Canadian e-commerce is picking up speed
Canada is one of the most connected countries on earth: Almost 90% of Canadians use the Internet, and 86% have a broadband internet connection. Nonetheless, the adoption of e-commerce in Canada has been slow; lagging other markets such as the US and UK. However, things are changing, which is mostly due to the increasing popularity of Amazon that has pushed more retailers to set up an online presence. In 2017, there were an estimated 19.2 million digital buyers, more than half of Canada’s population. E-commerce sales increased by an estimated 30%. eMarketer projects that by 2020 e-commerce sales will represent 10% of overall retail sales in Canada. Additionally, compared to the US, the Canadian e-commerce landscape is still less competitive, because there are fewer local players. As of 2015, 40% of Canadian SMEs still did not have an online presence.
The Canadian online shopper
Canada presents an interesting market for Swiss retailers, as more than half of Canadians have purchased products cross-border. Shoppers who purchased in the US (the number one destination) and Europe did so because there was no comparable product available in Canada. Canadians’ main reasons for shopping online are convenience and price, with the most popular product category being clothing and apparel, followed by electronics and media. Convenience also means that mobile e-commerce is becoming increasingly important. By 2020, mobile e-commerce is forecasted to make up nearly 33% of e-commerce sales in Canada. Canadians pay for their online purchases mostly by credit card, as they perceive it to be the safest payment method. In 2016, about 92 per cent of e-commerce transactions in Canada were credit card transactions. Payment by invoice, which is common in Switzerland, is non-existent in Canada.
Challenges: shipping costs and delivery times
Canada is the second largest country of the world with a population of over 36 million. Since there are only a few major cities across the country, as compared to the US, retailers/online marketplaces, such as Amazon, usually have fewer distribution centres serving very large areas. As a result, Canadian shoppers are faced with longer delivery times. The cost of delivery is another aspect to consider. While consumers would shop more online if shipping were free, it is challenging for smaller retailers to absorb these costs, as it cuts into their margins, especially considering that Canada has some of the highest shipping costs worldwide. In order to save costs and make online shopping more economically viable, click and collect models are becoming more and more popular. For example, Loblaws, one of the big Canadian grocery stores has recently rolled out click and collect across the country. Choosing the right shipping strategies, for example click and collect, a minimum threshold for free orders, etc. is definitely something that Swiss SMEs need to consider.
Despite these challenges, Canada remains an attractive country to set up an online store. According to Karim Salabi, Partner at Ascendis Consulting, “Canadian consumers look for strong and differentiated brands offering quality products … some of which they don’t always have access to in Canada. As such, Canadian demand for new brands and products lead consumers to regularly buy from foreign websites. For Swiss companies, Canada represents a dynamic and high-potential market from which they can build and manage a strong North-American eCommerce business.”