While Canada’s economy is considered to be among the developed ones globally, it would be more appropriate to call its e-commerce market developing due to the high rates of annual growth it’s been experiencing, according to a report by Admitad.
In its annual report for 2018-2019, the global affiliate network, which helps advertisers and publishers develop their online business around the world, cites eMarketer data indicating the volume of online retail in Canada for 2018 promised to grow by 26.3 per cent and reach almost $43 billion (nine per cent of the total Canadian retail income). It also said Statista believes that the volume of online retail in the country by 2023 will reach $55.4 million.
“As far as industry coverage is concerned, there are at least 26.8 million unique users in Canada. In 2018, more than 72.6 per cent of the population made purchases online, and by 2023 the proportion of online purchases promises to exceed 75 per cent annually,” says the Admitad report.
“The average purchase amount per user for the year is $1,493. The main payment method is credit cards; 71 per cent of buyers prefer to pay online. E-wallets and debit cards rank second. The hottest season in Canada is the end of the year, just like in the USA. It is worth noting that the highest average amount is due to such events as Christmas, Black Friday and Cyber Monday, as well as the end of school holidays (back-to-school) in August, Mother’s Day (May), Father’s Day (June), St. Valentine’s Day and Thanksgiving Day.”
Admitad says that in 2018 mobile devices brought about 30 per cent of all sales to online retailers which is about 2.6 per cent of the total retail income.
“Canada is the largest US neighbor in the Americas, and this largely determines the structure of its e-commerce market. Almost all of the largest online trading sites are American services such as Amazon, eBay, Etsy, Walmart, Best Buy, Newegg. Separately, it is worth highlighting Shopify as this service allows creating own online store (including work on a dropshipping model through partner networks),” says the report.
It says the largest category of Canadian e-commerce is “Clothing & Shoes”, which in 2018 online retailers saw at least $11.8 billion, or 29.5 per cent of total income.
“The main trends in the e-commerce market are active mobilization, multi-channel sales (omnichannel) and cross-border trade. By some estimates, nearly half of Canadian customers buy goods from abroad.
This trend may be due to two factors: the high users’ dependence on retailers from the US and the inability of Canadian business to compete with them. Moreover, almost half of the local small business representatives do not even have their own website,” says Admitad.
“During the year, a total of 1.25 million sales were made, of which almost half has accounted for the fourth quarter. The average monthly number of sales exceeded 104,000. The percentage of deviation from the highest average sales amount was 20.8 per cent; on the decline it was 26.6 per cent. The most active months by dynamics of consumer activity were October (126,000) and November (121,600). The smallest number of sales was observed in February (76,600); the maximum deviation the monthly average back then was as high as 27,700 orders.”
The report says the average amount for all categories in 2018 is $103.5. The highest average amount is in March ($131.3) and September ($125.8). November hit the lowest point with $77.1, another significant decline was noted in April ($77.6).
The largest category in Canadian e-commerce was Goods from China.
While consumers are getting better deals from international retailers who don’t have to charge a tax like the GST/HST, it puts Canadian online retailers at a disadvantage in terms of competitive pricing.
But that also has a broader context. It hurts the Canadian economy in general not having those taxes collected on international retail purchases.
“The internet has no borders and the popularity of online shopping is growing every year. Governments in Canada have sadly lagged on the related tax and duty collection and Canadian retailers have been directly impacted,” said Michael Kehoe, Broker / Owner of Fairfield Commercial Real Estate Inc. in Calgary and Government Affairs Chair Prairie Provinces for the International Council of Shopping Centres.
“Canadian couriers by licence must collect and submit duty and taxes owing on the delivery of goods purchased outside the country. Postal service is another issue and Canada is losing significant tax revenue. At present there are three postal stations for parcels in Canada; Vancouver, Montreal and Toronto. Vancouver is now automated for duty and tax collections while Montreal and Toronto should be automated by spring of 2020. Canada Customs is working with Canada Post Corporation to move forward to develop a level playing field for Canadian retailers. It has been estimated that Canada and Provinces lose $1 billion per year in uncollected duty and tax related to online shopping. All are small dollar value amounts averaging around $10.
“Canada Post Corporation is estimating a 10 per cent annual increase in postal parcel imports in the near-term. Canadian online retailers work hard to compete and the current value of the Canadian dollar compared to the American dollar or the Euro can be advantageous to creating retail sales. HST is not a factor on exported goods. The retail industry in Canada has been seeking tax fairness and a level playing field for years.”
The Admitad report also found:
The number of people purchasing goods in online stores is steadily growing. In 2018, the number of customers on the web was close to 1.8 billion people, and in 2019 it is expected to exceed 1.9 billion. This is almost a quarter of the world population;
The average penetration rate of online shopping in the world is expected to reach 63 per cent in 2019;
The share of e-commerce in retail keeps increasing. Although in 2017 the world average share barely exceeded 10 per cent, in 2018 the figure rose to almost 12 per cent. According to Statista, the share of e-commerce in 2019 can grow to 13.7 per cent;
The costs of online mobile advertising keep growing. In the US, by 2020 the volume of the mobile advertising market will exceed all other “traditional” channels;
The total volume of online retail sales is also growing, promising to step over $3 trillion in 2019. According to preliminary data, in 2018 it has not yet reached the mark;
Amazon is the world’s largest e-commerce platform with a capitalization of more than $810 billion, followed by Alibaba Group with $393.8 billion as of early January; and
Credit cards are currently the most frequently preferred means of payment (30 per cent), followed by debit cards and digital wallets (21 per cent each). In 2019 online wallets, such as PayPal and AliPay, may become the most preferable means of payment. Judging by the forecast, they are expected to become responsible for over 30 per cent of all sales.