Canada Hungry for Domestic E-Commerce

The bad news is Canada is lagging behind the United States in electronic commerce. The good news is Canadians are dying to buy Canadian, if only their local businesses would get online.

IBM and the Retail Council of Canada are offering Canadian companies a primer on how to get started and who to target in a report issued this week by the Retail Council.

Canadians spent about $688 million (Canadian) online last year, up more than 150 percent from 1997. But about 65 percent of those dollars went to companies outside the country, according to the study. “This country’s consumers are ready, willing and able to spend significant dollars online. Even better, they generally want to buy Canadian, if only they could,” the report states. “Domestic companies have been slow so far in entering the e-retail race.

Banking on more Canadian companies waking up to the Internet market, the Canadian government predicts online spending by Canadians will grow quickly over the next five years. By 2003, the country projects $12.8 billion in online sales, accounting for 4.6 percent of the country’s overall retail spending. About 13 percent of Canadian Internet users say they shop online today, and nearly the same number say they plan to make online purchases in the near future.

Pros and Cons

Not surprisingly, Canadians list security of their transactions and personal data as their primary concern when shopping online. Based on the U.S. experience, where security is also a key concern but the market is far more advanced, IBM and the Retail Council of Canada argue Canadian retailers can help shoppers overcome those fears. “Those who do shop online display a high level of confidence in the security of their transactions on the Net,” the report says, noting 70 percent of online shoppers pay for their purchases with credit cards.

On the flip side, Canadian businesses and the country’s economy offer several good reasons for Canadian shoppers to spend their dollars at home. With Canadian dollars worth half as much as U.S. dollars, spending in Canada will stretch the currency farther. In addition, shopping at home will enable Canadians to avoid paying import taxes on their goods. Finally, goods shipped from Canadian stores and warehouses often take less travel time than goods coming from the United States because they cannot be waylaid at the border.

Canadian retailers also have an advantage, according to the report, because they understand Canadians better than Americans do. “There’s nothing like a firsthand understanding of the needs of Canadian shoppers. For example, Canadian retailers already offer products packaged in both official languages. They also have experience dealing with regional differences in buying behaviors,” the report states.

What Kind of Sales?

As is the case south of the border, Canada’s biggest online market is business-to-business products and services. About 86 percent of all online transactions last year were business-to-business, where $4.54 billion changed hands. Spending in that sector grew 192 percent from 1997 and is expected to grow to almost 72 percent per year to $80.4 billion by 2003. In the United States, by comparison, business-to-business dollars spent online outnumber consumer purchases two to one. By 2003, business-to-business spending is predicted to reach $636 billion.

The Canadian business-to-business market “offers a huge opportunity for retailers to improve efficiency and reduce costs of supporting traditional stores, catalogue sales and online shopping,” according to the report. Over the next five years, business-to-business spending will continue to dominate overall Canadian online spending, the report predicts.

But IBM and the Retail Council of Canada caution Canadian companies not to overlook the consumer opportunity either. They predict consumer online spending will climb 79 percent per year over the next five years, with consumers shelling out $12.8 billion in 2003. The typical Canadian online shopper is male, making 56 percent of all purchases, and he falls in the 18-29 years or 40-49 years age ranges. The latter age range, the study notes, includes the best target shoppers because they have the highest average incomes.