There's little question that Canadians have been underserved when it comes to homegrown e-commerce options, and many are hoping that Amazon's recent product expansion in Canada will light a fire under consumers and retailers here.

"They entered some of our categories in the early half of 2013, and we certainly felt the impact. But​ we view their presence as a good thing in the sense that Canadians lag Americans and many European countries," says Erin Young, chief marketing officer at Well.ca, an online retailer of health, baby and beauty products that started as the e-commerce site of a small, family-run pharmacy in Guelph, Ont.

"The way we look at it is, they are likely to bring people into the [product] category and highlight the e-commerce channel as a channel that's viable for Canadians."

E-commerce is not well tracked in Canada, and the data Statistics Canada compiles is usually about two years out of date — a lifetime in the expanding online retail sector. According to the latest figures from 2012, 83 per cent of Canadians are online, but of those, only 56 per cent make purchases there.

Online sales make up five to eight per cent of total retail sales in Canada and are expected to generate about $25 billion this year. In the U.K., meanwhile, they account for more than 20 per cent of retail and will reach almost $200 billion.

Electronics, entertainment do well online

Roger Hardy-e-commerce

Roger Hardy founded Clearly Contacts in 2000 in Vancouver and has built it into a $220-million digital retailer that sells about 7,000 contact lenses and glasses a day. (Clearly Contacts)

The extent of e-commerce varies widely by product. Books, electronics, music, movies and office supplies — commodities that are virtually interchangeable from one retailer to the next — sell better online than items that are specific to a particular store or that customers want to see and touch, such as clothes, cars and food.

"I think that's really important in terms of what categories will be impacted," says Alex Arifuzzaman, a retail analyst with InterStratics Consultants in Toronto. "If you look at what Amazon sells, a lot of it is that commoditized kind of stuff."

As e-commerce grows, however, retailers are finding new ways to get around some of the reasons why people don't buy certain items online.

"There are all sorts of technologies now that are being built to really make it easier for the customer to see what they're getting, understand whether it fits, be able to imagine what it looks like on them," said Maureen Atkinson, senior partner at the retail and marketing consulting firm J.C. Williams Group. 

"Virtual fitting room" software, for example, uses body measurements to enable customers see what an outfit looks like on their body type. 

Customers at ClearlyContacts.ca, one of the biggest online retailers of prescription contact lenses and glasses in the world, can upload photos of themselves and see how certain frames look on their face or use the "perfect fit" tool to find frames that match the fit of their current glasses using the serial number on their frames.

Many Canadians still shopping abroad

Clearly Contacts, which was launched in Vancouver in 2000 and has since spread to several countries, is a $220-million business that processes about 7,000 orders a day from around the world, but e-commerce sites of that size are an exception in Canada.

"Even though it's big market, a lot of that is going across the border because Canadians haven't had the choice that they want in terms of Canadian-operated e-commerce businesses," says Drew Green, founder and CEO of Shop.ca, the closest thing Canada has to an Amazon-like online, multi-merchant marketplace.

In the last three months of 2013, 66 per cent of Canadian shoppers did at least some of their shopping on foreign websites, with U.S. retailers accounting for a third of that traffic, according to a survey by J.C. Williams. 

Wal-Mart-e-commerce

Wal-Mart is one of the few retailers that can compete with Amazon when it comes to breadth of products, but Canadian sites like Shop.ca are trying to give them a run for their money. (Jacquelyn Martin/Associated Press)

Shop.ca, which launched in 2012, is determined to lure some of those cross-border shoppers back home by offering a range of over three million products from thousands of merchants and brands — everything from car parts to pet supplies.

"One of our core differentiators is selection; we add, literally, hundreds of thousands of products to the site every month," Green said. "In fact, this past month, we've added 500,000 products. We just didn't do a press release on it [like Amazon]."

'When people are looking for things now, they're not going to Google first. They're going to Amazon first and searching products there'- Doug Stephens, founder, Retail Prophet

Green would not reveal the company's sales but said about 7.5 million people visited the site last year and those who bought something spent an average of $130 to $180 per visit.

He says Shop.ca is not trying to go head-to-head with Amazon but is convinced it has the largest product catalogue in Canada — even with the U.S. behemoth's recent addition of more than one million items.

"I firmly believe we're the fastest-growing retailer in the country right now — online or off," Green said.

Amazon often the starting point for shoppers

But with almost $75 billion US in sales last year, few retailers can compete with Amazon for one-stop-shop convenience, says Doug Stephens, a retail analyst and founder of the website Retail Prophet.

"When people are looking for things now, they're not going to Google first. They're going to Amazon first and searching products there because they have this sense that they're going to find it," he said.

"Until recently, that wasn't always the case on Amazon.ca, but now, with them offering over a million more products, I think we're going to find that that's the ubiquitous starting point."

E-commerce-Google

Google has recently made a move to enter e-commerce and is working with retailers in San Francisco to provide same-day delivery of online purchases. (Robert Galbraith/Reuters)

If you can't be the go-to website for convenience such as Amazon, eBay or Wal-Mart, you have to go after a niche market, says Stephens.

"What you don't want to be is The Bay — that's kind of in the middle with a so-so brick and mortar presence and a half-decent online presence. That's just going to be overlooked, I think, almost every time."

