Canadians have embraced electronic commerce amid a major disruption in retail channels. In 2022, there were over 27 million eCommerce users in Canada, accounting for 75% of the Canadian population. This number is expected to grow to 77.6% in 2025. Increased online shoppers means that retail eCommerce sales in Canada continues to climb. According to Statistics Canada, eCommerce retail trade sales in Canada amounted to an all-time high of US$3.82 billion in December 2020, surpassing the boost recorded in May 2020 (US$3.2 billion) due to the coronavirus pandemic lockdown measures. In March 2022, e-commerce sales amounted to approximately US$2.34 billion. It is estimated that retail eCommerce sales will total US$40.3 billion by 2025. Retailers are investing in digital platforms to reach consumers dispersed over a vast land mass, while responding to competition from websites, such as Amazon Canada.
Electronics is currently the leading product category, followed by Fashion and Furniture. Fifty-nine percent of Canadian shoppers use credit cards when shopping online and a further 20% use PayPal. Digital wallets are steadily increasing and estimated to account for 27% of online payments by 2025. The growth of eCommerce is due not only to the volume of purchases, but also to the breadth of goods and services Canadians purchase. The products that Canadians are buying from U.S.-based merchants are apparel and accessories, followed by books, music, and videos; consumer electronics; toys, hobbies, and games; health and beauty products; footwear; jewelry; household goods; sporting goods, DIY and garden supplies and groceries. From a B2B standpoint, virtually all Canadian small business owners report making online purchases. Large numbers of business owners are opting to arrange and purchase their travel online and are more likely to access services or office supplies online.
Canada’s eCommerce infrastructure is highly developed and closely integrated with that of the United States. Broadband internet access is offered throughout Canada using much of the same equipment as in the United States. U.S. companies do not need to set up a separate website. Many U.S. companies have integrated Canadian transactions into their current websites. Others maintain a distinct “.ca” domain. U.S. companies selling to Canadian business and consumers over the Internet should have procedures in place to meet Canadian customs requirements and pricing in Canadian dollars. More than 200 languages are spoken in Canada. English and French are official languages. This linguistic duality can present an obstacle for retailers, sometimes requiring multilingual customer care and sites to be successful. Due to rise in social media accessibility, there is a growing emphasis surrounding the importance of a good customer service experience. The types of businesses likely to use e-commerce as a tool are wholesalers (29.8%), Information and Cultural Industries (27.1%) and Finance and Insurance (25.1%).
Legal & Regulatory
U.S. companies need to comply with Canada’s federal data privacy laws, including the Privacy Act and the Personal Information Protection and Electronic Documents Act (PIPEDA), as well as provincial privacy laws. A main requirement of PIPEDA requires persons or firms that collect personal information during commercial activities to inform the subject of all possible uses of the data and to obtain consent for the use.
Canada’s Anti-Spam Law (CASL) took effect on July 1, 2014. CASL significantly limits the way companies send Commercial Electronic Messages (CEM). A CEM is defined as any electronic message intended to encourage participation in a commercial activity. An electronic message includes email, text messages, VoIP phones, digital radio, digital TV, and some aspects of social media. Under CASL, the sender of a CEM must have express or implied permission before sending the recipient a CEM. Although CASL does not ban sending CEMs, the law requires that senders obtain prior consent before sending the CEM. Senders must also provide identifying information in all CEMs. This information must be valid for 60 days after the message is sent. All CEMs must also include an obvious unsubscribe mechanism.
Canadian consumers increasingly rely upon the Internet to place orders. For the past decade, Internet consumer sales have risen at a far higher rate than traditional retail sales. Most Canadian retail firms have adopted wireless technologies and internet-based systems to improve business-to-business and business-to-consumer relations. Manufacturing firms and government organizations are also increasingly likely to use the Internet for purchases, especially for small routine orders. Although approximately 94% of all Canadians have access to stable internet service, the users primarily live in the more urban areas of the country. Internet access provides a crucial link to the rest of the world for residents in remote communities in Canada’s north, but delivering high-speed services remains costly and difficult.
Beyond internet accessibility, consumer behavior is also greatly affected by the economic landscape. Price can be an influential factor in consumer behavior and increasing inflation or economic downturn can result in far lower activity in e-commerce as much of the activity is defined by the consumer discretionary category. Additionally, data shows that acquiring new customers is generally perceived to be far less profitable than maintaining loyal customers online. The percentage of repeat customers grew indicating that it is more difficult and costly to acquire new customers.
