This is marketing research on the e-commerce - Canada industry and can include information on the background, market structure, definitions, competitors, trends and developments of e-commerce and direct marketing in Canada and is related to other topics such as the Internet, web and on-line shopping.

E-Commerce and Direct Marketing: Canada

Table of Contents

1 Direct Marketing in Canada Overview 
2 Direct Marketing Benefits 
3 Demographics of Canadian Online Shoppers 
4 Opening a New Direct Marketing Channel in Canada 
5 Challenges with Direct Marketing Techniques in Canada 
6 Direct Marketing Regulations in Canada 
7 Sources

In 2006, approximately 19.3 million Internet users generated over $50 billion of online sales in Canada. Most of that $50 billion ($46.5 billion) was generated from private online sales. Business-to-consumer (B2C) sales increased 61% from 2005 to reach in excess of $15 billion, while Business-to-business (B2B) sales were valued at $31.4 billion. As an increasing number of Canadians subscribe to the Internet and many become online shoppers, advertisers have responded by nearly doubling their online marketing spending to $1 billion. It is clear that Canada’s retail e-commerce market is rapidly gaining momentum.

In fact, Canadians are expected to double the purchase value of retail goods bought online from $8 billion in 2006 to $16 billion by 2009. Canada has a higher percentage of Internet users who shop online, compared to the US. However Canada has a lower percentage of users who buy online. The lack of online options for Canadian consumers bodes well for the largely unexploited, direct sales opportunities that exist in Canada. Such tremendous growth is not limited to e-commerce sales, however; the emergence of a catalogue market cannot be ignored. While circulation in 2002 was limited to 35 titles, in 2005 that number had dramatically increased to 135. As such, it is fair to say that the Canadian mail order market is far from saturated.

Direct Marketing in Canada Overview

Direct sales channels (in particular e-commerce) are changing the nature of Canadian retailing. Although the addition of a direct sales channel requires a fundamental shift in operations for a store-focused retailer, the benefits are vast: the increase in online sales in 2005 was six times the rise in overall retail sales in Canada! While nearly 70% of large Canadian firms made online purchases in 2005, a mere 16% provided the option for online selling. The disparity between these numbers is even larger for medium and more so for small firms, with only 6% of small firms offering online shopping.

Growth since 2000 for Canadian private businesses using the internet to sell goods/services has likewise paled in comparison to the growth of private businesses using the internet as a purchasing tool over the same time period. Since 2000, only 12.6% of Canadian private business have added a website, leaving the 2005 overall rate at 38.3%. However, with over 130 members from the Canadian Marketing Association identified as direct marketing firms, Canada is well equipped to aid multi-channel retailers as they confront the new business requirements needed to maintain retail market leadership in Canada.

Although American online shoppers outspent their Canadian counterparts by an average of $119 over a six-month period in 2006 (at $566 and $447, respectively), theses figures are nonetheless favorable given the significant difference in e-commerce availability between the two countries.

Direct Marketing Benefits

While at present e-commerce represents a small fraction of the overall Canadian economy, internet advertising in the US is predicted to be the largest ad medium by 2011. Although such a trend is not yet as visible in Canada, widespread use of the internet will invariably lead to increased internet advertising expenditures as firms seek a more targeted audience. As such, the advantages of using the internet as a marketing tool will also extend beyond final sales dollars. In fact, direct marketing can help in meeting business objectives by allowing the marketing of goods/ services in a measurable and targeted way.

With information such as response rates or cost per lead for example, results enable the effective evaluation of a marketing campaign in a timely manner. The information obtained can also be used to develop a database that can benefit future initiatives. Direct marketing is not merely a means to acquire new clients. It can also be used to develop existing relationships through up-selling, cross-selling and retention strategies.

