Canada’s Digital Report Card

On Tuesday, I’ll be heading north to attend and speak at the Canadian Online Travel Conference being held in Ottawa.

At this event, suggestively titled, Online Revealed, I will talk about the state of online marketing and selling in Canada, including a seat-of-the-pants “report card” for digital Canada as it plays on the world stage.

First, in the interest of full disclosure, let it be known that I am technically Canadian. I left Canada at the age of four, so don’t ask me to comment on hockey scores, Canadian politics or state healthcare. Fortunately, eMarketer’s coverage of the Canadian market, in terms of online marketing and e-commerce, is ample, so at least I will have some facts and figures to parlay.

Does Canada Make the Grade?

Canada is a bit of an enigma. While the country is far ahead of the US and some other industrialized nations in matters relating to the Internet, it lags the global online market in two fundamental areas: online buying and Internet advertising.

Market Fundamentals

Digitally-speaking, Canada has a lot going for it. By eMarketer’s count, 58% of Canada’s population is online, which is only slightly behind the US penetration rate of 63% and yet beats the UK’s 49%. What’s more, according to Canada Internet Project, fully 90% of Canadians aged 18 to 24 are online. In Canada, as in other parts of the world, youth rules in the digital space. More importantly, Canada is an “A” student when it comes to broadband adoption. While just over half (51%) of all households in Canada were connected to a high-speed line as of year-end 2005, a clear majority (59%) will be at the end of this year. That puts Canada about two years ahead of the US, which we predict will have a household broadband penetration of only 44% by the end of this year.

Similarly, usage of the Internet in Canada, as measured in time spent per week and pages viewed, exceeds that of the US. According to comScore, the average Canadian spends about 75 minutes per day online, compared with about 60-65 minutes in the US.

Shopping and Searching

Online marketers will also note that Canadians are on par with the US and UK when it comes to shopping and searching on the Internet. eMarketer estimates that 80% of Canadian Internet users shop on the Web (but don’t necessarily buy there), which matches the rate in the UK and even exceeds the US rate of 78%. And while 83% of both Canadians and Americans use search engines on a monthly basis, Canadians are slightly more frequent in their usage. In other words, Canada is a great market for delivering advertising messages via the Web.

Online Purchasing and Internet Advertising

Despite these high marks, only 56% of Internet users in Canada actually make purchases over the Web. The rate is 70% in the UK and 66% in the US.

So Canada gets a B- for online buying. There are many reasons for this reluctance, but they can be summed up by the following factors:

  • Canadians, unlike Americans, do not have a rich history of purchasing remotely via catalog; while 50% of Americans make catalog purchases each year, only 12% of Canadians do so, according to Canada Post Borderfree.

  • Realizing that the majority of North American online stores are US-based, Canadians looking to buy online from US stores face higher shipping costs, potentially unfavorable exchange rate movements, customs complications and, in some cases, language barriers.

  • A “chicken and egg” situation whereby Canadian consumers don’t want to buy from Canadian merchants that don’t bother to invest in creating great online shopping sites, while merchants restrict their e-commerce investments, citing the lack of interest in online buying.

Data from Stats Canada reveals that only 42% of Canadian retailers even bother to put up a Web site, and a mere 11% of Canadian firms sell their goods and services online. With 89% of businesses not selling online, that has to put a damper on consumer buying! Compounding these problems is the “fear factor” among Canadian consumers. Depending on which survey you read, between 75% and 81% of Canadians express concern over online security and privacy. And while the same levels of concern are seen in the US, Canadians exhibit their fear with action, or rather lack of action � they keep their cyber wallets shut. When asked about the affects of Internet security concerns on online holiday shopping plans in 2005, 40% of Canadians replied that they would not do any online holiday shopping this year. That rate was nearly double the figure in the US and quadruple the rate in Germany and the UK.

The last item on the report card for Canada is Interactive advertising, where the country receives a middling grade of B-. It’s true that Canadian advertisers beefed up their online advertising spending last year by 43%, versus a growth rate of 30% in the US; we can therefore say that Canada is “showing improvement.” Looked at proportionately, though, marketers in Canada spent only US$28.05 on online advertising for every Internet user last year; in the US, the average spending per Internet user was US$71.43. This is a huge gap, particularly when you consider what Canadian marketers could be gaining if they ramped up their use of the Internet as a sales and marketing tool.

Specifically, Canadian marketers should be leveraging the high levels of Internet usage, broadband penetration and online shopping and searching behavior to deliver online campaigns that impact consumers where they are spending so much of their time. Even if Canadians prefer to consummate their purchases offline, they can be influenced by branding and direct response ad campaigns on the Web and via e-mail (note that in Canada, e-mail open rates, delivery rates and conversions are higher than in the US).

And what are the best practices for Canadian advertisers looking to market their products on the Web? That’s what I’ll be focusing on in my presentation at the Online Revealed conference on May 16. I hope to see you there. Just don’t ask me about hockey! Click here to read about Online Revealed.

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