Canadian e-comm offerings disappointing: study

A study from Google and L2 finds shops north of the border may miss out on a $38-billion industry if they don't improve their online offerings.
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A huge disconnect exists between Canadian retailers’ online and in-store channels, according to a new study from Google and L2, a New York-based think tank.

The study does not paint a pretty picture for Canadian retailers in the digital space, highlighting that an estimated 40% of funds are sent across the border to international retailers online, while 68% of Canadians shop away from home.

What’s more, the e-commerce industry – expected to reach $34 billion in Canada alone by 2018 – is not expected to make up much of Canadian retailers’ total business. By 2016, the report estimates online will only make up 5.3% of all transactions for Canadian retailers, compared to 23% in the U.K. or 11.7% in Germany.

The study examined Canadian retailers with a local headquarters, including big box locations such as Costco, Target, Walmart, Canadian Tire and Staples; food and drug stores, including Jean Coutu, Loblaws, Shoppers Drug Mart, Sobeys, London Drugs, Metro and Rexall; department stores including Holt Renfrew, Sears, Winners and Hudson’s Bay; Telco companies including Bell, Rogers and Telus; electronic stores including Apple, Best Buy, Future Shop and The Source; home improvement stores including Rona, The Home Depot, Home Hardware and Lowes; specialty retailers including Golf Town, Indigo, MEC, Lululemon, Petsmart, Sephora, Sport Chek and Toys ‘R’ Us; furniture including the Brick, Ikea and Leons; apparel including Aldo, Aritzia, Gap, H&M, Harry Rosen, Joe Fresh, Mark’s, Reitmans, Roots and Zara; and finally, pure-play digital shops including and Beyond The Rack.

Of these retailers, 78% offered full e-commerce in Canada, the study found. The 11 holdouts had “a weak legacy in direct-to-consumers e-commerce,” the report found, with brands like Target and H&M operating e-comm sites in other markets but not making the Canadian investment. Other retailers like Canadian Tire and Hudson’s Bay have had more limited offerings (such as a ship-to-store for Canadian Tire) or start/stop approaches (Hudson’s Bay shuttered its e-comm site in 2009, but relaunched it more recently).

“In addition to disappointing customers, the stop-and-start approach to e-commerce in Canada has robbed organizations of momentum and the ability to test and learn online – ceding the advantage to retailers headquartered abroad,” the report states.

The result of this lower investment may become apparent in three to five years, the report finds, when global retailers have become efficient behemoths, leaving Canadian e-comm retailers unable to compete on the world stage.

This could have detrimental effects on in-store sales as well, as the study finds retailers with robust e-commerce sites saw better in-store returns.

Online offerings from the likes of Amazon have fundamentally changed what consumers expect out of a digital transaction as well, according to the study. Ease of checkout drives satisfaction among online shoppers, alongside free shipping and timely delivery. In the U.S., where Amazon has been operating with a more robust offering than Canada for years, Americans are only willing to wait 6.8 days for a delivery, compared to Canadians willing to wait 9.8 days. The report predicts as Amazon continues to grow its Canadian product base and services, our patience for delivery will dip as well.

So far, the study found only six Canadian retailers are starting to play “offense” against Amazon, offering things like free shipping regardless of basket size. Four retailers actively promote their in-store pick up and online reservation offerings.

Most, however, don’t bridge the online/in-store divide with more omni-channel approaches. In comparison, in the U.S., a quarter of all retailers allow consumers to book an in-store service online, versus 17% in Canada.

Brands that do make an investment online may be best served heading into the tablet space, the study finds. Walmart built a “tablet first” responsive design in November 2013, and has since seen a 20% jump in conversion and a 98% increase in mobile orders.

However, the mobile experience is not a seamless one. Of the 66% of Canadian retailers with an iOS or 56% with an Android app, the study found 24% don’t include a store locator, while only 39% include some form of customer service feature.

Image courtesy of Google.