Canadians Are Warming Up to Online Shopping: eMarketer

A climate change?

DECEMBER 23, 2008 – In 2007, Canadian retailers sold C$13.8 billion ($12.9 billion) of consumer products and travel bookings online. But by 2012 eMarketer projects that Canadian business-to-consumer (B2C) e-commerce sales will reach C$22.8 billion ($22.2 billion).

That means that between 2007 and 2012, Canadian B2C e-commerce sales will show a compound annual growth rate (CAGR) of 10.6%. Not bad numbers in a tough economy.

But the numbers could be better.

“Until Canadian consumers show a larger appetite for buying big-ticket physical goods online, such as home furnishings and consumer electronics, the Canadian e-commerce market will remain small compared with other G-7 countries,” says Jeffrey Grau, eMarketer senior analyst and author of the new report, Canada B2C E-Commerce.

Consumers in Canada are avid online product researchers, on par with their US counterparts. But they are much more likely to make a subsequent purchase in-store rather than on a Website.

“The fact that Canadian Web retailers are required to charge sales tax is certainly a disincentive to online buying,” says Mr. Grau.

Because of the tax structure, Canadian shoppers have never seen much of a price advantage to buying online. This is one reason why Canadian e-commerce has grown at a more gradual pace compared with the explosive growth that occurred in the US.

“The upside of this is that the Canadian market is enjoying a longer period of solid growth,” says Mr. Grau, “albeit on a much smaller scale.”

Another factor that has depressed the growth of B2C e-commerce in Canada is the lack of product selection online. In fact, many prominent Canadian retailers have not found the ROI compelling enough to run an online sales channel.

“While Canada has about one-tenth the population of the US, the cost of running a transactional Website is about the same,” says Mr. Grau. “This creates a challenge for small to medium-sized retailers with fewer financial resources.”

Nevertheless, Canadian retailers are in a better position than foreign merchants to understand the needs and interests of local consumers. And like consumers across the world, those in Canada prefer to shop with indigenous retailers.

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