In 2020, it was found that Canadian consumers, compared to other countries, had the highest sentiment to support local businesses (68%), online or offline, to strengthen their local economies. This should be something considered when considering exporting products into Canada.
A new consumer behavior that has seen more activity in recent years is personalization. One in five Canadian customers is willing to spend 20% more on a product to have it personalized, although 42% of these people want the customization to be guided by the company.
As of January 2022, 55% of Canadians made online retail purchases with their mobile devices and this trend is growing. Younger consumers lead the trend, with 47% of these shoppers purchasing via digital devices at least once a week.
The Canadian eCommerce market closely resembles that of the United States and therefore shares numerous trends, including:
- Hybrid purchases/“Click and Collect” – so-called “omnichannel” consumers order goods online and pick them up in a brick-and-mortar store.
- Marketing through social media – return on investment for using social media is constantly improving; retailers increasingly spend marketing dollars on social media ads.
- Cybersecurity – fraud is a growing concern for Canadian retailers. Tools that help companies detect and deter cybercriminals are becoming more easily available and affordable, with integration often built into a company’s strategic planning.
- Migration to mobile payments “mPOS (mobile Point-Of-Sale)” – continues to increase in Canada using technologies like Apple Pay, Android Pay, and Google Pay.
Although Canadians prefer to support Canadian online business, a sizable proportion of the nation’s eCommerce spending goes to non-Canadian websites. Various reports state that close to half of Canadian consumers’ online purchases are made at foreign retail sites. Canada has many small and medium-sized enterprises (SMEs), but the companies have been slow to enter the eCommerce industry. Canadians cite lower prices and better selection as some reasons for shopping outside the country.
Due to Canada’s strong economy and proximity to the United States, retailers aspire to tap into the growing eCommerce market in Canada. For U.S. retailers who are selling beyond their borders for the first time, Canada offers an easy cross-border opportunity with similar taxes, fees, and shipping safety. How-to websites, such as CrossBorderShopping.ca, have also been created for the sole purpose of aiding Canadian consumers through the process, providing price comparison tools and outlining areas such as return policies, taxes, and restrictions.
The major consumers “buying holidays” are like those in the United States:
- Valentine’s Day (February 14)
- Easter (March/April)
- Mother’s Day (May)
- Father’s Day (June)
- Back-to-School (August)
- Halloween (October 31)
- Christmas (December 25)
- Boxing Day (December 26)
Canada also sees a rise in sales around the fourth quarter holidays, most notably Cyber Week, the buying period that begins on the United States Thanksgiving holiday, including Black Friday and Cyber Monday.
Digital Marketing & Social Media
Given the rising internet penetration rates and the expanding digital platforms, businesses are spending more on digital promotion than ever before. In 2021, digital ads revenue reached US$9.59 billion, representing an increase of 28% year-on-year. Search advertising was the leading ad format in Canada, accounting for over 46% of total internet spend. Social media ranked second with a share of 26.1%. The remaining ads are placed on news and information sites and directories, among others.
In terms of consumer preferences, young consumers have shown a greater trend toward mobile purchases and are more responsive to mobile ads. Another preference in Canada is for video advertising: according to Com Score, mobile commerce (m-commerce) is on the rise, given increasing mobile connectivity of smartphones and tablets. Digital advertising now has surpassed TV advertising revenues and is poised to become the favorite advertising venue in Canada.
Social network user numbers are on the rise in Canada and in 2022 amounts to an estimated 38.93 million users. Recent data from Statista showed that market leader Facebook accounted for 65.5% of all social media visits in June 2022, followed by Twitter with 13%. Instagram ranked third with 7.65% of visits.
There are several methods online vendors can use to collect payment in Canada, the most popular being credit card-based – Interac Online, MasterPass, and PayPal — but some vendors also offer the option for prepaid card or prepaid voucher. In 2020, the credit card was the most common payment method, accounting for 55% of eCommerce transactions. Digital wallets ranked second with a share of approximate 25%. According to a survey in 2020, Canadian consumers were interested in Buy Now, Pay Later (BNPL) payment for their online purchases, with the highest interest of 65.4% in the group ages 35-44 and least popular for consumers from 65 and older (47%).
For more information on eCommerce in Canada, please contact Commercial Assistant Cat Le at email@example.com .