The Time is Ripe for Electronic Commerce

The fact is well known and highly publicized: Canada is fertile ground for B2C e-commerce. In fact, Canada is ranked fourth worldwide in terms of broadband Internet use and heads the charts for use of online services, such as banking services. [1] These facts clearly demonstrate that governmental efforts to connect the population and the work of businesses to provide Canadians with the services they want have been fruitful.

And yet, online purchases by Canadians this year will not surpass 1% of total purchases. According to eMarketer’s forecasts, 9 million Canadians will make online purchases this year, equivalent to 49% of Internet users. [1] In dollars, this represents yearly online purchases of $526 per consumer, for a total of $4.7 billion.

Heading the list of suspects at fault for this dismal situation are Canadian businesses, and SMEs in particular. According to Statistics Canada, 34% of Canadian businesses operate a web site, but only 7% of them sell their products or services online.

Canadian SMEs have every reason to use the web to promote and sell their products since the Internet offers a range of opportunities and cost incentives. The main reasons cited by Canadian businesses for not taking this step are:

• High cost
• Lack of time
• Security problems
• Lack of competence in the domain [1]

In light of this, governments need to coordinate their efforts and enable SMEs to make the Internet both an integral part of their operations and a solid business opportunity.

As for SMEs, they must think carefully before deciding to launch themselves online and, as with any initiative, they must first define their objectives for an online presence. There are three principal objectives that I will address in this article.

1) Objective: retain current clientele

The Internet offers merchants a unique opportunity to integrate themselves into the decision-making processes of potential customers. In Canada, 13.2 million people, or 72% of Internet users, browse online first before making a purchase either in-store or via the Internet. Having no online presence therefore means that traditional merchants are losing out on an important opportunity. If company executives notice that their main competitors have opened an e-commerce, they should sit down and start asking themselves some serious questions.

The outdoor sporting goods store Latulippe, based in the Quebec-city region, was faced with this situation when the industry leader, Mountain Equipment Co-op, opened an e-commence. Latulippe reacted by deciding to create a transactional site that regroups several of the industry’s best practices. Today, their site attracts up to 5,000 visitors a day.

2) Objective: attract market share away from your competitors

A persuasive example of a Quebecois business that achieved this goal is IGA. Their initiative elicited considerable scepticism at first, yet thanks to their site, which is unique in the Quebecois food sector, IGA attracted customers away from other grocery companies. This is a remarkable feat in a sector in which consumers normally remain very loyal to the ir preferred food chain. All this without even counting the media attention that IGA elicited with this initiative, publicity worth several hundreds of thousands of dollars.

3) Objective: improve information availability

If there is one sector in which retailers have fully understood the benefits of the Internet in terms of distributing information, it is undoubtedly the home renovation sector. Large-surface stores and fierce competition have made in-store service increasingly rare, and many commerces have therefore turned the Internet into a virtual service agent that displays answers to frequent questions, detailed information about renovation projects and expert advice on any renovation queries.

The results are impressive. At RONA, 50% of in-store consumers confirm that they consulted the web site for information before visiting the store. Customers who first go to the online store spend 24% more in-store and visit more frequently than other customers. For this retailer, each dollar spent online is equivalent to $7 spent in-store.

Obviously, the Internet can have considerable impact for retailers, but it is important to clearly define your online commerce’s business objectives in order to develop the appropriate strategy. To find out more on this topic, I invite you to consult our page devoted to online retail commerce (French only).

[1] “Consumer E-Commerce in Canada: Firing Up the Internet Economy Growth Engine”, eMarketer, Dec. 2004.