E-commerce takes off in Canada as online selling becomes simpler

Online sales in Canada continued to soar in 2007 as companies profited from offering instant gratification to customers (whether consumers or businesses), according to Statistics Canada.

E-commerce continued its double-digit growth for the sixth year in a row, and was 26 per cent higher than the previous year, the study reveals.

The survey of 19,000 Canadian businesses across various sectors found online sales generated an estimated $62.7 billion.

While this may not seem very significant in the context of the overall economy, it’s still early in the game after the dot-come bubble burst in 2000, notes Jean-Yves Martineau, founder of Ottawa-based Cactus Commerce Inc.

The firm is Microsoft Corp.’s global partner for e-commerce, helping to develop Microsoft Commerce Server.

“After the bubble burst, business plans went south and everybody moved right out of the space, and the pendulum swung completely the other way,” he says. “Now in a more pragmatic and social kind of way, it’s slowly moving back to where it belongs.”

The pace of e-commerce growth is a sign of a business-changing trend, Martineau believes.

It’s a theme he detected in conversations with top retailers at a recent summit.

“I haven’t met a company in the past year that doesn’t think it needs e-commerce,” he says.

But focusing only on dollars moved over the Internet isn’t a fair way to account for the total economic impact of the Web, says Tim Hickernell, a research analyst with London, Ont.-based Info-Tech Research Group.

He suggests a more holistic approach is needed and says studies that focus on a single channel are to be taken with a grain of salt.

“This study discounts wholesale and company-to-company transactions,” he says. “That produces a rather unfair picture of the type of benefits private businesses are getting.”

The analyst said while one needs to consider purchases made in brick-and-mortar locations, online catalogue technologies have “played large role in helping the consumer make a decision on those purchases.”

Investments in information Web sites can help inform customers and bring them into the store, the analyst adds.

There are also other things to consider such as the increase in payment speeds when doing business-to-business transactions.

“It’s still a multi-channel selling world out there and you can’t just isolate one channel only and do all your planning and measure the return on your investments.”

Although overall online sales grew across the country, the number of private companies selling goods online remained stable at just eight per cent.

Double the number of public sector firms reported e-commerce activities, at 16 per cent.

It is still early in the game for e-commerce, Martineau says. Large enterprises are helping to pave the way for smaller outfits that lack the same level of technology savvy.

He cites the case of the owner of a 20-store pizza shop in Toronto who wants to run an e-commerce operation, but figures he doesn’t have time for it and would rather play golf.

“The software has to be simple enough to send your office manager to a two-day training course and have him come back ready to operate the e-commerce department. You’re no longer going to need a doctorate in computer science.”

The private sector also appears more hesitant to plunge into online presence. Only 41 per cent of private companies report having a Web site, while 93 per cent of public sector companies report having one.

That disparity may be as a result of public sector companies being required to treat all customers equally, but private companies look to increase profits by choosing their most productive customer targets, Hickernell says.

Online sales channels might simply not be needed for many private companies to sell to their desired market segment.

“It doesn’t surprise me that many private firms don’t need online presence to profit from their customer base,” he says. “There’s no rule in private sector that you have to have some sort of online play.”

On the other hand, Martineau from Cactus Commerce notes that public companies are accountable to shareholder perceptions about what best practices should be followed.

They can’t ignore a trend that many feel is a good way to boost sales without having to pay for more real estate, he says.

“If Apple didn’t have an Apple store online, then you’d feel like they were missing something.”

Businesses looking to expand e-commerce activities or get their start can expect another year of growth in 2008 – barring a major global depression or changes to the tax rules surrounding online sales, analyst Hickernell predicts.

He says mobile phones will help drive that trend by becoming popular point-of-sale devices at vending machines and convenience stores.

“Japan is the test bed where companies are doing this right now. They have a convenience-store, vending machine type of culture as compared to North America or Europe.”

Next year’s study will have consider usage of such devices in its numbers if it wants to accurately reflect e-commerce in Canada, he adds.

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