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CANADIANS WARM UP TO SHOPPING ONLINE

By Susan Thorne

Internet retailing in Canada is catching on thanks to homegrown retail Web sites like Future Shop (above) that have recently come on the scene.

Canadians are known as cautious, conservative people, slow to take up the latest new thing. That is reflected in the fact that Internet retailing has taken longer to catch on north of the border. But the sector is coming into its own as new homegrown retail sites stimulate online shopping.

Both consumers and retailers in Canada have been slower than their counterparts in the United States to take advantage of the possibilities of e-tailing.

Despite one of the world’s highest rates of Internet use, Canadians buy less per capita than Americans when they window-shop on the Net, and use retail Web sites more for browsing, to research purchasing possibilities or for price information, said Michael Szego, a consultant with the J.C. Williams retail consultancy, Toronto.

This is partly due to the lower level of disposable income in Canada compared with the United States, but also shows the greater degree of caution among shoppers. “Canadians tend to have a higher level of concern about issues such as privacy, the ability to return merchandise, supply and the ability to touch and feel items,” Szego said. “The result has been a slower development of online buying.”

Many Canadian retailers originally adopted a “wait-and-see” attitude toward e-tailing, too, with the result that U.S.-based companies dominated Internet sales in Canada until recently. But in the past year Web sites have been launched by several non-U.S. brick-and-mortar retail leaders including Future Shop (consumer electronics), La Senza (lingerie), Roots (casual apparel), HMV and Sam’s (music), Canadian Tire (automotive/home goods), Eatons and Hudson’s Bay/Zellers.

These join such earlier startups as Chapters (books), Danier Leather, Indigo Books and Music, Sears Canada and Gateway Grocery.

The addition of these Web sites is taking Canada’s Internet sales to new heights.

A J.C. Williams study predicts that online spending will reach C$3 billion for the year 2000 — more than double the 1999 total of C$1.4 billion — and says that the wider availability and selection of Web sites are causing the increase. The so-called Internet trade deficit has vanished, too. In the first quarter of 1999, 62% of online purchases were made at U.S. sites and only 28% at Canadian sites, according to the J.C. Williams data.

But that had reversed by the fourth quarter, when 52% of purchases were at Canadian sites. In the first three months of 2000, 58% of Canadian online shoppers had made their most recent purchase at a Canadian site, compared with only 37% at American sites.

Is patriotic loyalty at work here? The preference for Canadian firms probably has more to do with savings and convenience, said Chris Ferneyhough, senior research manager with the Ipsos-Reid Corp., Vancouver (formerly Angus Reid), a business consultancy. Ferneyhough said shoppers have learned through trial and error that purchasing from U.S. sites — which often require payment in U.S. dollars — is expensive. “When you get your credit-card statement, you see charges for tax, shipping, and [customs] duty plus [currency] exchange, so you get a kind of back-end sticker shock,” he said. Internet shoppers who experience this are likely to look for a Canadian site with similar merchandise the next time, he said.

For retailers, the Internet can extend market share in the widely dispersed Canadian marketplace. HMV Canada, Toronto, has close to 100 stores in the most populous provinces, but no outlets in Newfoundland, Prince Edward Island, the Northwest Territories, Yukon or Nunavut, the new Inuit territory.

“Yet we have thousands of dollars worth of CD, DVD and video purchases by Internet in those provinces,” said Frank Koblun, director of consumer e-commerce for HMV. “It’s roughly equivalent to adding one more store.” The Web site reaches a different customer profile, too: HMV’s online customers are slightly older, and are often lapsed music buyers looking for catalog or older titles, Koblun indicated. Selection is a big draw, since HMV’s 300,000-item Web database far exceeds the 25,000 titles available in the company’s typical 5,000-square-foot stores. Canada’s later entry into e-commerce retail means that there are fewer Ôpure plays’ — companies selling exclusively through the Net — than in the United States, said David J. West, a senior analyst with J.C. Williams. And since most e-tail leaders are also brick-and-mortar retailers, they tend to take a holistic multichannel approach. “Today’s leaders are looking beyond the direct sales revenue of e-commerce to the other benefits of Internet sites, such as providing product information and boosting store sales,” West said.

A good example of this is Danier.com, the Web site of Danier Leather, a Toronto-based leather fashion retailer with 80 stores. Like HMV, Danier reaches a different market through the e-tail facility; 80% of e-buyers are not in the in-store shoppers’ database. But the Internet facility is useful even when there is no purchase order, said Kevin Strahan, Danier’s vice president of e-commerce, who welcomes the careful browsing for which Canadians are known. “It means when they come into the store, they’ve pre-shopped so they need less staff assistance. That translates directly onto our bottom line.”

Source: Ipsos-Reid Corp.

Danier.com offers an interactive virtual store with a zoom feature to provide closeups of merchandise, and real-time chats with sales reps, who will show specific items on request, help with sizing and even mail sample strips of a garment’s leather to customers.

The site goes beyond the inventory in Danier’s mall and Main Street stores, offering a full-size selection of 300 items, from a C$149 bomber jacket to C$2,000 couture coats. Danier designs and manufacturers its apparel lines, so it can react quickly to changing demand and update the site offerings daily.

The company hopes U.S. shoppers will notice, too: A push into the U.S. market is one of the primary goals of Danier’s Web site, Strahan said.

As e-tailing expands, Szego predicts that the up-and-coming product sectors in the coming months will be online travel ticketing (used less widely at present than in the United States) and health and beauty products. But Canadian Web retailers could face renewed competition from U.S. rivals, some of whom are focusing specifically on the market to the north. Amazon.com, the second most popular of all online retailers among Canadian shoppers, has announced plans to go after the Canadian market with a dedicated Web site highlighting Canadian literature and publications.

Yahoo Canada, a division of Yahoo Inc., opened a new Canadian shopping service in October. WalMart Canada Inc., subsidiary of the Bentonville, Ark., discounter, has not yet established a site for Canada, however.

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