E-News

Canadians go on $2-Billion online shopping spree
September 20, 2002
National Post
by Kate MacNamara

Canadians spent almost $2.billion shopping online in 2001, a jump to nearly double estimated 2000 levels. Research by Statistics Canada shows that some 2.2 million households shopped online last year (up from 1.5 million in 2000); of those households, each spent an average $880. However, Statistics Canada researcher Jonathan Ellison warned against direct comparisons of the data year over year because of changes to the survey - the 2001 research provides a wider catchment as it measures purchases made by households from any computer, including at work whereas previous surveys gaged only online spending at home.

"Canadians seem to be buying a more diverse basket of goods." said Mr. Ellison. Books, magazines and newspapers have remained the single biggest online sellers since the measurement began in 1999; however the sum spent on these items shrunk to $28.1 million in 2001, falling from $36.6 million in 2000, and $37.5-million the previous year.

Meanwhile, spending online is rising for purchases of travel, clothing, and entertainment items like tickets. And those increases are expected to continue in categories like travel where airlines have aggressively pushed customers to online purchasing. Earlier this year, Air Canada followed the lead of major U.S. carriers slashing the commission it pays travel agents and redoubling Web marketing efforts.

The Statistics Canada data also show that more than 75% of Canadian online shoppers worry about privacy and security. "It's interesting that they register those concerns, yet they're ignoring them," said Mr. Ellison, noting that while spending is up, security concerns are largely unchanged over last year.

Canadians did the majority of their online spending with Canadian firms, while $682- million worth of their purchasing was spent abroad. U.S. boarder and shipping slowdowns- prompted by security fears ignited last fall- likely dampening foreign purchasing. "We haven't tracked that, but it's certainly a possibility," Mr. Ellison said.

While the growth appears strong, online spending still represents less than one half a percentage of the $621 - billion Canadians racked up in total personal expenditure last year. "I think we're seeing incremental growth in many areas," observed Richard Talbot, president of retail consultancy Talbot Consultants International Inc." In retail, in particular, there has been a lot of revision strategy for online sellers over the past years. Most have now recognized that those touchy feely things like fabric don't sell well over the Internet. But there has been also been a realization that the Internet is a wonderful marketing tool."

Indeed, the survey figures reflect both transactions made online and shopping initiated on the Web, where selection is conducted online and purchasing made at bricks and mortar stores.

Many retailers ar using some very innovative ways to drive business through their Web sites, even if shoppers aren't actually buying online," said Internet consultant Rick Broadhead. "Radio Shack Canada, for example, has a function on its site where customers can check each store's inventory to make sure that the product they're looking for is in stock before they actually turn up at the store."

Although pundits, who at the height of the dot com boom, predicted massive growth for online shopping have been chastened, most industry watchers still believe in its growth potential. "There is still tremendous room for expansion," said John Pliniussen, professor of marketing at Queen's School of Business. "Canadians are growing more comfortable shopping online, and that's only going to increase as today's teenagers mature. They're already far more adept at using the Web than their parents. As they get credit cards and enter the work force we're going to see online spending balloon."

Mr. Pliniussen expects online commerce to rise to approximately 5% of total spending in the next ten years, a growth driven by shoppers' increasing willingness to make big ticket purchases like automobiles online, he said. "We're not talking about the death of the shopping centre, but it'll be substantial trend."