Exploding e-commerce realm sloughs off fear of global instability

Part of an ongoing series that looks at changes one year after the global trade wars ignited.

Investors may be turning to gold and silver as a safe haven amid international trade woes, but the digital economy remains unburdened by such fears of global disarray.

Canada’s digital economy between 2010 and 2017 grew faster than the rest of the economy, with a nominal GDP growth of 40.2 per cent compared to 28 per cent, according to Statistics Canada.

Although the digital economy is not an industry as classified by Statistics Canada, a report in May showed it made up 5.5 per cent, or $109.7 billion, of the national GDP, more than mining, oil and gas extraction (4.8 per cent), transportation and warehousing (4.6 per cent) and utilities (4.2 per cent).

Technology has relentlessly encroached on every aspect of our lives and the digital economy, whether that means e-commerce or the hardware or software driving it, is proving to be resilient as traditional retail markets flail in the face of international uncertainty.

Many companies, such as Canadian Caterpillar dealer Finning International Inc., have been supplying equipment for data centres in places such as Frankfurt, London, Amsterdam and Paris, as well as Ireland, to mitigate Brexit blowback.

GIC Private Ltd., Singapore’s sovereign wealth fund, has also been investing in data centres, and on Aug. 15 it partnered with GDS Holdings Ltd., China’s largest data centre landlord, to fund an expansion in Jiangsu Province.

But the digital drive is reaping rewards in the consumer space as well.

The portion of Canadians buying online increased to 61 per cent in 2019 from 43 per cent in 2013, according to a recent report by the Business Development Bank of Canada (BDC).

One beneficiary of all that spending is Montreal-headquartered Lightspeed, the point-of-sale and e-commerce provider, which recently posted first-quarter revenue of $24.1 million, a 38 per cent increase over the same period last year. This growth comes after the company quickly accelerated to unicorn status and became Canada’s second-biggest IPO this year as well as the biggest offering by a Canadian tech firm in almost nine years. Crucially, the number of its customer locations grew 20 per cent to 51,000, a benefit of the omnipresent cloud.

“North America is a huge area of growth for us, but we’re a very international company,” said Dax Dasilva, Lightspeed’s chief executive. “The U.S. is about 50 per cent of our customers, Canada is very strong at 15 per cent and Europe and the rest of world is very strong at more than a third.”

BDC’S report also said global retail e-commerce sales totalled US$2.8 trillion in 2018 and are expected to grow to US$4.9 trillion by 2021. Nevertheless, Dasilva stresses an omnichannel approach for Lightspeed’s small and medium-sized businesses.

“Retail isn’t dead, but boring retail is dead,” he said. “There’s been a lot of pure online that hasn’t been able to find a sustainable model. Everybody that’s been a success online has also done physical, whether that’s pop-up or permanent stores.”

Another Canadian player in the digital dominion is Shopify Inc., which posted $1.1 billion in revenues last year, a 59 per cent increase from 2017.

Chief executive Tobi Lütke’s net worth has more than doubled to $3.2 billion in the past six months, while Shopify’s stock price has skyrocketed 106 per cent since February.

“With Shopify getting bigger and bigger, it’s getting more on the radar of larger, more global-focused investors,” said Suthan Sukumar, an analyst at Eight Capital.

“That is drawing more eyeballs to the Canadian market.”

In 2017, e-commerce was responsible for 18.6 per cent of the jobs in Canada’s digital economy, behind only support services and more than double that of the hardware sector.

Dasilva said the e-commerce world is the path away from international trade losses.

“We have an office in the U.K., even despite everything that’s going in the U.K., we see independent businesses continuing to grow and open,” he said.

“(Digital) is better for the environment, it’s better to have products locally sourced, have money go back into the community.”

Clearly, a Canadian subsidiary of the French-italian Essilorluxottica, is a poster child for Dasilva’s belief in maintaining a bricks-andmortar presence.

The nearly 20-year-old eyewear retailer is headquartered in Vancouver, where it has two stores.

It also has a store in Toronto and international distribution centres in Australia and New Zealand.

The company predicts $160 million to $170 million in sales this year, with plans to surpass $200 million in 2020.

“It’s a digital and physical era, because consumers will not be doing everything online, they still need some sort of physical touch-point,” said Arnaud Bussieres, Clearly’s chief executive.

In an effort to provide that physical touch-point, Clearly recently developed augmented reality technology that lets customers virtually try new glasses. Bussieres is skeptical that being in the digital economy allows a company to avoid international trade woes. Clearly recently packed up production of its eyeglass frames in China and moved it to India, due in part to the “barriers between U.S. and China.” Clearly is also leaving the U.S. market in the next year, due to the relatively small scale of its operations when compared the wider retail industry down south.

The digital economy has proven itself more than capable of subverting trade models, such as Ontario’s regulations on interprovincial business.

This April, Clearly’s parent company, Essilor Canada Group, won a legal battle against the colleges of licensed Ontario optometrists and opticians, who said the eyewear company was selling prescription eyewear online and shipping them from its operations in Vancouver. The colleges argued that only they are allowed to prescribe eyewear, yet they did not establish harm.

The Ontario Court of Appeals found that barring online sales would be tantamount to using the Ontario’s Regulated Health Professions Act to give the colleges a monopoly, something the regulations currently do not allow.

According to court filings, the Canadian prescription eyewear market is estimated to be worth more than $4.5 billion a year. Those same filings also made note of the trend toward online sales. Said Bussieres: “We’re looking at a three-to-fiveyear plan where Clearly becomes a half-billion business just by building the right ecosystem.”

Everybody that’s been a success online has also done physical, whether that’s pop-up or permanent stores.