Money Talks is a daily business column from CBC radio.
By Michael Hlinka, CBC business columnist.

You can tell that it’s going to be a challenging year for retailers. And by retailers, I really mean retail stores. Whenever the economy slow, what goes first is discretionary spending. But there’s another whammy hitting the traditional bricks-and-mortar trade – and that’s internet shopping.

It continues to grow… and grow explosively. According to Statistics Canada, the amount that Canadians spent via the Internet in 2007 was more than 60 per cent higher than what it was two years earlier.

And if you ask me, this trend is far more significant – in the long run – than any dip in the global economy.

Now I’ve got to admit that I was surprised by the high growth rate. There’s a marketing theory that goes something like this: There is a small group of innovators who are the first to embrace any new technology. They’re followed by the innovators, then come the early majority, the late majority, and following up the rear are the laggards, doing what laggards, do … and that’s lag everyone else. I would have thought that by the year 2005, we would have at least been entering the late majority phase of the internet shopping cycle. That’s not what the numbers tell us.

There are 33 million Canadians, yet only about one-quarter of us shop online.

It’s interesting when you look at what we’re actually buying: Travel services, books and magazines, and entertainment products like concert tickets. We’re purchasing commodity-like goods and services.

There’s incredible benefit for the consumer in doing so. Think about price transparency. I can compare West Jet and Air Canada in seconds and get the deal that suits me best. The convenience factor is amazing, particularly for people who may do shift work and can’t take care of business during normal working hours. When we purchase commodities on the internet, the fact is that more traditional retailer are hard-pressed to add value to the experience.

That’s going to be the challenge for retail in the years to come. The natural inclination when you lose business or have an erosion in market share is to cut prices. That’s not going to work this time around.

Retailers are going to have to think very systematically about the bundle of benefits that they’re providing. Price will matter – it always will within a relevant range. But people are going to have to be given good reasons to go out of their way and leave their hard-earned dollars in a store, when the on-line alternative beckons … because when you think about it a moment, almost everything is a commodity.