E-Commerce? Sorry, We’re Canadian
It’s two days before Christmas and according to Visa, millions of people will be shopping this weekend for last-minute gifts. I ask you: why battle the crowds and traffic if you can do it all online from the comfort of your own home? Well, a new eMarketer study suggests the Canadian e-commerce market is “stagnant” because many shoppers complain retailers aren’t serious about selling online, while retailers claim they can’t make a commitment because not enough people shop online.
It’s your classic chicken and egg situation, which is hardly a surprise to anyone who has been following the Canadian e-commerce market. Apparently, we’re online browsers, not shoppers.
In the spirit of the season, here’s a sad example of why the e-commerce market is struggling and how many Canadian retailers have yet to start drinking the Kool-Aid. As an avid hockey player, I’m keen about the new composite sticks being used these days. (Anything to improve a miserable slapshot!) These sticks can be expensive so I went online and discovered a small Ottawa-based company called Ballistik that sold sticks and blades at reasonable prices - and they did it via e-commerce.
Over the last six months, I’ve bought several blades from Ballistik. A few weeks ago, I discovered they had spiffed up their Web site but closed their e-commerce store because they wanted to grow distribution (and, in the process, raise their reasonable prices) by going through retailers. The problem is no retailers in downtown Toronto carry Ballistik’s products - not surprise given the competition hockey market. So, I called Ballistik to see how they could help me, and asked why they were no longer selling online. The answer was they don’t want to compete with their retailers, which is a strange response for a little company looking to connect with consumers. But, they, this is Canada and apparently we’re a country of browsers, not buyers.
The silver lining is eMarketer expects e-commerce sales in Canada will climb 25% in 2006 to C$9.4-billion and by another 26% in 2007, which hardly seems stagnant. Hopefully, companies such as Ballistik will catch the e-commerce bug.
Update: Rob Hyndman has his own views on the Canadian e-commerce scene.
Technorati Tags: Canada, e-commerce
December 23rd, 2006 at 8:45 am
I think there are two reasons why e-commerce is low in Canada: customs and shipping.
One of the problems I’ve always had with shopping on Canadian sites is that the prices are all askew compared to U.S. companies offering the same products. Essentially, this is because if products go through the U.S. the company selling them needs to pay duties to bring them to Canada. An example is Pier1 imports. They are a totally integrated company with one website, one inventory management system and distribution network, yet they distribute through U.S. warehouses, so if they bring goods from, say, Singapore they end up paying about 16% more to bring them to Canada. This makes it very confusing to customers on what they are going to pay. Most companies just separate their operations to avoid these double fees. (try finding a company which exists both in Canada and the U.S. which you can set up a wedding registry! - very tough)
The other big issue is shipping. When I lived in the U.S. you could buy stuff online and it was $2-6 for shipping. My wife even bought clothes online. She could order a whole set of sized and the company would send a prepaid shipping bag to ship back all the goods they either didn’t fit or you didn’t want. For a $30-60 order, thats a deal. In Canada, however, its $10 at an absolute minimum for shipping and usually up in the range of $20-30. Why would you possibly order a present for a friend which you’re going to double the price by ordering it online? I think it’s because, like many other industries, there’s not a lot of competition for shipping, (did you know Purolator is owned by Canada Post) and the whole customs thing makes it difficult for U.S. companies to properly compete here.
Right, that’s my e-commerce rant….
December 23rd, 2006 at 10:42 am
The question is whether there are any Canadian retailers actually doing a good job. Canadian Tire upgraded its Web site, which suggests it may be getting more serious about e-commerce. Other than that, the landscape is far from appealing. If I was Ballistik, I’d be aggressive with e-commerce as a way to penetrate the market. They were charging $10 for shipping so it wasn’t like it was an expensive proposition from that perspective.
December 23rd, 2006 at 2:27 pm
To understand e business in Canada, look at demographics and geography. Highly urban, small # of centres, in a huge geography. This does not make shipping an easy economic proposition. Also makes in-person retailing a logical conclusion.
Versus the US…hugh population, signficantly rural (defined as a large percentage of the population outside the main metropolitan areas), and lots and lots of centres…making shipping economical to the consumer and a profitable to the shipper.
The catalogue, (pre ebusiness equivalent) was more successful in the US than Canada. Yes, there is a chicken and egg syndrome but these issues are resolved in a relatively short time when the underlying economics work. For Canada, the underlying economics may not work…meaning merchants will take a lot longer to consider going online and when they do, it will be at a slower pace.
To say customs and shipping are the causes of slow ebusiness growth in Canada is missing the point. Look at why customs and shipping costs are high….demographics and geography.
December 23rd, 2006 at 3:03 pm
If it really is a chicken-and-egg situation, the retailers who decide to be the first and fully embrace e-commerce early will benefit.
The first generation that grew up with the Internet are just now graduating from university. They’re very comfortable buying online. Now that they’re done school, they now also have jobs and more money to spend.
I think you’re right Mark, this Ballistik company is making the wrong move by cutting their e-commerce operations. If they really want a low-cost way to widen their customer base and compete with established retailers, e-commerce would be a good way to do it, and now is a good time.