Demographics of Canadian Online Shoppers

While women are largely propelling the growth of Canadian online shopping (at 55% of all shoppers), young Canadians (under the age of 35) are the most likely to be heavy shoppers. However, not only are heavy buyers younger, but they are also wealthier: propensity to be an online shopper increases with gross income. While there are some obvious conclusions to be drawn from such statistics, the fact remains that retailers simply need to catch up to consumer’s multi-channel shopping needs. As online buyers receive more catalogues, they are more interested in purchasing across multiple channels. In fact, a link has been established between catalogue recipients and online buying with frequent catalogue recipients reporting the highest levels of online shopping. Retailers must therefore respond with improved capabilities as consumers realize the convenience and cost benefits of online shopping and as consumers continue to seek multi-channel solutions to satisfy their lifestyles. Caution must be taken, however, to identify the right mix of online, catalogue and other channels to suit each firm’s business strategy.

Opening a New Direct Marketing Channel in Canada

Although the need to maintain brand consistency across multiple channels is a commonsense concern, online market entry poses additional unique challenges. Cross border shipping, price translation, and other logistics present the most obvious hurdles. Locating the correct customers can be another barrier since most American retailers do not have access to accurate databases and international demographic information. Catalogue merchants face additional challenges beyond the internationalization of consumer websites, however. Costly investments in printed materials, including unique data requirements for duties, taxes, etc must be taken into account as supplemental concerns to arrangements with local financial and logistical service providers, data integration and shipping systems.

Challenges with Direct Marketing Techniques in Canada

While the limited number of online shopping options available to Canadian shoppers may look temporarily beneficial for those US firms seeking to internationalize early, additional considerations must be taken into account. Notably, consumer behavior in Canada cannot be assumed to match that of US shoppers. In fact, to increase the likelihood of a successful purchase, US firms are advised to offer a “Canadian-ized” shopping experience, including posting local prices and offering streamlined ordering and returning of goods. Canadian online shoppers are more prone to complete an online purchase if they are not surprised by price or shipping factors, such as price differences as a result of exchange rates, surcharges, additional taxes and customs complications. To avoid customer dissatisfaction, US firms need to ensure they clearly describe the shipping and handling fees as well as potential customs clearance cost. A good first step to creating an integrated approach to the

Canadian market is to establish a “.ca” domain name, as Canadian consumers are more likely to check and trust such a site. While there are some Canadian Presence Requirements that must be met prior to domain name registration, in addition to the federally sanctioned dual language requirement, the previous more stringent requirements have recently been amended and as such obtaining a Canadian domain name should not pose an insurmountable challenge. There is also the option of keeping a US domain name and simply adding the option of viewing a Canadian-tailored version.

For further information: www.cira.ca/en/documents/q3/CanadianPresenceRequirementsForRegistrants- EffectiveDateJune52003.pdf

Direct Marketing Regulations in Canada

In addition to the laws and standards of marketing that govern marketing in Canada generally, other standards are mandated according to the marketing medium. In terms of Canada-wide regulations, the Competition Bureau and the office of Consumer Affairs federally govern marketing activities. However responsibility for consumer protection lies with provincial governments. As such, marketers often face a myriad of regulations across Canada. While Canada Post is the main body concerned with postal issues, Industry Canada has information on various e-marketing regulations concerning issues such as spam, opt-in consent, and fraud prevention.

For detailed information: http://www.the-cma.org/?WCE=C=47|K=224338.

Best Prospects for US Companies

Given that the US online market is currently in the maturity phase of the product life cycle, the largest opportunity for US multi-channel merchants lies in international expansion. While most early adopters have come on board in Canada, the majority of the mainstream market of online buyers is still largely untapped. The saturation of many US retailing categories, in addition to the overall decline in new online customers, should lead firms to consider the launching of country-specific sites and operations. Not only does such a strategy enable firms to take advantage of the growing number of international customers but also it remains one of the few means by which firms can continue consistent sales growth over the next several years. With comparable retail spending per capita in Canada and the limited number of suppliers serving the Canadian market via catalogues and the Internet, potential exists for US merchants to take a leading role in the growth of the direct-buying segment of the Canadian population. In particular for US firms involved in the four leading growth categories, clothing and accessories, health and beauty, toys and video games, and furniture, home and garden, a wealth of opportunities exist.

Sources

U.S. Department of Commerce].