Canadians Suffer from Lack of E-Commerce Sites

Canadians are more than willing to shop online, but aside from privacy and security concerns, there is a lack of Canadian sites from which to buy, meaning higher shipping costs and longer delivery times, according to a study by The Boston Consulting Group (BCG).

The study, “Winning the Online Consumer in Canada,” found that while Canadian Internet users are rapidly becoming Internet shoppers, security fears, service frustrations, and limited offering s are discouraging some Canadians from purchasing online.

“Canadian consumers are browsing but not yet buying as much online as their US counterparts,” said BCG VP Peter Stanger. “And those Canadians who do make online transactions spend far less than their American counterparts and are less satisfied with the actual online purchase experience. This is largely due to the fact that the current online purchase experience falls far short of its promise.”

The study found that while a similar percentage of Canadian and American Internet users shop online, only 43 percent of Canadian Internet users have purchased goods or services online, compared with 51 percent of their counterparts in the US. Americans spend more online, according to the study. The typical Canadian online purchaser conducted five online transactions and spent $220 Canadian over the past 12 months. American online purchasers averaged 11 transactions and spent $705 Canadian over the same period.

Both Canadian and American consumers cite privacy and security concerns as key barriers to purchasing online, with Canadians exhibiting even greater sensitivity in this area. Canadians also experience a higher rate of failed purchase attempts than their US counterparts and are more dissatisfied when it comes to the pricing of online products and order fulfillment. Their greater displeasure with these aspects of online purchasing likely reflects the fact that Canadians do a significant amount of purchasing at US sites, and must contend with exchange rates, slower delivery, and customs duties.

The scarcity of Canadian online retailers is also inhibiting consumers from purchasing online, according to the study. Seeking favorable prices, familiar brands, and quicker delivery, Canadians are highly motivated to look for Canadian sites. But they often end up at foreign (usually US) sites, either because they offer a better selection and shopping experience or because there are so few domestic sites to visit.

The report also cites two reasons why Canadian retailers are not online: 1) unproven online retail economics, and 2) challenges in achieving economies of scale. Fearing high start-up costs and cannibalization of their existing brick-and-mortar retail outlets, many Canadian retailers have delayed their entry into the online market. Because online retail economics remain unproven, the study found, many retailers have not yet made the online channel a strategic priority. Given the market size and population density of Canada, it is also more difficult for Canadian retailers to achieve economies of scale.

“Canadian are primed and ready to purchase from Canadian sites, but, with our supply-side deficit, they often end up purchasing from foreign sites, where the experience ends up being frustrating, costly, and inconvenient,” said BCG’s Research Director James Vogtle. “The challenge for Canadian retailers will be to satisfy online consumer demand before consumers become attached to foreign sites or get turned off to the online experience entirely.”

The study draws on the results of comprehensive research with 12,000 consumers in North America, including more than 600 in Canada. It included focus groups, one-on-one interviews, and surveys focused on consumers’ use of the Internet for personal reasons, at home or at work.

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