E-commerce Overview Series - Retail Trade in Canada

Publication Date: December 2001

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Canada’s retail trade sector is defined as establishments primarily engaged in retailing merchandise, generally without transformation, and rendering services incidental to the sale of the merchandise.

E-commerce Definition

E-commerce is defined as sales or purchases over the Internet, with or without online payment, excluding private networks.

E-commerce Overview Series

Learn about the various technologies used by Canadian retailers; how they are using the Internet to buy and sell goods and services; and the barriers to buying and selling over the Internet.

Canada’s E-commerce Market ¹

Canadian businesses posted e-commerce sales of $7.2 billion in 2000, a 73 percent increase over 1999. Businesses accounted for 80 percent of this activity. Online export sales were 17 percent of the total. Canada captured about 4 percent of global e-commerce revenue in 2000. The forecasted annual growth through 2005 is 64 percent for online business purchases and 57 percent for online consumer purchases.

Canadian retailers had e-commerce sales of $890 million in 2000, a 46 percent increase over 1999. Online export sales were 3 percent of the total. The mix of business was almost evenly split between business customers (51 percent) and consumers. Business purchases accounted for most of the growth. E-commerce sales contribute 0.4 percent to total operating revenue.

Retail trade’s share of Canada’s e-commerce sales fell 2 percent in 2000 to 12 percent, a fourth place ranking behind manufacturing, wholesale trade and, transportation and warehousing.

Accessibility of the Internet is improving. ²

More than half of Canada’s retailers currently use the Internet, an increase of 12 percent over 1999. About 23 percent of all retailers have a Web site, 13 percent feature an online payment option. Almost half of retailers use e-mail communications.

Business applications using the Internet are growing.

Large retailers can use the Internet to increase vendor collaboration and partnerships. This will drive costs out of the supply chain and reduce out-of-stocks. Small and mid-size retailers can look to the Internet to facilitate communications using e-mail, Web sites, intranets and/or extranets.

E-procurement activities outpacing online selling in retail.

In 2000, over 85 percent of large retailers (i.e., 300+ employees) sold goods and services over the Internet, capturing about 35 percent of total e-commerce sales. Retailers advise that online sales are less than 3 percent of revenues.³ The economic activity attributable to online buying doubled in 2000 to 32 percent.

Retail trade leads online sales to consumers.

Multi-channel selling strategies that use Web sites to drive traffic into stores and to increase brand awareness are key. Comparison shopping for products eventually bought elsewhere is a popular online consumer activity.

Business-to-consumer (B2C)

Clicks-and-mortar retailers are defining retail success on the Internet today. These multi-channel retailers address the consumer’s emerging preference to enjoy the same shopping experience and convenience in all channels (e.g., store, catalogue, Internet). Estimates suggest that one-third of today’s shoppers have bought in all three channels ⁴, and that they shop more often, spend more and are more loyal.

Experience shows that using the Internet to sell directly to consumers is most successful when it is part of an integrated multi-channel strategy. Two challenges are: (1) converting browsers to shoppers regardless of the channel they choose. Web only retailers will find this difficult since only 5 percent of visitors to retail Web sites are actually buying ⁵; and, (2) repatriating the 45 percent of Canadian online shoppers who are buying from foreign sites ⁶.

For small retailers, being on the Internet can be as simple as using e-mail to advise customers of upcoming sales promotions and new products, or to accept customer orders. These are all activities aimed at increasing customer loyalty and convenience.

Business-to-business (B2B)

Many analysts are suggesting that to be successful in the Internet economy, traditional and new format retailers will have to: (1) transform their businesses into multi-channel operations; (2) capitalize on established business strengths (e.g., customer relationship management, vendor relations); and (3) permit the development of new capabilities (e.g., data warehousing).

The Internet offers retailers an accessible, low-cost platform for reaching consumers and business partners alike. Retailers have yet to take full advantage of the Internet’s potential to revolutionize their businesses. Whether it’s how they communicate and interact with their employees (intranets), collect and share data with their suppliers (extranets) or market to consumers (Web sites), more needs to be done to remain competitive. The Internet’s importance as a strategic business tool for Canada’s retailers is growing.

Retailers are adept at using traditional e-commerce.

Retailers engage in a variety of e-commerce transactions, most of which do not occur on the Internet. Retailers have a long tradition of using technology to automate business processes, manage customer relationships, evaluate performance and collaborate with vendors. The Internet is no exception.

Barriers to using Internet powered e-commerce.

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Maximizing the return on investment of existing information technology (IT) investments might be a factor contributing to the apparent reluctance to change current business models. Better integration of IT Departments corporately, a reduction of cost pressures on IT expenditures, an increase in investment in IT and better vendor relationships are all viewed as strategic imperatives to remaining competitive in the global marketplace.

To learn more, you can visit these sites: 

• http://retailcouncil.org
• http://strategis.ic.gc.ca/ebizenable
• http://strategis.ic.gc.ca
• http://sourcecan.ca

OR you can contact: 

Industry Canada
Service Industries
Retail Council of Canada
vchu@retailcouncil.org

Reference Sources

1. E-commerce & Technology 2000 Survey, Statistics Canada
2. E-commerce & Technology 1999 and 2000 Surveys, Statistics Canada
3. 2001 Canadian Retail Technology Survey, RCC
4. 2001 The Multi-Channel Retail Report, JCWG
5. E-commerce Article, M. Totty, WSJ, Sept. 24, 2001
6. 2001 Household Internet Survey, Statistics Canada

Published in partnership with Retail Council of Canada