Online retail sales in Canada will grow tenfold from $2.5 billion this year to $24 billion by 2006, says a new report by Forrester Research.

That might sound big, but it will only represent a mere eight per cent of all retail transactions. However, the report also concludes that in five years the Net will influence another $59 billion in offline sales as consumers use the Web to research products before buying.

To take advantage of consumers online retailers will have to customize marketing, merchandising and customer service for targeted groups, says Jordan Kendall, the report’s lead author

“Retailers will find the Internet will become one of the most important places to interact with customers,” he said.

Rather than use it for “one-way marketing messages,” retailers must use the Web to get critical information from consumers about what they want, what they value in their relationship with the store and how they can be better served, said Kendall.

Retailers here do see the Net as important in their strategies, according to 40 executives interviewed as part of the study, while only 10 per cent see it as unimportant. By 2003, 23 per cent believe it will be critical to their operations, while another 48 per cent see it as very important.

In 2003 more than half said they will be spending more on their online retail capabilities. But a majority complained that customer usage is the major barrier to online sales.

Kendall warned retailers not to assume that e-commerce won’t be influential here because Canadians aren’t catalogue shoppers, are more urbanized than Americans and there wasn’t an explosion of dot-coms here.

Those may be reasons why Canadians lag behind Americans, he said. However, Forrester noted that Canadians are comfortable online, frequently use the Internet and many have a broadband connection.

It concluded the problem is poorly designed or stocked Web sites. The executives surveyed may also think so because 53 per cent said improving site functionality will be their top online priority over the next two years.

“There are no online retailers in Canada that are doing a bang-up job overall,” said Kendall. There are what he calls sites with “pockets of goodness” such as Sears Canada, which has excellent product descriptions; Radio Shack Canada, where shoppers can search the inventory of stores across the country; and Toronto’s Grocery Gateway, which has a well-regarded fulfillment system. But each of those sites has at least one serious flaw as well, he adds.

As expected, leading online sales products over the next five years will be computer hardware and software, toys and video games, books, music, and consumer electronics. However, the sale of event tickets will leap from $150 million to $1 billion during that period.

Forrester’s predictions sales are based in part on a survey of 10,000 online Canadians.

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