

8. Word of Mouth.
Build and sustain meaningful relationships at all times. Ultimately, when all other factors are similar, people buy products and services from people they like and trust. Maintain relationships and develop new points of contact through sustained networking. Staying top of mind to a potential customer is the key to positive word of mouth.

Look for two additional tips in next week’s issue.

Information provided by: Deb Scaringi, Consultant, Scaringi Marketing, www.scaringimarketing.comdeb@scaringimarketing.com
 

                                       
Economic News

Bank of Canada Holds Interest Rate at 1%
As expected, the Bank of Canada left its benchmark interest rate unchanged at 1% yesterday, while slightly boosting its outlook for growth in the Canadian economy due to a pick-up in U.S. demand and an anticipated strong rebound in business investment.
 
The central bank revised its forecast growth to 2.4% this year and 2.8% in 2012, up modestly from its last forecast in October of 2.3% and 2.6%, respectively.

“The recovery in Canada is proceeding broadly as anticipated, with a period of more modest growth and the beginning of the expected rebalancing of demand,” the central bank said in the statement accompanying yesterday’s decision. “However, cumulative effects of the persistent strength in the Canadian dollar and Canada’s poor productivity performance are restraining this recovery in net exports and contributing to a widening of Canada’s account deficit to a 20-year high.”

The Bank of Canada said the global recovery is “proceeding at a somewhat faster pace” than policy makers had anticipated last fall, though “risks remain elevated.”

The central bank stuck to its previous view that the Canadian economy won’t reach full potential until the end of 2012, a reflection that “significant” excess capacity remains in place. Inflation is expected to “converge” to the preferred 2% target by the end of next year. 
 
Will New Mortgage Rules Cool Housing Market?
On Monday, Finance Minister Jim Flaherty unveiled changes to mortgage lending rules that will reduce the maximum amortization period to 30 years from 35 years for government-backed insurance mortgages; lower the maximum amount Canadians can borrow in refinancing their mortgages to 85% from 90% of the value of their homes; and Ottawa will withdraw government insurance backing on lines of credit secured by homes. The changes will be implemented in stages, with adjustments on amortization and refinancing limits coming into force on March 18. While government backing on home equity lines of credit, or so-called HELOCs, will be removed as of April 18.

The changes to the mortgage rules, the second in as many years, have been introduced amid concerns about the record levels of household debt by Canadians. Mr. Flaherty predicted the latest measurements will have “some moderating” impact on the housing market. The government wants to make sure Canadians are not taking advantage of record low interest rates to splurge on houses they won’t be able to afford when rates inevitably start rising again.

In practical terms, the changes to amortization lengths would add about $1,300 a year to the typical mortgage. Not huge, but enough to squeeze out some marginal buyers in the market. Pascal Gauthier, senior economist at TD Bank, said the amortization change could affect 20,000 home sales on an annualized basis, with the average home price likely to weaken by 2% this year. Craig Alexander, the bank’s chief economist, said the housing market ended 2010 better than he expected, but the mortgage changes will keep a lid on growth. “If you think of home prices over the last 10 years, that’s not a big drop,” he said. “And really, if someone can’t afford 30 years instead of 35 then I’m not sure they should be buying a house anyway. So it cools the market a little bit, but I don’t think it leads to significant weakness.”

BMO Nesbitt Burns deputy chief economist Douglas Porter meanwhile feels resale prices could drop as much as 7% within the next 12 months because of the change to amortization lengths. “You can make the case that existing home owners will see their prices go down,” he said. “You can go back to basic economics – it is the marginal buyer that really drives the market. If the buyer isn’t there, the price has to drop until you get down to the next buyer.”

The Canada Real Estate Association (CREA) is concerned that changes to mortgage rules will force Canadians to buy homes through the traditionally slow winter market rather than waiting until the spring in order to secure lower payments. CREA vice-president of government relations Randall McCauley said “we think by and large the changes are wise and prudent. But we are a little concerned the amortization change is not a precise instrument – you can’t make a change and know it will have a certain effect.”

