The e-commerce market in Canada is in continuous growth
It has been picking up speed for the last five years. Annual Canadian e-commerce consumer revenues are now estimated at more than $20 billion, or about 7% of the nation’s $352 billion in total retail spending in 2016.
We expect online channels to deliver more than 35% of all Canadian retail sales growth in the coming decade, as consumers dramatically increase their e-commerce activity. Spending dynamics will vary considerably by category but it is clear across the board that if retailers do not move aggressively for online and mobile sales, they will face stagnant and even falling revenues and a loss of consumer relevance.
Drawing on a recent BCG study of Canadian consumers and their e-commerce behaviours, this report examines the opportunities and threats for Canadian retailers in this fast-changing market and what they need to do to position themselves to win as more business moves online.
THE FAST-RISING E-COMMERCE DEMAND
Digital commerce has been slow to develop in Canada, despite the fact that the country is a global leader in digital activity generally, with over 80% of the population connected and regularly online. Accounting for 7% of overall retail sales, e-commerce in Canada stands where the US was in about 2011, owing to both less frequent online purchasing and smaller basket sizes. While almost 70% of US consumers make purchases online at least once a month, the comparable figure in Canada is only about 50%. US consumers also spend almost twice as much online the equivalent of almost C$3,000 a year compared with Canadian average spending per consumer of only C$1,500 a year.
Younger Canadians are spending more online.
Our research found that younger Canadians (18 to 44 years old) are two to four times more likely than older consumers (over 55) to make at least one online purchase a month. Moreover, the younger the buyer, the more active he or she is online: in early-mover categories such as electronics and general merchandise, about 50% of Canadians under 35 make online purchases at least once a month. Purchasing by top-quarterly spenders under 35 is similar to that of young US consumers; average annual online spending tops C$4,000 for both groups. As younger Canadians age and make up a larger portion of the retail market, these behaviour are expected to drive greater demand for online offerings in many categories.
Consumers of all ages are engaging in online research. The history of markets with extensive e-commerce activity shows that consumers’ use of digital channels for research is a key precursor to increased levels of online spending. Today, Canadian consumers do some form of online research in advance of nearly 60% of all purchases—about the same level as US consumers. The most common research activities are searching for information on products, comparing prices, reading reviews, and seeking nearby retailers.
Online research and purchase trends by category in Canada are following similar trajectories to those in the US and point to the categories that can be expected to lead Canadian e-commerce growth. These include such typical e-commerce early movers as electronics (computers, TVs, and audio accessories), media (videos, music, and digital content), and apparel (shoes, accessories, and some types of clothing). The level of research activity in Canada suggests that both general merchandise and home furnishings will also be key growth categories for e-commerce in the coming decade, as researchers are converted into buyers. In apparel, we expect that growth may come more from larger online basket sizes and more frequent purchases than from significant increases in the number of online shoppers.
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