Canadian retailers are focusing largely on the domestic market, earning 96 per cent of revenues from Canadian consumers, according to a study by the Boston Consulting Group (BCG) and the Retail Council of Canada (RCC).
“Many do not necessarily offer shipping to the U.S., and more importantly they have not yet made an effort to establish a brand in the U.S,” said Julie Breen, e-commerce research analyst for Toronto-based BCG. “Many U.S. retailers have established brands in Canada, whether it be that they have a physical presence in Canada already or because with our close proximity we are witness to much of their advertising campaigns. U.S. consumers or other foreign consumers are not as familiar with Canadian retail brands.”
The Canadian Online Retailing Report was based on survey responses from 66 Canadian on-line retailers. The research shows Canada already has many of the ingredients required to take a leadership position in on-line retailing. Canada stands second to Sweden among developed countries in Internet adoption, and above the U.S. A main finding was that while Canadians have embraced the Internet, both consumers and retailers have yet to fully adopt on-line retailing.
“While Canadian retailers are doing well compared to the rest of the world, the plain fact is that our main competitors are south of the border,” said Michael Eubanks, RCC’s vice-president of information technology and e-commerce. “This timely study provides the key benchmarks required to evaluate our retailer’s performance and build on the many strengths we have to nurture the industry to maturity.”
Eubanks noted that in Canada there are a lot of bricks-and-mortar retailers dominating and moving to the on-line channel, while in the U.S. there are more pure-play on-line ventures.
The study found Canadian retailers have made progress in moving on-line, showing strong performance on several key economic drivers such as customer acquisition costs, conversion and loyalty rates, but have yet to conquer fulfilment challenges. The study indicates that only 71 per cent of on-line orders are completely filled and 12 per cent are never filled, a rate twice the average of U.S. retailers.
“Fulfilment is a critical part of the consumer purchase process,” said James Vogtle, BCG’s e-commerce research director. “Poor fulfilment performance weakens consumer confidence and will lead to customer defections. Canadian consumers find fulfilment to be one of the least-satisfying aspects of the on-line experience.”
Ilya Bahar believes the Canadian on-line retailing industry is improving, but not at the same speed as U.S. retailers.
“We’re one tenth of the size of the U.S. market and you really require more or less the same investment to have an exciting Web site,” said Bahar, who is responsible for retail and consumer product practice at Toronto-based PriceWaterhouseCoopers. “The volume of business you will generate in Canada is about roughly one-tenth, if not actually less than one-tenth, because on-line buying habits are lower proportionately.”
PriceWaterhouseCoopers’ business-to-consumer principle consultant, Rudy Bayoumi, said Canadian consumers are extremely cautious.
“I think a big factor in really turning things on and shopping on-line in volume will be a function of the confidence factor. As we get more and more good experience of shopping on the Internet, you’re going to see shoppers come on-line and use it as a mainstream way of shopping,” Bayoumi said. “But, we’re not there yet.”