The change to allow consumers to refinance 85% of their home value, down from 90%, will probably have a bigger impact on the condominium market, said Phil Soper, chief executive of Royal LePage Real Estate Services. “The group hit most dramatically by these changes is the casual investor. These changes and the ones a year earlier have taken a lot of the potential out of the buy and flip,” Mr. Soper said, referring to rules changes in 2010 which forced condominium investors to have a minimum 20% down payment.

The elimination of government insurance on non-amortizing home equity lines of credit should only affect a small segment of consumers, said Vince Gaetano, a principal with Monster Mortgage. “There were not that many people doing it and if they were, doing it was costing them a lot of money,” says Mr. Gaetano, who says rates on HELOCs were traditionally higher than a conventional mortgage.

While the new rules may initially slow the economy, some say they’ll help improve the financial health of households over the long run. But they will also have ripple effects on many Canadian businesses including home builders, real estate agents, the renovation industry and retailers.

Canada’s $44 billion home renovation market will be affected, according to the Bank of Nova Scotia. The home renovation sector now accounts for a record share of the country’s GDP at 2.8% but that could cool. The consequences of a slowing reno market are “far reaching,” the bank cautions, ranging from employment to retail stores and manufacturing.

Any cooling in prices or accessibility to home equity lines of credit may also dampen consumer spending on big-ticket items like cars, furniture and plane tickets. But the cooling off may not be a bad thing if it leads to more stable household finances. Craig Alexander, says he’d already factored in slowing consumer spending to about 2.5% this year from about 3.5%.


Resale Housing Market Solid in December 
The Canadian Real Estate Association (CREA) reported last Friday that it was a slightly better than average December for the Canadian resale housing market, although prices and inventory remained little changed from the month before.

The national resale price in December was $344,551, up 2% from the same month last year and little changed from November. The number of listings was also little changed from November, and as in November the stock of inventory would take 5.8 months to sell at current sales levels. Actual sales meanwhile, were down 14% from a year ago, when a new record for December sales was set. Some 447,010 homes traded hands on the Canadian Multiple Listing Service in 2010, down 3.9% from 2009.

After grinding to a halt in July after a record setting run-up in prices, the resale market gradually improved in the second half of the year. December seasonally adjusted sales were 18% higher than they were in July, and CREA said low interest rates are likely to keep propping up the market, at least in the short term. “Sales may be starting to plateau in some of Canada’s most active and expensive housing markets. Combined with a pickup in new listings and further interest rate increases, the stage is being set for smaller price gains and a further deceleration in the growth of mortgage debt,” said CREA chief economist Gregory Klump.

The new housing market has already showed signs of cooling, with construction starts falling by 13% in December, mostly because of a 45% decline in condominium construction in Ontario. Prices, however, are still climbing higher. Year-over-year, Statistics Canada’s new housing index was up 2.3% in November after a 2.5% increase in October.


Upcoming CHHMA Events For 2011

Canada Night
Sunday, March 6
InterContinental Hotel, Chicago, Illinois

Spring Conference & Annual General Meeting
Tuesday, April 5
International Centre, Mississauga, Ontario

Maple Leaf Night
Tuesday, May 10
The Mirage, Las Vegas, Nevada

Quebec Golf Tournament
Tuesday, May 17
Le Fontainebleau Golf Club, Blainville, Quebec

Ontario Golf Tournament
Wednesday, May 25
Angus Glen Golf Club, Markham, Ontario

Industry Memorial Golf Classic
Tuesday, September 27
Blue Springs Golf Club, Acton, Ontario

To register for all events visit our website at www.chhma.ca or call Pam Winter at (416) 282-0022 Ext. 21

CHHMA Cost Savings Links
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"Eye On Our Industry" is published by the CHHMA as an information resource for our members. Member input regarding content and format is welcomed. Please contact Michael Jorgenson by email: mjorgenson@chhma.ca or call (416) 282-0022, ext. 34.

 

 

Canadian Hardware & Housewares Manufacturers Association | 1335 Morningside Ave., Suite 101, Scarborough, ON M1B 5M4
Telephone: (416) 282-0022   Email: pwinter@chhma.ca