A widening income gap between the country’s top earners and everyone else is changing how companies are positioning their products, a new commentary from CIBC says.
CIBC says top executives at an investor conference last week indicated everyone from banks to movie theatres to cell phone firms are tilting their offerings to capture sales from deep-pocketed consumers whose pockets are getting deeper.
“With the rich getting richer, a growing number of businesses are seeking growth from those with money to spend and money to invest,” Avery Shenfeld, CIBC chief economist, said in conference recap note Monday.
Banks, insurers and mutual fund managers said at the conference they’re catering increasingly to higher income earners with more targeted marketing, Shenfield said.
“Beefing up private wealth management and mutual fund arms, in both the U.S. and Canada, is front and centre for both Canadian banks and insurers, as well as, of course, for independent fund companies, Shenfeld said.
He added, “but high-end spenders are also of interest to movie chains adding luxury theatre options at higher prices.”
High-end cinema
In August, the country’s biggest theatre operator, Cineplex, opened its first high-end cinema for 19 or older moviegoers. It’s planning to add lux theatres to at least 11 more locations in Toronto alone.
MORE: Adults only? Theatres bank on desire to leave kids at home
Cineplex says the new line of high-end theatres is aimed at adults who want a break from their kids, or a more refined trip out to see a film.
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“We know that people like the adult-only environment, so we’re catering to that piece,” Pat Marshall vice-president of communications at Cineplex told Global News.
Broader shift
CIBC says the move reflects a broader shift in income distribution in Canada, with incomes for those in high-paying sectors accelerating while wage growth remains sluggish for everyone else.
That slow to stagnant wage growth at the lower end of the income spectrum has benefitted bargain shops such as Dollarama and Dollar Tree. Experts say both have intentions of expanding aggressively across the country.
MORE: Dollar stores in expansion mode as more Canadians feel pinch
At the high end, a wave of luxury and boutique retailers is entering Canada – another sign, experts say, that businesses see more room to grow at the top of the income ladder.
This month, the first Nordstrom location opened in Calgary, while Hudson’s Bay is currently planning the launch of several Saks locations.
MORE: Sneak peek – inside Canada’s first Nordstrom store
Even cellphone companies are moving to capitalize on the widening disparity, CIBC suggested.
“Even in the telecom space … industry players appear to be looking … to service options that would appeal to those with discretionary spending room,” Shenfeld said.
Top execs for BCE, Rogers, and Telus, the country’s three big wireless providers, spoke at the CIBC conference.
TV channel owners like Bell and Rogers are facing a possible squeeze on TV sales as regulators weigh breaking open television packages to allow consumers to pay for only the channels they want – a move to alleviate cable bills that have climbed sharply in recent years.
“Pay for fewer cable channels? That’s OK, we’ll get you to buy more data to feed your appetite for watching movies and sports on the go,” Shenfeld said.
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