Despite eCommerce Surge in Canada, Stores Dominate Generating 95% of Sales in July
The pandemic has forced many Canadians to shift their habits from shopping in-store to online. For example, food and beverages have historically had a low eCommerce penetration rate at only 0.7% of sales in 2019 according to Statistics Canada. But between February 2020 and April 2020 online sales of food and beverages increased by 107% in Canada because of the pandemic. That number would be even higher if grocery stores were able to meet demand. But the surge in eCommerce adoption in Canada masks the reality that the vast majority of retail sales still take place in stores.
Let’s take a look at April. In April at the height of the lockdown online sales as a percentage of total retail sales reached a record high of 9.5% or $3.4 billion in Canada. Since then online sales have fallen to $2.8 billion, or 4.8% of total retail sales in July. That’s hardly an eCommerce revolution but in line with historic trends that show that between 2016 and 2019 online sales as a percentage of total retail sales in Canada only increased from 2.4% to 4.0%. Now many months into the pandemic online sales are only slightly higher than they were at the height of last year.
Source: CBC, 2020
The reality is that eCommerce adoption in Canada is low, lagging behind many other countries. Countries like China and England have many more people shopping online. One of the reasons online adoption is lower in Canada than other countries is availability. A 2019 report by the Business Development of Canada (BDC) found that only 43% of businesses in Canada with national or international activities can receive and fulfill online orders.
Source BDC, 2019
With costs like picking, packing and shipping shifting to retailers when eCommerce picks up, retailers are likely breathing a sigh of relief that the pendulum has not swung too far in the direction of online sales since the most profitable channel for retailers is often their stores.
Alex Snider, co-owner of Queen Books in Toronto says it costs $12 to ship a book across Canada which is significantly above the cost of shipping in the United States. Snider concedes that she does not know if once the pandemic is over if her company will continue with eCommerce due to the significantly higher cost structure.
Even large organizations like Walmart are struggling with the cost of eCommerce. Walmart lost an estimated $2 billion on eCommerce in 2019. In Canada, Walmart recently sent a letter to its suppliers stating that starting on September 15th of this year Walmart will apply a 5% fee to the cost of products sold at Walmart through eCommerce. The fee which suppliers have to cover is to offset a $3.5 billion Walmart initiative in Canada to add more distribution centres, improve online ordering functionality and renovate stores. Suppliers also have to pay a 1.25% infrastructure fee which is applied to the price of products sold to Walmart. “These changes are about sharing in the investments we are making to ensure our customers have the low prices and shopping convenience they expect and deserve from us,” says Walmart in a statement.
The new normal in Canada may mean fewer more purposeful shopping trips but stores are still Canada’s retail engine with eCommerce playing a supporting role.
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