Northern Exposure: Why Canadian e-Commerce Needs a Different Approach
Growth of digital commerce in Canada is getting a lot of press. This isn’t Canada “catching up” to the US: Canadian consumers adopted online services much faster than the US, including banking, travel, and investing (Deloitte finds Canadian banking customers are far more omnichannel than in the US). Core e-com, click-and-collect, and digital reinventions (Sears Canada, CTC) are underway.
In retail, the quip goes, “Canada. It’s like a whole other country.” The Canada market entries of the #1 and #2 US retailers offer great examples. Walmart entered via acquisition 23 years ago, taking over most of Woolworth’s Woolco locations. Today, their footprint has grown 3-4 times larger. Some experiments worked (stretching Canadian manufacturers, changing layouts from indoor malls to outdoors plazas), others didn’t (Sam’s Club never really caught on). E-commerce, mobile and home delivery are thriving.
Target’s entry tells a different story. Price was an issue from the start, as Target did not match US prices in Canadian stores and crucially did not match Walmart on their most popular items. While Target tried to become a “one-stop shop” it missed the fact that Canadians routinely shop across retailers to get the best products or cheaper deals. Target lasted two years post-launch, folding in 2015.
The lesson: Canadian consumer adoption does not mirror the US. How so?
Personal interaction: Like many European consumers, Canadians combine digital-savvy with general preferences for person-to-person, in-person (P2PIP) interaction. Choosing stores over e-com even when available by a 4 to 1 margin is just one example. In brick-and-mortar retail, self-service adoption has lagged the US in part because Canadian consumers prefer personal interaction.
Loyalty: Canadians shoppers have options that are unavailable in the US. Loblaw’s private label brand, “President’s Choice” routinely ranks among the country’s most-trusted across all categories and including non-Canadian competition. Unique models such as Canadian Tire – which runs a potent intergenerational loyalty program called “CT Cash” – have no US-based analog. And two words: Tim Horton’s. And this loyalty comes despite Forrester finding that Canadian Cx lags US Cx in retail.
International Shopping: Surprisingly, 2/3 of all Canadian e-commerce purchases are made with US-based retailers. For Canadian retailers, this raises the bar for service levels, pricing and assortment available online; for US retailers, it creates challenges around fulfillment, shipping, taxation, and in some cases language needs at customer care.
Constraints: Canadians lag US consumers in using mobile devices to conduct product research. It’s not because they lack phones (they don’t) or are anti-mobile (again, they aren’t, they just use them more for services than for shopping). What Canadians do face are more expensive data plans (particularly at the entry-level) and longer refresh cycles on mobile devices. Data is more expensive, and opportunities to negotiate are less frequent.
So what? Simply put, Canadian e-commerce will be a thing of its own, similar to the US but distinctive in ways that matter materially to retailers and consumers – particularly around customer care.
Premium placed on quality service. Accenture notes that Canadians tend to be “silent switchers” – most can be retained with quality service; few let brands know when they’ve failed; and 2/3 will not go back once they’ve had a bad experience. The same study shows that half of Canadian consumers “have higher expectations towards human interactions versus digital.” Given Canadian e-commerce complexity, empathetic, on-shore resources – with dual language capability – are best positioned to handle customer care needs.
Different modes. Canadian retailers are very likely to face a different mix of contact channels. Human voice may trump AI given the preference for personal interaction. Mobile costs may drive down acceptance of text or mobile-based chat. And new modes like video may gain earlier acceptance. Net: retailers and brands need a multi-mode, omnichannel approach.
Own calendar. Despite participating in the Black Friday / Cyber Monday retail insanity, Canada goes “off cycle” for any number of events (for example, an early Thanksgiving). Canada also features a more pronounced Easter changeover as winter gear gives way to spring/summer outdoor items.
Own challenges. Besides cross-border care and language issues, Canada also faces, unique weather impacts (usually of the “white-out” variety versus “wash out”).
Personally, I’m optimistic about this resurgence in Canadian e-commerce. The tools at retailers’ disposal are superior to those available 5-10 years ago, particularly for cross-channel commerce. Consumer attitudes have improved in steady fashion, with less of the impossible to meet “zero-hour free shipping” expectations of US consumers. Individual brands have weathered challenges (Lululemon’s customer care turnaround story was a great NRF17 session).
And the Canadian innovation ecosystem around retail and e-commerce is booming. I’m stoked to he headed to Dx3 in Toronto this week to engage.