I'll have the Zellers fries
...with a side of inflation
Good morning. One of the main indicators of a recession is two back-to-back quarters of a shrinking economy. But there's one other, far less formal indicator: makeup sales.
Coined by Leonard Lauder (chairman emeritus of cosmetic giant Estée Lauder) in 2001, the lipstick index describes an uptick in makeup sales as a broader economic indicator of an underperforming economy. It theorizes that when the economy is gloomy, people will cut back on eating out, but indulge in smaller luxuries, like a tube of Tom Ford lipstick.
Sure enough, consumers are spending big bucks on makeup products 👀
In this edition: 🧸 Hey, it's Zeddy Bear!🏡 Renting is a nightmare🩸 Reimagining period pain relief
— Vindhya Kolluru, Editor
* Market data as of 9:00 pm ET Sunday, August 21.
Is Zellers the answer to rising inflation?
Credit: Claudio Schwartz / Unsplash
Low-rise jeans, butterfly clips, frosty blue eyeshadow and… Zellers? The Y2K era really has taken over our lives if the discount department retail chain is coming back from the dead.
What happened: Zellers plans to return sometime next year, a decade after the discount chain closed most of its locations, owner Hudson's Bay Company (HBC) said Wednesday. Zellers will launch a brand spanking new e-commerce website and expand its brick-and-mortar footprint within existing Hudson's Bay department stores across the country in early 2023, HBC said.
ICYMI: HBC originally closed down Zellers due to a lack of profitability and rising competition from retailers like Walmart Canada.
Sadly, the reason for the resurgence isn’t just wanting to recapture the nostalgia. With soaring inflation and the cost of living rising at a record pace across the country, the timing of the brand's resurrection is also an attempt to give consumers another budget retailer option.
Just how bad is inflation right now? After notching a nearly 40-year high rate of inflation in June, inflation in Canada fell to 7.6% in July. This is the first decline since June 2020 (*crowd cheers*), but if we take a peek at the data, there’s some bad news (*crowd boos*). Although gas prices have come down, your next grocery shopping trip or vacay will still cost you more than usual. Food prices increased by 9.9% in July compared to 9.4% in June, bakery products by 13.6% and airfare by 25.5%.
TLDR: inflation is still hot…but just not piping hot. Mind you, we’re still far off from the Bank of Canada’s sweet spot for inflation, which is at around 2%.
The bottom line: With competition heating up between Walmart, Amazon, and Giant Tiger, Zellers has an uphill battle to win back market share among low-cost retailers. Time will tell if the retailer is able to offer consumers products at a lower price point for Canadians. If nothing else, we hope that HBC brings back the yummy Zellers fries and hot dogs and, of course, Zeddy Bear. Talk about a throwback!
— Sabrina Dotsch and Harsimran Kaur Garcha
On our radar
Amid a tight labour market, some small businesses in Canada are offering extra benefits to retain staff, according to the Globe. One of those businesses, Toronto-based facial spa Glow Beauty Bar, covers therapeutic massages for staff. The spa’s owner, Ashley Cammisuli, is offering the benefits so that her team of five can access the perks of working at a bigger company.
The broader market downturn is headed for private companies. VC funding (financing offered to startups and small businesses) in Canada fell to pre-pandemic levels in the second quarter — by a whopping 67% this time one year ago to $1.65 billion. “We’re going to see a slowdown that might persist,” Christiane Wherry, vice president of research and product at Canadian Venture Capital and Private Equity Association, told the Globe.
Skipping the guac? You aren’t alone. Preliminary data from Statistics Canada finds that retail sales dropped by 2% in July, a possible sign that high inflation has begun to weigh on shoppers. TD economist Ksenia Bushmeneva noted that, compared to last year, Canadians spent far more on travel, entertainment and recreation this summer. But Bushmeneva adds that she expects spending in these areas to slow in the coming months because of…you guessed it, inflation. Seriously, how many times have we said ‘inflation’ in this edition? 😩
Renting is straining our financial futures
Credit: Brandon Griggs / Unsplash
With a rise in the average price of rentals across major Canadian cities, the Globe's personal finance columnist Rob Carrick muses that renting could financially hurt a generation of young adults. Yikes.
Carrick refers to the general rule that says you can't spend more than 30% of your gross pay on living costs, like rent. But in this rental and housing market, that's near impossible for most Canadians.
How expensive is rent? According to a report from Rentals.ca, the average rent was $1,934 last month, up 10.4% year-over-year, and up 2.6% monthly. In Toronto, for example, you may have to shell out $2,257 for a one-bedroom unit. Moving out of the downtown core might help, as rent in Hamilton is around 25% cheaper.
Aside from cutting down on other expenses, getting a roomie or moving in with your family, there's not a whole lot that can be done on the individual level.
The bottom line: Don't put too much pressure on yourself to stick by certain budgeting rules or if the high cost of living is preventing you from starting, say, an emergency fund. In his column, Carrick notes that we should bump the max for living costs from 30% to 35%, adding that many Canadians, including young adults, will be at a much higher number than that through no fault of their own.
— Vindhya Kolluru
Other things we read and we liked
👖 We're having a hard time wrapping our minds around this TikTok hack to find the perfect pair of jeans during your shopping trip, without even trying them on.
👩👧 For a dose of wholesomeness, check out these beautiful portraits of motherhood by Madeline Donaghue.
👯♀️ Who's cutting onions?! In this Vox feature, six people muse about the importance of friendships in their lives. This might be the reminder you needed to catch up with an old pal.
MONEY CRUSH MONDAY
Lux Perry is reimagining period pain relief
Today, Btchcoin is spotlighting Lux Perry, the CEO and co-founder of somedays, a Vancouver-based company that is putting pleasure (yes, really) into treating period pain. Founded in 2020, somedays uses the latest research on chronic pain to develop bath products at lotions that target the root cause of period pain.
Their advice to new or aspiring founders: Don’t wait for perfection. If you wait until your product is perfect to put it into the world, it’s too late. You have to be able to look back on the first iteration of your product and be embarrassed.
On their 5:30 am morning routine: My mornings are generally prepped for the night before by writing out my to-do list. Then, I sort of do the same thing every morning. I drink a smoothie, take my dog Dwayne for a walk, and listen to a podcast.
Their WFH essentials: Headphones and, of course, a proper chair. For the longest time, I was working from my couch thinking “this is fine.” But, alas, I ended up with the craziest back pain of my entire life.
Read the full Q&A to learn about how Perry's journey with chronic pain led them to launch somedays.
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