Canadian research paints bleak picture for e-retail

Canadians are spending less money online, but that’s no surprise to analysts who say the revenues are dropping because there’s nowhere decent to shop.

The latest installment of the quarterly Ipsos-Reid Corp. Canadian online

spending survey shows a 14 per cent drop in money spent on gifts during the holiday season. The drop means that in 2002 Canadians spent close to $990 million buying gifts online, as compared to $1.1 billion spent in 2001.

The survey results, compiled from interviews with about 2,000 Canadians, surprised researchers, especially when compared to the surging online sales in the United States, says Ipsos-Reid vice-president Chris Ferneyhough. Sales south of the border were up between 17 and 24 per cent in the same time period. Earlier in the year, when conducting a similar survey, the company found that most people were planning to actually buy more things online, he says.

Despite the spending drop, the overall number of shoppers inched upwards, with three per cent more people deciding to shop on the Net, according to the poll. And Ferneyhough suggests that some of the decline in revenue isn’t necessarily bad news. Some of it may be the result of lower prices, free shipping, or Canadians shopping on Canadian sites, bypassing having to spend more because of the U.S. dollar exchange rate and duty.

Ferneyhough points out that in an ideal situation the drop in amounts spent by a single shopper would be offset by more people giving Web shopping a try. And while return business is not a problem, most online shoppers come back to the Net again and again, new users are simply not materializing.

“”I think the key take-away from this is that we’ve really plateaued, it seems, in terms of the number of people who are buying online,”” he says.

Conventional wisdom suggests that mistrust of technology and concerns over protection of sensitive personal information as the key barriers to a virtual online retail boom. But J.C. Williams Group Lmtd. retail consultant Andrew Cooper points to booming sales south of the border. Canadians are generally more Net friendly than our American neighbours — Ipsos-Reid reports that 18.3 million Canadian adults have Internet access — there may be a different reason we’re not buying.

“”I think part of the problems in Canada is that ordering things from the U.S. is in many cases difficult, if not impossible to do,”” he says. “”And many of the Canadian retailers don’t really have that strong of an online presence. So with some exceptions, like travel sites, a lot of Canadian retailers have not done a particularly good job of establishing a very strong presence online.””

Cooper points out that the most successful e-retail sites in Canada have been spin-offs of American entities. Enterprises like and haven’t had much trouble getting Canadians to drop dollars into their cash registers. And yet homegrown organizations are in most part still struggling to wrap their heads around the concept, he says.

“”I’m not saying nobody has a Web site, it’s just that in a lot of cases they kind of have their Web site there because they have to,”” he says. “”And they don’t put a lot of time and effort into making sure that it’s user friendly and that everything is easy to find. It’s kind of an afterthought.””

With a huge chunk of the population online, Canadian retailers are doing themselves a disservice by not pursuing e-retail more aggressively, Cooper says. He points out that shoppers will often comparison shop using the Web, so a positive online experience can translate into higher sales anyway.

“”Eventually Canadian companies are going to realize that their American counterparts are doing quite well online,”” he says. “”They’re going to have to look at themselves and say: ‘Hey, what’s the problem here?’ “”

The problem may be it’s not likely to go away soon. Although Ferneyhough says it’s still too early for any 2003 numbers, he doesn’t expect an uptick. The revenue generated by online shopping will hopefully remain flat, he says.


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Jim Love, Chief Content Officer, IT World Canada

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