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Canadian retailers falling behind U.S. in ecommerce: BMO

Brenda Bouw
Nitin Mittal from InnoVentures talks about how the growing ecommerce scene in ASEAN countries represents huge opportunity, but is not without its challenges.
Nitin Mittal from InnoVentures talks about how the growing ecommerce scene in ASEAN countries represents huge opportunity, but is not without its challenges.

Canadian retailers have a lot of catching up to do if they want to better compete with their American counterparts in the increasingly important ecommerce sales category, suggests a new report from BMO Nesbitt Burns.

It shows the overwhelming majority of the estimated $16 billion in total ecommerce sales generated in Canada last year was by American companies.

The top three ecommerce retailers – Amazon, eBay and Apple – accounted for nearly a third of online shopping sales in 2014. The top 10, which again are all American companies, accounted for just above 50 per cent of ecommerce sales.

Of the top 20 ecommerce sites ringing up sales in Canada last year, only one is based in Canada – an electronics site called Canada Computers – which is in 19th spot, according to the report.

The report says ecommerce accounted for just 3 per cent of retail sales in Canada in 2014, or $16 billion out of $500 billion. In the U.S., ecommerce transactions account for about 7 per cent retail sales and about 15 per cent of total retail sales in the United Kingdom, according to estimates.

Canada is lagging despite a number of studies showing Canadians are among the world’s most digitally-savvy consumers.

“Ecommerce is more in its infancy in Canada,” says BMO retail analyst Peter Sklar

Geography and population may be partially to blame. Retailers have to deliver their goods to fewer people across greater distances in Canada compared to markets such as the U.S. or in Europe.

The onslaught of ecommerce offering from Amazon and eBay in recent years has forced more Canadian retailers, and others selling online in Canada, to improve their game.

The BMO report also found that ecommerce sales in Canada are more narrowly focussed on electronics and apparel. It shows retailers offering consumer electronics, which includes personal computers, accounted for $8.7 billion of the $12.5 billion in sales represented by the 100 top retailers in 2014.

“While a large number of retailers among the top 100 offer apparel, the total sales of the retailers offering apparel represents a lesser $5.7 billion in sales,” the report states. When Amazon.ca is excluded, because it doesn’t have a huge selection of apparel, that number drops to $3.8 billion.

The report also takes a closer look at eBay, with the second-largest market share in Canada, at about 9 per cent, in line with Apple. (That compares to a 12 –per-share of ecommerce sales for first-place Amazon).

Citing comScore data, the report notes that eBay shoppers in Canada are slightly older than the median for Canadian Internet users, (41.7 years versus 37.2 years), and have a slightly lower income ($73,424 versus $79,388)

The report follows on Sklar released last fall highlighting Amazon’s dominance in the online retail space.

In the latest report, Sklar found Amazon’s was losing a bit of ground in Canada. It shows Amazon’s share of total website visits declined in February 2015 to 1.54 per cent, compared with 1.63 per cent in February 2014. There was also a drop in January compared to the same month last year.

That’s despite the company’s unveiling in November of same-day delivery in Toronto and Vancouver, which “has not had a noticeable impact on its overall share of Canadian visits in the first few months with the service,” the report notes.

Meantime, Walmart.ca’s share of visits increased slightly, by six basis points to 0.33 per cent of total website visits. Free shipping is likely helping Walmart gain some traction, the report notes.