Canadian businesses are losing an estimated $20 billion to cross-border shopping every year.
But there is another form of cross-border shopping in Canada that doesn't get as much attention: e-commerce.
According to a recent Forrester white paper commissioned by Canada Post, Canadians spent $21 billion online in 2012.
The report was unable to quantify how much of that was spent outside Canada but estimates that 66% of Canadians made some of their online purchases in other countries – 43% of those in the U.S.
The numbers underscore concerns that have been raised by the Canadian Chamber of Commerce – among others – about Canadian businesses lagging when it comes to the digital economy, especially e-commerce.
While Canadian consumers are quick to adopt technology and e-commerce, Canadian businesses have not been keeping up.
Canadian Tire, Holt Renfrew, Rona, and Shoppers Drug Mart are major Canadian companies that have "limited or nonexistent" e-commerce capabilities, according to the Forrester report.
"It is a misconception to think that a website is enough to get people through the door," said Michael Gokturk, CEO of Payfirma, which specializes in mobile payment systems.
"They need to allow people to buy. The repercussion of Canadian businesses not executing on an e-commerce strategy is that consumers will buy from the U.S. online retailers."
Canada's geography, low population density and the cost of putting sales online are the main impediments to Canadian businesses embracing e-commerce.
"Our historical challenge with Canadian e-commerce has tended to be more about pricing and shipping costs," said Bill Tam, CEO of BC Technology Industry Association.
Last year, in an attempt to increase its share of the parcel delivery in Canada, Canada Post revamped its e-commerce platform to make it easier for Canadian e-tailers to integrate Canada Post delivery options into their online checkouts. And in attempt to promote e-shopping in Canada, Canada Post has launched the E-Commerce Innovation Awards, with $1 million in prizes going to the most innovative Canadian e-commerce innovations.
B.C. companies that have embraced e-commerce have done well. BuildDirect, Coastal Contacts Inc. (TSX:COA) and Indochino are local examples of companies that have built successful businesses based strictly on online sales.
Darrell Hadden, CEO of Graphically Speaking, which builds e-commerce websites, said the return on investment might not warrant the cost of having an e-commerce site built, especially for small businesses.
"Down in the states you've got a 10 times larger market than you do in Canada, and then you've got this great stretch between Eastern and Western Canada, which impacts shipping."
Businesses that don't have an e-commerce website may simply have done the math and concluded the return on investment doesn't justify it.
Hadden said that building an e-commerce site can cost between $12,000 and $25,000. Services like Shopify are helping to reduce those costs by providing an off-the-rack e-commerce content management systems and payment processing.
Hossein Maleki, president of Satel Enterprise Ltd., said his company can now build an e-commerce site with Shopify for as little as $3,500.
"One of the challenges is to have accurate inventory so that you don't have people buying stuff and you have to call them and say, 'I'm sorry, we don't have it anymore,'" Maleki said.
Are you being showroomed?
A customer walks into your store, asks questions about a product – maybe even tries it on, if it's clothing – walks out, whips out a smartphone and orders the same item online from an American competitor. You've just been showroomed.
According to a recent TNS Global report, 60% of Canadians have admitted to showrooming, and many are now using their smartphones while they do it.
Berkeley Scott, vice-president of digital media for TNS, a global marketing research company, said merchants need to embrace mobile technology, if they want to try to turn the trend around.
One way they can do that is by adopting near-field communication and GPS to push special offers and coupons to customers as soon as they walk into a store.
"Best Buy is starting to do this in the U.S. now," Scott said. "They're giving offers [via mobile phone] as soon as someone walks in.
"Part of our hypothesis is, you need to embrace this, otherwise it's at your peril."
