The state of eCommerce in Canada is unlike many other places in the world. The adoption rate of new technology in Canada is among the top countries in the world – almost the entire Canadian population is connected to the internet thanks to its dense urban population and smartphones in Canada will be owned by approximately 15 million people by 2014 (40% of the expected Canadian population). Despite the “early adopter” mentality Canadians have toward technology, many consumers surprisingly still prefer to shop in-person than online. Canada has been ranked as an “average” eCommerce country, with online sales expected to make up approximately 5.3% of the country’s total spending by 2016. Why has Canada lagged behind the United States (and other countries) in eCommerce when they are among the pioneers in other avenues of technology – and most importantly – will this change in the future?
Let’s look at some research to answer these questions…
- Canadian consumers are fiscally responsible with credit cards – Although credit card ownership rates are similar between Canada and the United States, Canadian consumers generally show more fiscal responsibility with their debt. The average Canadian carries two credit cards whereas the average American carries six and the credit card delinquency rate in Canada is half of what it is in the United States, a clear indicator of their aptitude to spend within their means.
- Small Canadian retailers are slow to sell online – A unique element of eCommerce in the United States is the perception that consumers can buy anything online – a perception which can be attributed to the large presence of small online retailers. The ”small retailer” presence has not only been influential in getting more of the United States population to shop online but also in motivating consumers to sign up for services such as Paypal which simplify the eCommerce process for online shoppers. Canada is currently lacking this large presence of small online retailers as although 71% of small businesses purchase products online only 18% actually sell products online.
- Canadians purchase impulsively far less than their southern neighbors – Because of the lack of smaller online retailers in Canada, consumers there are more likely to make fewer purchases and make sure those purchases count. Canadians are also faced with several import taxes and fees that can increase the total price of the purchase dramatically. A $30 shirt imported from the United States could cost as much as $58 after taxes and fees. The inflated price makes it worth the effort for many Canadian consumers to pick up the shirt on their next trip to the mall rather than order it off of a retailer’s site, even if they can locate the product for less online (before fees and taxes).
Although there are certainly some barriers for online retailers entering the Canadian eCommerce market, from consumer perception to customs, it’s no secret the market is growing and attracting the attention of online retailers stateside. In fact, the Canadian eCommerce marketplace is projected to surpass $30 billion dollars by 2013, with almost twice as many online transactions taking place compared to just five years earlier. As eCommerce in the United States continues to mature more online retailers are looking to international markets to expand their online efforts, making Canada an attractive option in the initial stages of global growth due to its proximity and cultural similarities with the United States.