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The Elusive Canadian Consumer




The retail industry is going through a major shift worldwide with the advent of Internet technology. In the few decades of existence, the Internet has disrupted the way businesses function. The founders of e-commerce, giants like Amazon and Alibaba, have grown to multi-billionaires in the span of a decade and independent E-commerce platforms like Shopify & Oberlo continue to grow exponentially around the globe. The emergence of this new place to reach customers has driven sales away from brick-and-mortar channels across many industries and markets.



However, different markets have responded to this e-revolution in various ways. An interesting market to look at is Canada. Despite approximately 90% of the Canadian population having access to high-speed internet, e-retail in Canada seems like a distant reality due to a multitude of reasons. Despite the fact that the Canadian population spends the most hours online in the world (CIRA), the e-retail market is still hazy because Canadian consumers still prefer to do things ‘the old way’.


Previous Internet access & ‘leapfrogging’


Online sales comprised 5% of the total B2C market in Canada in 2016. Even though the percentage isn’t insignificant, it is small considering the fact that the Canadian population is one of the most active populations in the world on the Internet (CIRA). Canada’s dismal show in online retail might have something to do with Canada’s affluent middle class and previous access to Internet technology. Euromonitor’s Tim Barrett calls this phenomenon “leapfrogging” (The Mobile Revolution 1).


‘New data from the US Census Bureau and mobile spending data from Euromonitor indicate that “leapfrogging” is pervasive amongst people with less purchasing power across the world. Those without access to prior internet networks are now being ushered into an era of low-cost technology and connectivity while those who have previously enjoyed these features continue to cling to the old modes of access’ (The Mobile Revolution 1).


A commonplace example to showcase this phenomenon is grocery shopping. It is interesting to note that Walmart and Amazon are struggling to get the formula right for online groceries in North America; however, their online shopping initiatives are getting a much better response in countries like China. Only 1 % of the US’s groceries are sold online today; despite China’s humongous size (324M tons of groceries annually) & comparatively later ‘initiation’ to the internet, 2% of its groceries were sold online in 2017. “Walmart’s net sales in China grew 4% from the previous year after they started selling online".



Another statistic to support this phenomenon is that mobile’s share of transactions in the US & Canada is much lower than that of countries like China, Indonesia, Nigeria and India. In all these countries, mobile contributed to more than 50% of online transactions. This ‘mobile revolution’ is happening much faster amongst the less affluent. For instance, in the span of six years, the amount of spending from mobile platforms in India has gone from $4 bn to $40 bn. However, this figure of mobile share is just above 40% for the US and even lower for Canada (The Mobile Revolution 1). Only 16.2% of Canada’s E-retail sales came from mobile devices in 2016 (E-Commerce 11).


It is surprising to say the least, that in countries like China, India, and Vietnam, where internet penetration is comparatively lower and logistical & network issues exist; every second internet user has shopped online at least once. “The share of mobile transactions in these countries is also 3 to 4 times that of Canada” (The Mobile Revolution 1).


Shipping costs & other deterrents


Factors such as the cost of shipping, and the quality and variety of goods might also contribute to the Canadian shopper’s distance from e-retail.


Some 58% of Canadian Millennials reported that they “will only shop online if the shipping is free” (Mintel 1). Amazon started off by offering free delivery, however today, delivery charges can range anywhere from $2 – $10 for each purchase. Unsurprisingly, free delivery is an acquisition cost that corporations cannot afford to pay for long, in Canada.


It would be wrong to put all the blame of high delivery costs onto e-commerce websites’ greed entirely. Tough terrains, high wage, logistics rates and harsh weather makes it impossible to cut down on delivery costs in Canada. On the other hand, bigger, much cheaper workforces and lower logistical costs in other markets make free delivery comparatively easy for e-retail giants.


The study also indicated that another deterrent in shopping online is the current line of products offered. 72% of Millennials said that they would “shop more online if there are a larger range of products available” (Mintel 1). Although that necessarily doesn’t hold up. Amazon Canada sells >133 mn items, much more than some of its counterparts. Canadians are wary of online shopping for other reasons as well: 20% of Canadian shoppers strongly agreed to the fact that they felt uncomfortable making online purchases (CPA Canada). This could be attributed to security, privacy, and other concerns, or simply to the fact that there is still a need to ‘touch & feel’ the product before making the purchase.


Aging population


It is of human nature to be averse to change. This is more so the case as a person starts growing older. While 41% of Millennials use mobile shopping apps in Canada, that percentage is only 21% for baby boomers (E-Commerce). With that in consideration and the fact that 57.6% of Canada’s population is above 35 years of age (StatCan), Canada’s online shopping habits can also be partly accredited to the country’s aging population. There is a 95% buyer penetration of online mediums in Canada amongst consumers aged 18-34. However, that number is only 71% of consumers aged above 55 years of age (E-Commerce).


Even the inclement weather during the holiday season does not seem to deter Canadians from going out shopping. Even though more than 70% of shoppers said that they would prefer buying online during the holiday season, less than 10% of the annual online retail sales came from the holiday season in 2016 (E-Commerce).


In conclusion, there is no contesting the fact that e-retail is the future; it is more a question of when rather than whether. Canadian brick-and-mortar sales grew only 2% in 2016, while the growth of online retail sales was 16% as compared to 2015. Mobile shopping has been increasing at a compounded growth rate of 43% for the past 6 years (Mobile 1).



For now, when it comes to online shopping, the Canadian consumer has proven to be a tougher nut to crack. It would be interesting to see how this changes with the changing demographic of the Canadian population.




Works Cited


Chang Rachel, “China Doesn’t Want To Go to the Store For Groceries, Either” , Bloomberg Business Dec


2017


“E-Commerce in Canada” , Statista , 2017


Harris Polls , CPA Canada , Accessed 2 Feb 2017


“Marketing to Millenials” –Canada, Mintel Reports, February 2017 , Accessed 2 Feb 2017


“Mobile Internet Retailing in Canada” Passport GMID, Accessed 2 Feb 2017


“The Mobile Revolution is Happening Faster amongst the Less Affluent” Tim Barrett 31 May 2016


Passport gmid


Photo Credits Patrick Tomasso on Unsplash

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