Strategy

Amazon takes root in Canada

Amazon's new Canadian warehouse is a threat to more than just the book business.

Since Canadian Heritage announced on April 12 that it would allow Amazon to build a “fulfillment centre” warehouse north of the border, attention has focused on what the Seattle-based retailer’s apparent Canadian operations expansion would mean for the country’s booksellers. But the upgrade in Amazon.ca’s capacity may represent as much of a challenge to general merchandisers such as Canadian Tire and the Bay.

At the end of 2009, Amazon.ca quietly introduced a “beta” section of its website offering home and garden merchandise, alongside its books and other media offerings. It suggests a step in the direction of the company’s American operation, which offers everything from electronics and sporting goods to tools and automotive accessories. That sort of general merchandise has become a crucial part of Amazon’s business. While the company’s first-quarter results included a 26% increase in revenue from the sale of books and other media, it saw a 72% increase in revenue from other merchandise categories, representing sales of US$3.51 billion (a number goosed by the acquisition of online shoe and apparel seller Zappos, and one that outstrips the US$3.43 billion grossed from media sales).

Contrast Amazon’s success with the back-to-basics strategic plan Canadian Tire unveiled a few weeks ago. Though the company previously dabbled in e-retailing, it has since pulled back, preferring to use its website as a marketing tool. The April announcement by new CEO Stephen Wetmore that the chain would refocus on its core bricks-and-mortar business seemed to rule out any foreseeable return to a robust e-commerce effort.

With few exceptions, Canada’s retailing icons have abdicated the e-commerce space. Andrea Hadley, producer of the eMetrics Marketing Optimization Summit, acknowledges that Canada historically hasn’t taken to e-commerce as much as have other comparable countries, but that could simply be because we don’t have as many retailers selling online. “What is interesting is that U.S. retailers are seeing opportunity in Canada, and they’re expanding their positions here.” And if domestic retailers are content for now to concede that territory, she asks, “is it a mistake that will come back to bite them down the road?”