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Internet Retailing in Canada Picks Up Steam as More E-Commerce Options Open Up

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Canada has one of the highest rates of internet penetration in the world. Statistics Canada indicates more than 80% of Canadian households in metropolitan areas and more than 70% of Canadian households in rural areas have access to the internet. However, e-commerce in Canada historically has been lagging behind many markets, with the level of e-commerce penetration among the lowest in the developed world, behind markets like the US, the UK and many others. Cultural differences have often been cited among the factors behind the slow progress of internet shopping in Canada, such as the fact that Canadians as shoppers prefer to feel and touch merchandise in stores.

However, some industry experts rightly draw attention to the issue of e-commerce readiness of Canadian retailers and their reluctance to invest in online shopping as a key factor behind the slower development of online retail in the country. For instance, reports by EIU on digital economies downgraded Canada’s ranking from ninth in 2009 to 11th in 2010 among 70 countries. The reports indicated that the country underutilised its internet potential, and businesses lagged behind in internet retail innovation. Some retailers blamed logistics problems for their decisions not to invest in e-commerce or even shut down already existing sites, examples being Canadian Tire in 2009. Coupled with the fact that not all foreign-based sites ship to Canada and the cost of shipments and custom duties can significantly add to the price, a lack of options certainly resulted in lower levels of online retail penetration in the country.

Nonetheless, 2011 and 2012 finally saw more bricks and mortar retailers in Canada investing in e-commerce, a development spurred not the least by increasing competition coming from foreign-based (US-based in particular) retailers moving into Canada at a time when Canadian retailers are struggling to drive sales growth. Furthermore, more Canadian-based online-only retailers have emerged to further boost e-commerce in Canada.

Rise in Canadian-based online-only retailers

While, for the past few years, US-based online retailers have ruled Canadian e-commerce, with Amazon leading the pack, Canadian based e-retailers are finally breaking the ranks.

Although still small in terms of sales, www.well.ca has been in the spotlight since its launch in 2007 as the site has been picking up growth and expanding its merchandise and customer reach. In spring 2012, the company introduced its first virtual shopping wall at a Toronto subway station, featuring a line of popular products marketed by Procter & Gamble, such as nappies/diapers and detergents, in addition to www.well.ca’s typical selection of health and beauty products.
hoppers can download a smartphone app and place orders by scanning QR codes on pictures of products, which are shipped to customers free of charge. The retailer reported that, in the first three hours of operation, over 100 apps were downloaded and hundreds of items scanned. The retailer aims to introduce similar shops across Canada to increase its share of growing m-commerce.

Joining Canadian online retailers is www.shop.ca, launched in August 2012 with an ambitious goal of becoming Canada’s number one destination for online shopping. Currently, the site features a broad selection of merchandise and carries well-known brands, such as Cuisinart and Bissell in appliances, Samsung and Panasonic in electronics, and 7 for All Mankind and Canada Goose in apparel, amongst many others. The retailer offers free shipping (with some exceptions) and free returns. The retailer also features a Social Loyalty Network reward program, with Rewards Dollars offered on purchases and social sharing (ie customers earn rewards by sharing a link to a product or posting a review on a social media site). In October 2012, two months after its official site launch, the company announced that it was ranked 28th in the top 100 Canadian e-commerce sites and fifth as an e-tailer by comScore.

A number of other e-retailers have emerged as well, further adding to the array of available online shopping options for Canadians, including luxury online shopping clubs like Montreal-based www.iGet.it and Toronto-based members-only flash sale site www.thepeacockparade.com.

Bricks and mortar stores see growth in online sales

In 2011, Wal-Mart Canada moved into online shopping in the country with more products made available to Canadians as online purchases. Sales through the retailer’s site have since been growing in leaps and bounds. However, not all products are available for online purchase, and online sales’ overall share of Wal-Mart Canada’s total sales still falls behind that of the retailer’s sales in the US.

Other retailers saw healthy growth in online purchases in 2011. Thus, The Bay – one the oldest and most established department stores in Canada – has reopened its online shopping site (after shutting it down in 2009) and has since seen growth. Sears Canada – one of the earliest entrants into online retail in Canada – has also updated and improved its shopping site, helping to boost site visits and purchases.

Growth ahead will be dependent on retailers’ e-readiness and investment in online retail

Canadian internet retailing is expected to see a 14% CAGR increase in constant value terms over 2012-2017. However, the success of internet retailing in Canada is largely dependent on the readiness of retailers to invest in online shopping to ensure user-friendly site designs, product assortment, convenient shipping and return options, competitive prices and reward programs to encourage repeated purchases. For instance, current projections only show a modest expected rise in internet sales of food and drinks. Behind these modest expectations is the fact that many grocery retailers in Canada do not consider online shopping as a viable option. A 2012 survey released by the Canadian Grocer magazine indicated that 43% of grocery retailers do not consider e-commerce as a part of their future strategy, while 57% are in the research stage to assess whether it is worthy of investment. Hence, the options for grocery purchases remain limited, even in large metropolitan areas.

Current trends in online shopping demand and the success of many retailers in the area attest to the readiness of Canadian consumers. It is becoming increasingly important then for Canadian retailers to appreciate the opportunities in online retailing, assess where they fit in best and move with the times, times where digital communications and technologies are increasingly defining consumer shopping behaviour.

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