Amazon.ca dominates Canadian e-commerce with 7% share
Wal-Mart aims to catch up, while The Bay, Canadian Tire boost digital presences
Amazon.ca dominates online retail in Canada with seven per cent of Canadian e-commerce sales, more than the combined share of Wal-Mart, Costco, Home Depot, Best Buy, Lowe's and The Bay, according to research from BMO.
BMO Capital Markets says Amazon.ca had $1.5 billion in sales in Canada in 2013. Its reach may be even greater if shopping from its U.S. site is included, the BMO report says.
Amazon had a head start over other retailers, lodging itself in the public imagination as a bookseller with very low prices before moving on to other merchandise. It first began business in Canada in 2002.
- Amazon expansion could be just what Canada's e-commerce sector needs
- Amazon beefs up online offerings in Canada
- E-commerce doubles in 5 years but still a fraction of sales
The BMO report points out to Amazon.ca’s savvy addition of new product categories, beginning in 2013 and programs geared to boost consumer loyalty.
These include Amazon Prime, which offers subscribers free shipping for a $79 annual fee, Amazon Family, which offers a 20 per cent discount on baby diapers, and Amazon Student, which offers free shipping to students for six months and then unlimited shipping for an annual fee of $39.
The report also notes the detailed product descriptions and enhanced website search technology, which picks up near matches, as ways Amazon.ca has created a positive consumer experience.
BMO analyst Peter Sklar believes it will keep that lead and “triple or quadruple” revenues in Canada over the next few years.
Sklar says Amazon.ca has not yet made an impact on overall retail sales in Canada, but as it expands product categories it has potential to eat into the share of incumbent domestic retailers.
Amazon has often been criticized by its investors for its minimal profit as it invests in expansion around the world.
The increase in online shopping will likely help all retailers boost retail sales, with traditional retailers such as Canadian Tire and The Bay announcing game plans to build digital sales.
Costco.ca had the second-highest online sales in Canada — $352 million, or 1.63 per cent of retail e-commerce sales.
Consumers often turn to online sources to research holiday gifts, making the coming holiday period a critical time for retailers to build their digital presence.
The importance of online shopping can be seen in Wal-Mart’s digital strategy, outlined today by chief financial officer Charles Holley at a meeting with analysts in New York.
Holley says Wal-Mart is preparing for a surge of sales on the internet, investing $1.2 to $1.5 billion over the coming year.
“The greatest investment of capital and in operating loss for our e-commerce operations will come over the next 18 to 24 months, and then we would expect to see that investment start to moderate in fiscal 2018,” said Holley
Wal-Mart estimates online sales will amount to about $12.5 billion US worldwide this year and rise roughly 25 per cent next year. After that, it says growth should average 30 per cent to 40 per cent annually through fiscal 2018.