Mobile has changed the retail game

In a global marketplace, where many retailers are drawing on the same pool of suppliers and undercutting each other on price, arming customers with reliable product information and providing good customer service is how online retailers like Well.ca, whose 50,000 products are a tiny fraction of Amazon's selection, differentiate themselves.

"They're always going to win on breadth, but the reality is it can be overwhelming to shop on Amazon. So for us, it's about highlighting products and helping people find the product they want," Young says.

phone-shopping-apps

Smartphones now have a wealth of apps that allow customers to compare prices, make in-store purchases and cash in on in-store promotions. (Michael Dwyer/Associated Press)

Traditional retailers have lagged in this regard, says Stephens. Even ones like Indigo, which has a strong online presence, have been slow to incorporate features such as product reviews and customer recommendations into their physical stores.

"When I go on Amazon, I can very quickly establish how many people like this book, what are some of the reviews, is it relevant for me, what other books compare to it," he says.

Smartphones have upped the stakes even more by allowing consumers to examine a product in the store while checking prices at competing retailers online — a practice called showrooming.

"Mobile has really once and for all put the consumer in control," Stephens says. "In some cases, consumers are actually ordering from Amazon while they're standing in the Best Buy."

Free shipping, hassle-free returns the new norm

At J.C. Williams Group, Atkinson argues that Canadian businesses have been hesitant to put up the money needed to establish a retail presence online, and banks and investors are still learning how to evaluate such ventures in terms of financing.

"It really it doesn't matter what the ultimate size of the business is, there is a base cost for building out the online business, and if what you're counting on is only selling in Canada, then making that business case is really challenging," she says.

e-commerce-delivery

Amazon has made a big push in some U.S. cities to provide same-day delivery and has even claimed it might eventually use drones to deliver packages. (Mike Blake/Reuters)

Retailers have also argued that it's too costly to ship in a country as large as Canada, but Stephens says the bulk of the country's population is actually much more densely situated than in the U.S., and that this excuse no longer flies in an online world where free and fast shipping, hassle-free returns and generous warranties have become the norm.

Some Canadian retailers have already caught onto that. Sites like Shop.ca and ShoeMe.ca offer free shipping, including for returns, on all but a few large items.

Clearly Contacts has emulated the customer-friendly polices pioneered by sites like Zappos in the U.S. by allowing customers to try out up to three pairs of glasses before making a purchase and accepting returns for up to a year.

It has its own manufacturing plant in Vancouver where it can assemble a pair of glasses in 90 minutes and ship them out overnight.

"We want it to be easy. We want it to be painless for people to buy glasses online," said founder and CEO Roger Hardy.

Brick and mortar stores can compliment web presence

Having an automated manufacturing plant and only a few physical stores has allowed Clearly Contacts to reduce labour costs to $1 per pair and undercut prices of traditional optical stores by 25 to 50 per cent, said Hardy, who doesn't have to worry about competition from Amazon, which doesn't yet sell prescription contacts or glasses. 

Chapters at John and Richmond

Chapters recently announced it's closing three of its stores in Toronto but experts say it could make smarter use of its retail space. (Google Maps)

While those kind of numbers might scare a lot of traditional retailers, experts say e-commerce doesn't have to be the death of brick and mortar, and can, in fact, be complimentary.

Rather than just shuttering stores, as Indigo has done recently in Toronto, established retailers could be taking advantage of the real estate they already have near their customer base — by turning some of that space into distribution centres.

"That's something that they could certainly leverage and put in their favour if they began to look at their stores more as multipurpose spaces that can give a consumer a great in-store experience, but also with an efficient back end that can be shipping online orders direct to consumers," Stephens says.

Clearly-Contacts-e-commerce

Clearly Contacts started as an online-only business but last year opened a series of street-level stores, including one in Toronto, above. (Clearly Contacts)

Cleary Contacts started as an online-only retailer but opened several physical stores last year in three Canadian cities and a handful of other countries, including the U.S., Sweden and Australia.

"We didn't actually expect to sell anything out of the store. We thought it would just be a way of receiving feedback from customers, watching them order," Hardy said. "What we found when we opened stores, all of a sudden, we were generating great, great sales."

The sales came both in the stores themselves and online, where orders started flooding in from regions that were close to the new stores.

Canada short on e-commerce talent 

This so-called "omni-channel" approach to retail seems to be working for Hardy. Even though the business expects to just break even this year, its parent, Coastal,com, was bought last month by the French optical giant Essilor for $430 million.

'The retailer that can serve customers with a storefront and online is the retailer that's going to win. That's what great brands are doing.'- Roger Hardy, founder of ClearlyContacts.ca

Hardy thinks chains like Wal-Mart have also picked up on the benefit of being an omni-retailer and have a leg up on Amazon.

"I sold all my Amazon stock recently, because I think the retailer that can serve customers with a storefront and online is the retailer that's going to win. That's what great brands are doing," Hardy said.

Canadian retailers are getting stronger, Hardy says, but will face the same challenge as any new entrants in the e-commerce sector: a shortage of talented people with experience scaling up online businesses.

"There are only 100 e-commerce sites in the world of any scale," says Hardy. "In retail, there's thousands and thousands of people that have opened successful retail stores and grown them into successful chains.

"It's hard to find the e-commerce talent that's been to a $50-million business, that's been to a $500-million business, that's been to $​1-billion business."