Surprise, surprise: Canada lags in e-commerce

Selling online would allow Canadian businesses to escape the constraints of our small domestic market–but it ain’t happening

Keith Williamson/Flickr

The government’s Standing Committee on Industry, Science and Technology has released its report (links to PDF) on e-commerce in Canada, titled “Pursuing the Promise.”

It paints the same picture we’ve known for some time now–that despite Canadians being among the most prodigious users of the Internet, they really aren’t doing much online business-wise. With the amount of effort the government has put into this area, a more accurate title for the report might therefore be “E-Commerce in Canada: Half-Assedly Pursuing the Promise.”

Canadian businesses are investing 40 per cent less in information and communications technologies, or about $2,400 less per worker, than American businesses, the Committee heard from witnesses. Some of that has contributed to the fact that only 1 per cent of retail expenditures in Canada are from online transactions, compared to 8 per cent in the United States.

That’s bad because, as the report says, the ability “to reach customers beyond Canada’s borders helps businesses alleviate the challenges associated with operating in a relatively small domestic marketplace.” Also, “the effective use of technology and networks can help a business reduce costs, improve efficiency, ultimately leading to increased productivity.”

So why is Canada lagging so badly? Depending on your perspective, the paper reads either as a list of reasonable explanations, or as a litany of excuses.

There’s the familiar refrain about the lack of access to capital. With Canada being a smaller country, there aren’t as many sources with deep pockets that can fund the necessary expenditures on new technologies needed to drive e-commerce. In some cases, such as with telecommunications, this problem is further exacerbated by foreign ownership restrictions. Thankfully, the government is finally taking action on those.

Also, Canada is predominantly a country of small and medium-sized businesses. As some witnesses suggested, it’s more costly for such companies to invest in technological upgrades than it is for big businesses. “It costs businesses that are a lot smaller a lot more,” said Diane Brisebois, CEO of the Retail Council of Canada. She also said that it’s hard to find tech-savvy people who want to work for small companies; they’d rather work for big, multinational corporations.

Others brought up concerns with security and consumer protection. With neither being strong enough, they’re acting as obstacles to getting e-commerce options up and running. Broadband issues were also raised, with the Canadian Chamber of Commerce saying the country’s e-commerce infrastructure is no longer “world class.”

Last but not least, a number of commentators said credit card transaction and postage costs are too high.

The Committee wrapped up its report with 16 recommendations, which generally followed the same uninspired script of virtually every similar paper: the government should serve as an example to businesses and adopt e-commerce itself wherever possible, it should move to modernize payment systems, cut red tape, encourage digital literacy, boost security, yadda yadda.

More informative was an addendum from the NDP at the end, which suggested specific courses of action. These included defining an innovation and economic development policy with broadband and e-commerce adoption as a priority, the spending of proceeds from the upcoming spectrum auction on rural broadband, StatsCan reinstating the Survey of Electronic Commerce and Technology (which was discontinued in 2007), and new regulations for electronic transaction fees, among other items.

All in all, even with the milquetoast official recommendations, it’s hard not to come to a singular conclusion after reading the entire report. It’s almost like the Committee is telling the government: “The reason Canada’s e-commerce situation sucks is because of your inaction, so let’s get to that long overdue Digital Strategy.”

The Digital Strategy is, as Michael Geist–the Canada Research Chair in Internet and E-commerce Law at the University of Ottawa–puts it, the government’s Penske file, so named for George Constanza’s non-existent work project on Seinfeld. Moreover, Canada remains the only G7 country without some sort of broadband plan, never mind an actual digital strategy. To say it’s overdue when Japan had such a plan 11 years ago is a gross understatement.

If Canada’s e-commerce situation is woeful, it’s a case of the digital chickens coming home to roost.




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Surprise, surprise: Canada lags in e-commerce

  1. The government should serve as an example? That’s not a solution. In the places where e-commerce is more widespread, government was not the lead. The private sector leads the way.

    It’s all about risk-reward. The reward for successful start-ups like Google, Paypal and Amazon is far greater in the US. Therefore it is the US where such ventures are most prevalent. It’s all about entrepreneurship. The competition is also more fierce in the US, and this competition breeds the best outcomes. Entrepreneurship is encouraged by lower tax rates, less regulation and more economic freedom. Canada is doing better in measurements of economic freedom over the last decade, and so Canada may reap more rewards in the future.

    The only industry where I would say that online business has thrived in Canada is banking. Online banking in Canada is as good or better than anywhere. That’s likely because banking profits have been so high, so they’ve had lots of leeway to spend to improve their online presence.

  2. It’s odd. After all, we do so well in the phishing side of the industry.

  3. Reliable networks would be a required start. We’re on the customer service side but I’m tired of IT workers trying to blame each other for two hours when it ultimately takes them minutes to repair the corrupted software or replace to offending hardware. Paper based resources are still the life saver.

  4. Yes, but Canadians have always had less pick-up of alternative methods of shopping when compared to Americans. A prime example would be catalogue shopping (remember that?).
    One reason could be that as Canada is a more urbanised country, and le are closer to downtown shopping and shopping centres while America, with 10 times the population living in many smaller centres, has always required other ways of allowing people to access various goods and merchandise.

  5. PN is right. A litany of excuses. Canada has a high tolerance for oligopolies, — banks, phones, internet, pharmaceuticals etc. Another is Canada Post.

    I have lived in the Netherlands for 5 years. Although this country has half the population with no cities over 1 million people in size, I have at least twice as many options for phone, internet, and banking as I did in Calgary, and at much better prices.

    But Canada Post wins the award for the worst of the monopolies. Their service is beyond pathetic. A magazine subscription in Calgary can take anywhere for 3 days to 3 weeks. (I feel for ya Maclean’s).

    We buy things here online all the time — books, DVD’s, computer parts, whatever. The dutch postal service is next day 98% of the time, including Saturday.. We have ordered stuff (like a laptop battery charger) at 6:00pm and received it the next day. Shipping on a small item is almost always included in the cost from the on-line retailer, which is comparable to what is in the store – if the stores have it stock.

    A recent news item was that Canada Post had lost money for the first time in 17 years. Many reader comments were in favour of shutting it down or going to once a week. Who needs the junk mail?.

    Canada Post also has an online store, which is happy to compete for the low hanging fruit. But they still manage to lose money, probably because Canada Post has to rely on Canada Post to deliver the product.

    Who wants to pay $10 and wait for a week, walk half a kilometer to the community mailbox 3 times, just to see if it’s there?

    Many Canadians would be really surprised at how many countries still have Saturday mail delivery (USA, Britain, Netherlands, etc.). It’s like those countries still consider it part of the infrastructure. Here is a hint — it is.

  6. E-Commerce in Canada ?!. Why ahoukd I bother ordering a device online when Harper and the Customs Tax Con’s want to charge me another 100% for it, before I even get it. ???

    • That’s why Canadian suppliers need to fill the gap and be the ones to sell it to you.

  7. Our governments have actually been pretty good when it comes to getting online. The private sector isn’t lacking a role model. It is lacking competition and big ambitions.

    I wish we had data, though, on the percentage of our small and mid-sized businesses that are online as compared to the % of American businesses of the same size who are. One gets the sense that more American companies are online, but if you compare apples to apples (i.e. companies of similar sizes) are they really? I can’t find a data-based answer to that.

  8. the first and last time I ordered on line – I paid middleman to Canada, Ipaid customs, I paid postage and taxes and import tax & etc. My $10 article which was not suitable in end cost me $50 so did I bother to pay to return it – no.
    I have never ordered on line again unless I was in the States.

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