Aggressive moves by U.S. retailers to win over Canadian online shoppers with perks such as price-matching and free shipping might be just what Canadian stores need to sharpen their e-commerce offerings.
“I think (Canadian) retailers have been complacent—until now. (But) things are changing with the influx of U.S. competition,” says retail analyst Doug Stephens.
“Canadian retailers really have to ask themselves, is it not time to at least get on board and do e-commerce like it’s 1999?”
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Stephens said pressure is building for established retailers such as Hudson’s Bay Co. (TSX:HBC) and Canadian Tire (TSX:CTC.A) to beef up their online presence to compete with the U.S. where the online marketplace is developing so fast that last month Amazon, the country’s largest online retailer, introduced one-hour home delivery in New York City.
Stephens said the amount of experience large-scale companies like Amazon and Walmart have in e-commerce, as well as the speed that online shopping is evolving in terms of technology and product offerings, can put Canadian retailers at a disadvantage.
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So can the “perks,” like free shipping, according to Craig Patterson of Vancouver-based blog Retail Insider.
“Free is huge and if Canadian companies aren’t offering free shipping then they’re going to have a challenge competing against American websites,” he said.
“They’re going to have trouble attracting Canadians in general to e-commerce because, otherwise, people are just going to go into stores. Retailers need to put the investment in and recognize that e-commerce can drive in-store sales.”
Canadian retailers are challenged with having not enough distribution centres that would allow them to offer incentives like same-day shipping without hurting their bottom line.
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Retailers have also been held back by legacy computer systems that may not be able to handle a high volume of e-commerce stocking and distribution, said Sally Seston, founder of Retail Category Consultants.
“It’s almost like a Band-Aid on a Band-Aid on a Band-Aid,” said Seston, whose company is based in Toronto and New York. “It’s a huge expense to make that leap into the technology, to be in the position of where you need to be to add these services.”
Yet she suggests that the ultimate goal for Canadian retailers may not be to mirror the U.S., but rather, countries such in Europe or even Australia that have similar geograpical and distribution challenges.
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In those countries, in-store delivery or pickup at lockers, which are usually located outside stores and accessible after hours, are offered in place of free or low-cost shipping.
That’s the route that Canadian Tire seems to be taking. Customers at the national general merchandiser can pick up website orders in-store. But the retailer has said it doesn’t expect e-commerce to be a “meaningful part” of its business until at least 2017.
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In June, Hudson’s Bay executive chairman and recent CEO, Richard Baker, also emphasized the importance digital sales.
In the recent third-quarter results, HBC said digital commerce sales amounted to $228 million of its $1.9 billion consolidated overall sales. The Toronto-based company has said its goal is to have online sales account to 20 per cent of overall sales within the next five years.
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