E-COMMERCE IS WAY TO SAVE RETAILERS
But why are small and medium businesses so slow to adopt it? Dave Burnett explains.
As a kid growing up in Canada, I spent a lot of time at the shopping mall. Millions of us across the country still do. Indeed, bricks-and-mortar retail is alive and well here — for now. But that will change if a trend from south of the border takes hold in Canada.
The headlines proclaiming a U.S. “retail apocalypse” are all too real. The American retail sector is experiencing seismic shocks. Canadian retailers — particularly small and medium-size ones — must dial up their digital sales and marketing efforts or risk commercial extinction. How big is the problem? As writer Derek Thompson notes in a recent article in The Atlantic, U.S. retail has recently seen nine major bankruptcies, as well as downsizings by heavy hitters ranging from J.C. Penney to Macy’s. Even Ralph Lauren has vacated an exclusive space on Manhattan’s chic Fifth Avenue.
So, the U.S. economy must be tanking, right? Nope. Economic performance in the U.S. is relatively robust. Unemployment is below five per cent, interest rates are at rock-bottom, GDP growth was 2.5 per cent in Barack Obama’s final quarter in office — although that dipped to an anemic 0.7 per cent in the first few months of the Trump administration — and even income equality is improving.
Anecdotally, as a Canadian entrepreneur with a base in New York City and a significant number of U.S. clients, I can confirm that Americans are ready and able to spend money. So, what explains the bricks-and-mortar retail slump, and why should Canadian retailers care?
There are a number of factors, including the plethora of U.S. shopping malls and a general dip in spending on material goods. But the chief culprit Thompson cites is the growth in e-commerce sales.
According to the U.S. Department of Commerce, fourth-quarter e-commerce sales in 2016 were US$102.7 billion — 8.3 per cent of total sales, up from 7.3 per cent for the same period of 2015. In other words, goodbye, shopping mall.
In contrast, Canadian retailers sold $1.7 billion online in December of last year, or 3.4 per cent of all retail sales.
So, we still lag far behind in online shopping, but that’s slowly changing and our digital adoption rates will continue to accelerate. Now comes the troubling part. According to a new survey of Canadian small and medium-size retailers by online transaction-management firm PayPal Canada, only 17 per cent of respondents said they have an e-commerce-enabled website, and 71 per cent have no plans to develop e-commerce capabilities.
As for their reluctance to embrace the e-commerce shift, respondents cited such concerns as online fraud, limited tech knowledge and worries over providing equivalent levels of service online as in-store.
Worse, the Canadian Internet Registration Authority reported in 2015 that a whopping 40 per cent of Canadian SMEs lacked a website. It’s not that their online presence was poor — they simply didn’t have one, or at least not their own digital storefront (some small businesses rely on social media platforms such as Facebook to market their products and services).
In the digital era, many firms struggle to attract and retain customers. Given such statistics, the reason is hardly a mystery.
So, what’s a small-to-mediumsize Canadian retailer with a lacklustre e-commerce presence to do?
First, don’t panic — but do get your head out of the sand. Understand that e-commerce is an essential component of your survival. Without a robust online presence, you won’t be in business in five years.
Next, invest heavily in digital. Immediately pump 80 per cent of your current marketing budget into the digital arena; if you haven’t already, make your website e-commerce enabled.
Lastly, develop a digital-first strategy focusing on everything from building an appealing online brand to developing a strong social-media presence highlighting the best aspects of your products or services. Boost search-engine rankings and deliver a user-friendly online shopping experience. It all helps to nurture a community of loyal customers.
This is remarkably rudimentary advice, but I’m still surprised by how often I need to make these points to small and mid-size retailers, most of which are rapidly losing market share to digital giants such as Amazon.com and even Canadian online retailers such as Wayfair.ca and Shop.ca.
The bottom-line is: retailers who want to survive must commit to online success.
In my next column, I’ll detail some key considerations to bring your new e-commerce strategy to life.