Electronic commerce and technology

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Online sales recorded their fifth consecutive year of double-digit growth in 2006, as e-commerce gained momentum among Canadian retailers.

Private and public sector online sales combined surged 40% to $49.9 billion. Online sales by private firms increased 42% to $46.5 billion, while those by the public sector rose 17% to $3.4 billion.

Retail trade was one of the fastest growing sectors. Retail firms sold goods and services online worth $4.7 billion last year. This was nearly double the revised figure in 2005, and it accounted for 10% of all private sector online sales.

However, this level was just slightly over 1% of the total retail market. In fact, e-commerce still represents a small fraction of the overall economy.

About 8% of Canadian firms conducted e-commerce last year, up slightly from 7%, where the proportion had stagnated for the past three years. However, in the retail sector alone, more than 15% of firms sold online in 2006, up from only 10% in 2005.

The vast majority of online sales still occur between firms as part of business-to-business (B2B) sales, as opposed to sales from a firm to an individual consumer.

Sales from business to business amounted to $31.4 billion, which represented about 68% of total e-commerce by private firms, unchanged from the year before. In 2006, 45% of Canadian firms made purchases online.

The use of mainstream technologies, such as the Internet and e-mail, remained constant in 2006. These basic information and communication technologies are now nearly ubiquitous, lacking only in small pockets of industry.

Wholesale trade continues to lead online sales

Four sectors – manufacturing, transportation and warehousing, wholesale trade, and retail trade – led the way in terms of value of online sales, accounting for nearly 61% of the private sector total.

Wholesale trade accounted for 18.5% of total sales, the highest proportion. It was followed by transportation and warehousing, which represented 17.9%, and by manufacturing, with 14.2%.

All these sectors, except retail trade, make the bulk of their online sales to other firms. This demonstrates the continued importance of B2B sales in the e-commerce environment.

Retail firms bring the goods, online

Other data from the Survey of Electronic Commerce and Technology reaffirm the surge in online sales in the retail sector. More than one out of three retail firms with more than 100 employees conducted e-commerce sales in 2006, according to the survey.

In 2006, 46% of Canadian retail firms had a website, compared to 42% in 2005. A large retail firm without a website is now almost unheard of; 88% of retail firms with 100 employees or more had one in 2006.

Retail firms have managed to overcome barriers to selling online by taking advantage of different delivery solutions, adapting their product mix and embracing the new way that consumers now shop.

In 2005, 50% of retailers that used the Internet felt that the goods and services they offered did not lend themselves to Internet transactions. Only a year later, this proportion has declined to 39%. This may be the result of innovative thinking, as more and more Canadian retail firms appear to have found a way to participate in e-commerce.

In 2006, the most important benefit of conducting e-commerce sales perceived by Canadian retail firms was the ability to reach new potential customers. Over 40% of Canadian firms that conducted e-commerce felt this was a benefit, up from 35% in 2005.

About 37% of retail firms felt that a benefit of conducting e-commerce was better coordination with their suppliers, customers and/or partners.

These two benefits — reaching new customers and better coordination — were often cited as reasons that e-commerce in the retail sector was a natural fit. This was also seen more generally across the economy.

It appears that in 2006, a greater number of Canadian retailers were able to recognize the potential of these previous expectations and were participating in the multi-channel shopping model that many consumers desire.

Perceived benefits of e-commerce shift

At the outset there were many perceived benefits to e-commerce, one being that e-commerce would result in cost savings for firms as they would be able to scour markets throughout the world and reduce overhead costs associated with traditional business. The survey found that most firms see things differently.

Only about one in four firms that use the Internet reported that they believe that conducting business over the Internet results in lower costs. This figure has remained relatively steady through the past five years. It points to the fact that organizations must recognize other benefits to doing business online.

Firms identified two principal perceived benefits in 2006. The first was the ability to reach new customers. Overall, 36% of firms thought that conducting business over the Internet could allow them to connect with new customers. This was an increase from 31% in 2005.

Of note, 50% of firms in the manufacturing sector and 59% of firms in the information and cultural industries sector believed that online business allowed them to reach new clients.

The second perceived benefit of conducting business online was better coordination with suppliers and/or customers and/or partners. In 2006, over 35% of private firms felt this was a potential benefit. This was nearly double the proportion in 2003, when only 21% perceived this as a benefit.

The growth may provide an indication that a critical mass of Canadian firms and individuals, whether they are customers, suppliers or partners, are now using the Internet to conduct business. The effects and perceived benefits of this are being recognized across industry.

Use of websites, broadband Internet up slightly

The proportion of private firms that had a website in 2006 edged up slightly to 40% of all firms.

The vast majority of firms are using these websites simply to provide information about their company and the products and services that they have available.

The use of broadband Internet by Canadian private firms continues to become more universal. About 85% of firms used a high-speed connection in 2006, up from 80% in 2005. This proportion is nearing a saturation point for the Canadian market.

Available on CANSIM: tables 358-0007 to 358-0011, 358-0014 to 358-0016, 358-0121 and 358-0139.

Definitions, data sources and methods: survey number 4225.

For more information, or to enquire about the concepts, methods or data quality for this release, contact Bryan van Tol (613-951-6663; bryan.vantol@statcan.gc.ca) or Mark Uhrbach (613-951-2856; mark.uhrbach@statcan.gc.ca), Science, Innovation and Electronic Information Division.

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