Canadian e-commerce companies need to look at lowering shipping costs

The leading deterrent to Canadian Internet shopping is high delivery costs, according to a recent Ernst & Young survey.

The Global Online Retailing survey asked more than 3,900 people from six countries about their on-line spending habits. The survey was further broken down to results by country, including Canada.

Miles Faulkner, vice-president of e-commerce for Ernst & Young, said he expects to see a move toward more cost efficient ways of delivery and he cited Grocery Gateway as a good example of an on-line company with a reasonable delivery charge.

“We just started using Grocery Gateway and my wife loves it. There is a low delivery charge. It’s an amazing value,” Faulkner said.

The survey showed that 46 per cent of Canadian shoppers listed high shipping costs as a deterrent to on-line purchasing.

Don Thompson, a partner at Deloitte and Touche Consulting Group whose area of responsibility is e-business, said one reason for the high shipping costs is the distance packages have to travel.

“I think New York state has the population of Canada, so if you were to look at setting up a business in New York state and deliver products to people that’s not very hard to do. (Customers) are going to be close to you and there’s enough of them to make it worthwhile. In Canada to get to the same market space, you’re probably shipping over a much larger distance across provinces,” Thompson explained.

He added that many e-tailers lost money at Christmas despite high shipping costs.

“It was interesting. A lot of the retailers that did go on-line before Christmas wound up subsidizing shipping costs to try to get market share and also to try to retain it, because customer satisfaction is critical here. So if they knew they weren’t going to make their deadlines by Christmas, they’d start reverting to courier services. There’s no way they got that money back from the customer,” he said.

Other deterrents noted in the study were: item is very large, 35 per cent; item is very high cost, 29 per cent; want to see/feel item, 23 per cent. Concerns about the security of credit card information were noted by only 9 per cent of the respondents.

According to the survey more than half of Canadian households own a PC and 39 per cent of those are on-line. Both of these numbers are larger than the percentages for the United States. However, only nine per cent of Canadians made on-line purchase compared with 17 per cent in the U.S.

Faulkner noted this represented great possibilities for Canadian businesses.

“There is a huge opportunity for Internet retail marketplace,” he said. “Canadians are ready to buy and willing to buy, and they want to buy Canadian.”

He added at the moment is the number one e-commerce site shopped by Canadians.

“The traditional Canadian retailers are going to have to take notice.”

The survey found that of the Canadian sites shopped, the most frequently visited one was Chapters, but of all sites eBay was the most visited. Other popular Canadian sites included Sears, Indigo Books and Music, Futureshop and Ticketmaster.

More than eight out of 10 Canadian buyers have increased their on-line purchases over the last year, with nearly half of the buyers doubling, and 26 per cent tripling, their volume of purchases, according to the survey. But almost 80 per cent of those buyers had made less than 10 purchases.

Canadian respondents bought most frequently from already-known site, with 51 per cent saying they would always or most often go to a site from their favourites file.

Faulkner said once a customer has built a relationship they will probably keep going back to that site. “Getting into that top 10 bookmark is vital.”

The survey also noted that 93 per cent of respondents have purchased from fewer than 10 sites in the past year.

Faulkner stated that shopping activity is very directed. “I think it was 90 per cent of the people went for specific purchases,” he said. “They don’t just wander around, they are making a decision to buy and then going in.”

More than half of the respondents said it didn’t matter if the site was run by an Internet only or a clicks and mortar operator.

However, Thompson said the best use of a Web site may come from a clicks and mortar operator, if it is not selling a virtual product. “We’re starting to see companies like Home Depot exploring this and Canadian Tire’s been doing this for a couple of years now; is to set it up so you incent people to come to your physical location to get their goods,” Thompson said.

He called it an ideal blend of the Internet and bricks and mortar.

“That’s an excellent model because stores like Canadian Tire are destination sites. People want to go there because it’s Canadian Tire. They go to look at the stuff. They want to browse, it’s an adult candy store,” he said.