Canadian retailers have been reluctant to shift to online retailing channels, and this has allowed foreign e-retailers to dominate the online Canadian marketplace. While online sales in the country continue to make up a relatively small share of total retail sales, retail e-commerce sales have been growing quickly and are expected to account for 8.2% of total sales by 2018 from 5.9% in 2015. As of 2014, online sales had hit C$25.4 billion and are estimated to reach C$29.6 billion this year.
However, the benefits of this growth are going to big US-based online retailers such as Amazon and Target. According to a report from BMO Capital Markets, five million local online shoppers a month are visiting Amazon.ca, the Canadian arm of online retail giant Amazon.
The report added that Amazon.ca could triple or even quadruple its Canadian revenues over the next few years as it continues to introduce new product categories, such as groceries, as well as rolling out services like its premium subscription delivery service, Amazon Prime. Amazon remains the market leader in the online Canadian marketplace, with $1.5 billion in sales in 2013.
Major Canadian retailers have been reluctant to embrace the online Canadian marketplace for a variety of reasons. One is that Canadians so far overwhelmingly prefer to continue making their purchases offline in the traditional brick-and-mortar stores.
While Canadian consumers are using the Internet to research products and search for deals, they finalize their purchases by going to the store. Retailers’ reluctance to completely embrace digital retailing has also confused consumers, as they either fail to offer online shopping options or introduce an online shopping channel but close it later.
Another factor hampering the growth of the online Canadian marketplace is high shipping rates. According to a report from Forrester Research, nearly 70% of Canadians surveyed expressed concern over prohibitive shipping costs when they shop online. Forrester pointed out that the cost of shipping a six-pound package from Toronto to Vancouver via the Canada Post Xpresspost service was US$40.63.
In contrast, shipping a similar package from New York to Los Angeles, a comparable distance, using the priority mail service of the US Postal Service, cost just US$11.30. This is why 68% of Canadians who shop online choose to do so at international websites, since it ultimately is more affordable.
However, many big retailers are gradually committing to rolling out a digital retail strategy. Loblaw Cos, Ltd, Canada’s biggest grocery chain, is trying out an omni-channel ‘click and collect’ shopping, in which customers make their purchases online, and then go to the store to collect them.
Canadian Tire is also committing to a three-year strategy in which digital shopping plays a significant part. While these moves are promising, there is still a long way to go before Canadian retailers can catch up to their American counterparts in making a dent on the online Canadian marketplace.