Online for the holidays

Will Canadian e-tailers get a lump of coal or a bag of chocolate coins in their stockings this holiday season?...

Will Canadian e-tailers get a lump of coal or a bag of chocolate coins in their stockings this holiday season?

That depends on a number of factors, say analysts surveyed by Strategy, not least of which is their preparedness for overcoming the fulfillment problems that plagued them last year.

Those retailers best positioned to benefit from the online holiday cyber-rush, experts agree, are those that have already survived one online Christmas, carry a breadth of items in ‘hot’ categories, and have the backing of their deep-pocketed offline parents. Among their favourites, in no particular order, are the online retail operations of Sears Canada, Chapters, HMV Canada, The Shopping Channel and Future Shop. (For a Future Shop case study, see p. 2.)

Various industry estimates suggest Canadians will spend anywhere from $500 million to $1 billion online this November and December, according to Michael Szego, a consultant with J.C. Williams Group of Toronto.

Chances are, the end figure will be somewhere in between, he says, but there’s no question it will represent a significant jump over last year’s spending, which J.C. Williams estimates at around $450 million.

Asked to predict what kinds of retailers will succeed this holiday season, Szego says it’s unlikely any low-profile operations will make much of an impression on Canadian consumers. For his money, the Hudson’s Bay Company and Canadian Tire, both of which expect to launch consumer Web sites this December, will be the big ones to watch.

The Shopping Channel, too, he says, is well-suited to the online model.

‘They have the infrastructure in place. It’s always been about television and phone or catalogue ordering. Their channels really do reinforce one another.’

Richard Talbot, president of Talbot Consultants International predicts the new Eatons site could also succeed at drawing Canadian shoppers online.

‘If you’re not a resident of one of the six cities where there is an Eatons store, there is the potential – if they market it correctly – that consumers would buy online,’ he says. ‘There’s an opportunity there to almost return to the old days of Mr. Eaton and his catalogue. That, I think, is worth watching.’

According to Vancouver-based market research company Ipsos-Reid, nearly one in five Canadian Internet users say they are likely to purchase gifts over the Internet this holiday season, with an additional 28% indicating that they ‘might’ buy online. Books, CDs and videos are at the top of their list, with toys, computer software, services – such as travel bookings – theatre tickets and gift certificates rounding out the roster.

Talbot concurs the fight for the lion’s share of the e-commerce dollar will take place in four main categories: books, music (CDs and videos), electronics, and toys.

But that’s not to say e-tailers are willing to spend more this year than last in a bid to lure Canadian customers online. The hype and momentum surrounding e-commerce has worn off, he says.

Joe Greene, vice-president, telecommunications and Internet with Toronto-based International Data Corp. (Canada), agrees.

‘We’ve seen a decrease in marketing activity over the last four to six months,’ he says.

‘A lot of [e-tailers] have come to the realization that they’ve got to start turning a profit – many of them spent a huge amount of money on advertising and that has put pressure on their bottom line. I think many are holding back and I don’t anticipate as much activity this year.’

New entrants to the market, he contends, will have to spend big if they hope to attract audiences and create some brand recognition, but established Canadian e-tailers are already familiar to the online shopping crowd.

Wendy Evans, president of retail consultancy Evans & Company and co-president of, an e-tail consulting firm, suggests ‘click-and-mortar’ companies – those with both online and bricks-and-mortar operations – will tap their existing holiday advertising and in-store promotional budgets to promote their Internet sites.

Brahm Eiley, president of The Convergence Consulting Group says more ‘intelligent marketing’ could also be in the works.

‘Last year, every dot-com on Earth was advertising around U.S. Thanksgiving and nothing was really pointed. This year, we should see more targeted campaigns,’ he says.

‘Certainly the bigger, more professional sites are better prepared this Christmas,’ says Ed Strapagiel, senior vice-president at Kubas Consultants. But he doubts they’re going to be in for a smooth ride.

In general bricks-and-mortar retail, he says the holiday season generates sales of 50-100% above average. On the Internet, he says, the Christmas peak – particularly in gift-related categories like books, flowers and chocolates – might be several hundred per cent.

‘It’s a very huge demand spike for some of these operations and even though they went through it last year, it’s one of those things that is very difficult to prepare for. Increasing your delivery capacity by four or five times for a period of five weeks – that’s tough for anybody to do.’