The gap is closing, though Canadian e-commerce growth continues to trail that of the United States.
This is despite early adoption of the Internet, high overall Web penetration, greater use of online banking and higher broadband connection rates than in the United States. E-commerce's percentage of total Canadian retail sales in 2004 was only 1.5 percent versus a 6 percent U.S. figure.
“The Canadian market is still bridging the chasm, gradually moving from early adopters to mass market,” said Jim Okamura, senior partner at J.C. Williams Group, Chicago.
Several reasons account for Canada's lag, according to J.C. Williams and YourShops.ca, a Toronto-based online portal with stores.
From the consumer side, there is a lack of history with remote shopping. The catalog industry has had little chance to develop, partly due to the cost of serving a geographic and ethnically diverse population and the expense of fulfillment.
Also, Canada's population is comparatively more urban, contributing to engrained brick-and-mortar store shopping behavior.
“This lack of remote shopping has resulted in particular challenges in migrating consumer spend to the e-commerce channel, where they're not used to paying for shipping or waiting for gratification of the purchase,” Okamura said.
From the retailer supply side, consumers have limited choice because of the paucity of Internet-only and multichannel retailers. Many leading Canadian retailers lack transactional capability on their Web sites. Some retailers even quit e-commerce.
“The business case can be more challenging as the fixed capital investment to run a competitive e-commerce channel can be as costly, yet the total size of the Canadian retail market is one-tenth the size [of the U.S.], suggesting that break-even points are at a much higher market share number,” Okamura said.
The sheer size of the U.S. market — a population nearly 10 times that of Canada's — encourages narrower niches, including specialty stores and regional chains. Canadian retail, meanwhile, has consolidated since regional chains aren't efficient enough to compete against U.S. entrants. This leads to a situation where a mall will have the same retailer in Vancouver, Toronto or Montreal.
These resource and long-term barriers to entry, as well as demand-side issues, have slowed Canadian e-commerce growth. Canadian e-commerce is where the United States was in 2001, with smaller purchases typically in commodity merchandise like books, music and DVDs, computer hardware and software, travel, apparel, tickets and consumer electronics.
A positive experience can encourage bigger-ticket purchases, albeit with more handholding during the shopping and buying process.
A recent J.C. Williams survey for YourShops.ca showed that the biggest letdown for Canadian e-commerce buyers was in the post-purchase experience.
The gap between expectation and satisfaction was most pronounced on attributes like “timely delivery and proper care and handling of your product” and “the handling of currency exchange and customs/duty charges.” Others were the “variety of shipping and delivery options” and “clear and easy-to-use customer service options.”
The survey also pitched another question to online consumers who shopped multiple Internet retailers before making their purchase decision. When asked whether they knew enough retailers to satisfactorily comparison shop, 46 percent said no.
Canada's e-commerce market includes 6 million to 7 million shoppers, based on reports from Ipsos-Reid and Statistics Canada. But the J.C. Williams survey for YourShops.ca gives a better handle on the Canadian online consumer.
Mirroring the United States, an estimated 55 percent of online buyers are women. Men spend more online, $368 (Canadian) in the past six months versus $275 for women. Women drive online purchases in the United States. Also, buyers online are younger than the general population, with 58 percent ages 18-44. One-third are under 34.
Online buyers straddle all household income strata, resembling the overall population. About 37 percent have incomes under $50,000 (Canadian), which is the same percentage as those from the mid-income households making $50,000 (Canadian) to $79,000.
J.C. Williams divides Canadian shoppers into three categories. Information seekers, at 48 percent of Canada's e-commerce universe, are shoppers who have an idea of what they want to buy, but need to comparison shop to make the purchase decision.
The next biggest type is search and destroy: shoppers who know what they want to buy and where. They account for 41 percent of the online buying population. Impulsive shoppers, at 11 percent, have no intended purchase but come across something they like and buy on impulse.
Also, 86 percent of Canadian e-commerce buyers are enrolled in The Loyalty Group's Air Miles reward program. There are more than 15 million Air Miles collectors in Canada out of a total population of 32 million.
The Loyalty Group developed YourShops.ca in fall 2003. The site features 40 North American brands and retailers like Victoria's Secret, RadioShack, Dell Canada and eBay.ca.
Integrated marketing campaigns seem to be most effective at pushing Canadians to shop online. The survey found that prior to making their last purchase online, 51 percent of the customers browsed an online store, 37 percent browsed a catalog or flier and 35 percent browsed in a physical store. The most popular tactics to drive Canadian e-commerce are e-mail marketing, paid search placement and affiliate marketing.
Mickey Alam Khan covers Internet marketing campaigns and e-commerce, agency news as well as circulation for DM News and DMNews.com. To keep up with the latest developments in these areas, subscribe to our daily and weekly e-mail newsletters by visiting www.dmnews.com/newsletters
