A report by Salesforce indicates digital online sales in Canada were down eight per cent year over year in the first quarter of this year compared to a year ago and the decline was worse than globally where it was only two per cent.
In its global Q1 Shopping Index, Salesforce, a global leader in Customer Relationship Management, said digital e-commerce in Canada was down nine per cent year over year in the fourth quarter of 2022.
The report said the per-visit average shopper spend sat at $1.99 in Q1, down from $2.71 in Q4 of last year and the overall conversion rate in Canada was 1.9 per cent compared to 2.5 per cent in the previous quarter.
Caila Schwartz, Director of Consumer Insights and Strategy, Retail & Consumer Goods at Salesforce, said Europe experienced a big drop in digital sales starting to occur in late 2021 and into early 2022 and that continued throughout the year.
“Now we’re seeing in North America – Canada and the U.S. – very similar behaviour. So we’re starting to see drops or flatness happening in digital commerce. It’s really being driven by two main factors. A decrease in traffic and a decrease in order volumes,” she said. “And our hypothesis is that it’s primarily been driven by decreased consumer sentiment.
“There’s a lot of economic headwinds at the moment and consumers are feeling pinched economically and we know that they’re making purchasing decisions – based on our research – price is the number one reason why they’re switching brands and making purchasing decisions.”
Those economic headwinds are also having an impact on the amount of average spend by consumers these days.
“The amount spent per visit is declining and we’re seeing this in Canada and we’re seeing this on a global scale. The traffic that we’re seeing coming to retailers’ websites is less profitable. So we’re seeing some really distinct shifts happening,” said Schwartz. “New customers or customer acquisition is not as lucrative as it has been for the past several years. And we’re seeing a shift now to more loyal customers driving value. The per cent or share of orders coming from repeat buyers in Q1 grew. It grew for Canada and it grew on a global level which means that those existing customers are doubling down and they’re being loyal whereas it’s getting harder to attract and retain a new customer.”
She said the retail sector will continue to face challenges for the rest of this year.
“I see it continuing especially in North America. I think what we saw is that economic headwinds hit in Europe first and they bore the brunt of those issues for the entirety of last year,” she said. “I see warning signs that here in North America – Canada and the U.S. – it’s going to continue. This downward trend could continue for the remainder of 2023.
“What will be a leading indicator when you look at the Q2 data, and we won’t have that data until the beginning of July, but if it’s two consecutive quarters, it’s heading into a pattern. We’ve done some research, some consumer-based studies, and we found that consumers are feeling pessimistic about their economic situation and the majority of consumers say that they’re pulling back on their spend. They’re not buying as much as they were this time last year or this time two years ago. That’s in Canada and on a global level.”
Schwartz said the reason why conversion rates are trending down on a global level is because there’s strong traffic growth which is growing by six per cent year over year.
“But we’re seeing decreased order volume growth. So consumers are still coming to retailers’ websites, they’re doing more research but they’re not converting at the same rates they once were,” she said.
“In Canada, it’s actually interesting. We saw traffic volumes decrease, order volumes decrease, which resulted in conversions being essentially flat.
“What’s interesting for markets like Canada and the U.S. is we’re going to see, and we’re starting to see this with some brands that have come out into the market and laid plans for this, is a strong emphasis back on their core customer base. So understanding who their customer is and catering to the experiences that those customers want . . . I think that’s a pivot we’re going to see happen across the industry which means we’re going to see more and more emphasis on having really good data. So what is a retailer’s data strategy, how are they integrating and operationalizing that data. Ultimately what that’s going to do is set them up for success using new tools that are coming out, especially in AI. There’s a lot of excitement happening there not only on the customer experience side but on the optimization, cost-cutting side that’s going to help retailers and ultimately all of these things are going to help drive a better customer experience for those customers.”
Some global highlights of the Salesforce report:
- After a Q4 comeback, global online sales fell two per cent year over year, largely driven by decreased demand in the US
- Globally, shopping spend is at its lowest in two years at an average of $2.30 compared to $3.02 in 2021 Q4 and $2.85 in 2022 Q4
- Digital traffic via desktops dropped significantly at 11 per cent, while mobile maintained at zero per cent growth ;
- Desktop reigned in follow through, with cart abandonment lowest at 68 per cent compared to 79 per cent on mobile.
The full report, including global data, can be found in the full Q1 Shopping Index.
