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This month, Forrester Research Inc. released its latest report on Canadian eCommerce, with projections for nationwide sector growth extending into 2019. Earlier in the week, we updated our Canadian eCommerce infographic with some of these new numbers. Now, looking at those numbers, let’s discuss some of the systemic realities of Canadian eCommerce that play a critical role in its growth, both on the retailer and consumer sides.

Judging from Forrester’s findings, the outlook for Canadian eCommerce as a whole is good. It anticipates Canadian spending online to grow at 12.3% annually over the next five years, reaching $39.9 billion (CAD) with 63.9% of all Canadians making purchases on the web by 2019. Canadians’ appetites for online retail have never been higher, and the Forrester report anticipates continued movement in this direction going forward.

Growth of demand in the domestic eCommerce sector is obviously a positive sign for Canadian companies, some of whom have been notoriously slow in developing their online brands. However Canada’s relatively underdeveloped market also offers promising opportunity for American retailers looking to expand their operations.

It is American companies that have made the greatest impact in Canada to this point, with Amazon taking the lead by a healthy margin. According to Forrester’s data, a reported 45% of Canadian online adults have made a purchase from Amazon in the past three months, while fellow American retailer Wal-Mart lags behind with (a still-impressive) 11%.

In an interview with Multichannel Merchant, Jennifer Campbell, general manager of commercial marketing for Canada Post, says the success that American companies are finding here derives in part from Canadians’ awareness of American brands due to spillover advertising. The Canadian advertising market is also substantially less saturated.

Amazon has only four fulfillment centres in Canada, compared to its 64 in the U.S.Amazon has only 4 fulfillment centres in Canada.

However, along with these advantages come some distinct and unique geographic and logistical challenges. Canada has a smaller population than the state of California, spread out over a land mass roughly 25% larger than all 48 contiguous states. With only a handful of densely populated major cities distributed across the country, retailers are forced to make do with fewer distribution centers serving larger areas than nearly anywhere else in the world.

For context, Amazon runs four fulfillment locations in Canada (Toronto and Vancouver), compared to its whopping 64 in mainland USA. Target Canada has only three regional distribution centres (which stock its brick-and-mortar stores as well as fulfilling online orders), while its parent company south of the border operates 26. Even for the biggest players in Canadian eCommerce, shipping to consumers in both an expedient and cost-effective way while also maintaining a competitive advantage has proven to be a challenge.

Given the circumstances, expediency has its realistic limits. The promises of same-day shipping that are rapidly accumulating in America show no real signs of making their way to Canada; even there, with far more agile distribution networks, large companies such as eBay are being forced to slow down their rollouts in favour of financial pragmatism. It is unlikely that any retailer, big or small, will be able to gain any substantial advantage over its competitors in the near future based solely on prompt shipping.

frank-and-oak-online-retailFrank and Oak has made a splash in the Canadian eCommerce world.

The price of shopping is another story. Last year, Wal-Mart upped the ante by introducing free shipping on all online purchases, without even a minimum order size required for a purchase to qualify. The company’s willingness to absorb what are often considerable shipping costs in order to draw consumer dollars to their site is a clear indicator of the cutthroat competition that exists in the market today.

So how are Canadian companies, particularly small businesses and start-ups, supposed to compete against the well-established American titans that dominate the Canadian market? Recognizing their niche is the first essential step. This is the approach that we have seen from such Canadian businesses as long-time success story LuLuLemon, and Montreal-based newcomer Frank & Oak, both of which have carved out a space in the country’s eCommerce sector, and developed a devoted following.

While Amazon and Wal-Mart will nearly always win when it comes to price, smaller Canadian companies can get a leg up with unique product offerings, personal customer service, and an exceptional user experience.

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