CLICKING ALONG
Canadian retailers are yet to suffer from web giant’s success
Retailers keep pace
The websites of Canadian bricksand-mortar retailers have not made much of a dent in Amazon Canada’s share of consumer visits, according to a new BMO report. But an absence of relevant product overlap between traditional retailers and the Seattle web giant, and a lacklustre response to Amazon’s bonanza Prime Day sale this summer, suggests Canadian retailers’ revenue is not suffering for it — not yet, at least.
Amazon Prime launched in the U.S. as a priority delivery service for its customers in 2007, and charges members an annual fee for next-day delivery and access to its music and video streaming services. Launched on Amazon. ca in early 2013, Prime costs $79 annually, but does not offer the entertainment options.
In a report published Monday, BMO Capital Markets analyst Peter Sklar assessed the performance of Amazon before and after its first Prime Day on July 15, a 20th anniversary promotion from the Seattle web retailer that offered discounts to Prime members. He also looked at some Canadian retailers’ share of web visits in the same period through to the end of September 2015.
In July, Amazon’s share of aggregate Canadian website visits through personal computers and mobile devices, excluding apps, was 1.94 per cent, compared with 1.85 per cent in July 2014 and up from a share of 1.66 per cent in June. Amazon’s share of Canadians’ overall web visits in September was 1.97 per cent, up from 1.94 per cent in July, and above its share of visits from February to June, which was around 1.70 per cent.
“Amazon experienced a notable increase in share of visits after the launch of Prime, which suggests Canadians do ascribe value to this paid service,” Sklar said.
That is the case despite the fact that by midday on July 15, the general consensus among consumers on social media and elsewhere was that Amazon’s exclusive Prime Day deals were “underwhelming” in both quality and quantity. “The discounts seemed to fall short of many consumers’ expectations,” Sklar said.
Amazon.ca’s top-selling Prime Day offers suggest the retailer’s rise in consumer web traffic won’t likely have an adverse effect on Canadian bricks-and-mortar retailers, the analyst said.
Top sellers included baby products and technology hardware — not core merchandising areas online for traditional retailers.
That could change in the future, BMO says, as Amazon grows. “In the long term, e-commerce will eventually result in pressure on Canadian bricks-and-mortar retailers that will be compelled to absorb the financial costs of developing a competitive digital platform,” Sklar said.
Amazon consistently has one of the largest shares of total website visits among key Canadian retailers, Sklar noted, and retailers such as Canadian Tire, Rona and Costco did not materially increase their share of consumer web visits during the June to September period.
The three also have a significantly lower share, with Canadian Tire and Costco at roughly 0.30 per cent of overall Canadian web visits and Rona, a more specialized retailer, at 0.10 per cent to 0.15 per cent.
Even if the boost in web visits and sales from promotions such as Prime Day are temporary, the data that Amazon is able to collect about consumers from such events is invaluable, and gives it key competitive advantages relative to other retailers with digital operations, BMO said.
Amazon Prime members also spend more during their visits. A study by Consumer Intelligence Research Partners found U.S. Prime members spend an average of $1,500 US per year, whereas an average non-member Amazon customer spends $625 US. “We believe Prime Day was primarily introduced to increase the number of more profitable customers,” Sklar said, because non-members could only participate in the event by registering for a 30-day free trial.