As shoppers gear up for the holiday shopping frenzy, American online retail sites are reporting record sales at the expense of their Canadian counterparts, according to e-commerce specialists.
Industry insiders do not have any numbers yet, but they say U.S. Web sales are being boosted by thehigh-flying loonie that is driving both outlet mall and online shoppers to seek bargains south of the border.
“Just as our bricks and mortar shops are getting hammered by the falling greenback, so are our online stores,” said Nick Dumitru, principal of Basis, a Web marketing firm in Toronto.
He said most insiders expect a 20 per cent drop in e-retail profits this Christmas season.
For years Canadians have crossed the border in search of bargains and greater selection even when the Canadian dollar traded way below the U.S.
But no sooner did the loonie surpass the American greenback a few weeks ago, than industry experts noted a new twist – Canadian online shoppers have started flocking to American retail sites.
On Cyber Monday, the day after the American Thanksgiving and considered one of the busiest shopping days of the year, American online retailers expected to attract 72 million shoppers and generate an estimated US$700 million in sales.
That’s a 21 per cent increase over the US$608 million of sales last year, according to Shop.org, a network of online retailers.
It’s hard to determine how much of that number could be attributed to Canadian shoppers, but indications are an online exodus is in the works, said Peter Woolford, vice-president of policy development and research for the Retail Council of Canada (RCC).
For instance, he said, Canada Post has reported that the volume of shipments through the postal service for American retailers has increased by an estimated 38 per cent over last year.
He said delivery companies such as UPS Canada have also reported significant growth in traffic from the U.S. since the loonie started rising.
“It’s no surprise, we’re very thrifty and we’re known bargain hunters,” said the top executive of RCC.
The RCC has around 40,000 store front members not a few of whom operate online as well.
Among its members are well-known Canadian brand stores such as The Bay, Canadian Tire, and Roots, but it also has members with American mother companies such as Sears and Best Buy.
But the online onslaught is not a big worry for local retailers yet because Internet purchases account for a small portion of their income.
Woolford said Web transactions accounted for a mere two per cent of last year’s total sales.
Canada’s smaller population – 33 million versus 302 million in the U.S.- makes online operations less cost-effective and less than a third of Canadian retailers sell on the Web.
“Online shopping is just another form of catalogue shopping. Canadians were never really big catalogue shoppers when it was all the rage,” Woolford said.
Another Canadian e-commerce expert, however, says the trend is quickly shifting.
“Online shopping is fast becoming popular with Canadians,” said Tim Richardson, a professor of e-commerce, marketing and international business at the University of Toronto and Seneca College.
He said several factors are contributing to the increasing popularity of online shopping here including: the growing number of women shopping online from home and at work; the distribution of more U.S.-based credit cards; more American sites are now able to process Canadian postal codes; improved shipping and handling services; rising gas prices; and greater online selections.
Canadian online stores that want to compete with their American counterparts must clearly explain to customers why their prices are higher than what the U.S. sites offer, Richardson said.
He said retailers must point out that some goods coming from the U.S. will also be subjected to additional duty charges that could jack up their total cost.
Finally, Richardson said, online stores offering uniquely Canadian items stand a better chance at weathering the current trend.
One such store is Roots; the Canadian icon sells its apparel and accessories in traditional outlet stores and at Roots.com.
“I don’t think the strong loonie would be an issue for us,” said James Connell, director of e-commerce, digital marketing and new media for Roots Canada.
He thinks Canadian online shops that sell “non-commoditized” items – goods or brands that are not widely available across the border will be able to shore-up their sales.
“Canadian shoppers might do some online research to compare prices. But when they’re searching for Roots products, they’ll only find them at Roots.com,” Connell said.