Ecommerce is growing rapidly in Canada, with more Canadians shopping online and ecommerce sales increasing year-over-year at double-digit rates. However, many Canadian retailers still lag in adopting ecommerce, with over 40% lacking an online presence. Those that do enter ecommerce often fail due to a lack of differentiation, disproportionately small investments compared to brick-and-mortar, and non-converting websites. Retailers can minimize these risks through strategic ecommerce governance including go-to-market planning, technology investments, analytical processes, and integrated cross-channel experiences to drive conversion rates and sales growth. Adopting such practices can help retailers maximize opportunities in ecommerce while minimizing credit and failure risks.

1. The Impact of Ecommerce
on Brick and Mortar Retail
(Plus Top Ecommerce Pitfalls to Avoid)
Fabiana Pereira
EVP, Brainpulse Consulting
Brainpulse © 2016-2017, All Rights Reserved

2. Ecommerce Today

3. 36M
Canadians
In 2015...
Source: Forbes
26M
E-Shoppers
21M
E-Buyers
80% 69%
58%

4. Ecommerce Shopping Up
Canada 2014 2015 2016 2017 (est) 2018 (est)
Shoppers 20.2M 20.9M 21.5M 22.2M 22.5M
% Users 79% 80% 81% 82% 83.2%
% Growth 3.2% 3.2% 3.2% 3.2% 1.5%
Buyers 16.9M 18M 18.6M 19.2M 19.5M
% Users 66.2% 68.9% 70.1% 71% 72%
% Growth 7.3% 6.1% 3.7% 3.2% 1.4%
Source: Emarketer- excludes travel and event tickets

5. Ecommerce Sales Up
Canada 2014 2015 2016 2017 (est) 2018 (est)
Sales 25B 30B 34B 39B 44B
% Retail 5.2% 5.9% 6.6% 7.4% 8.2%
% Growth 17.4% 16.8% 14.9% 13.8% 13.5%
Source: Emarketer - excludes travel and event tickets
Apparel and accessories represent roughly 17% of all sales
Double-digit sales increases are expected until 2019
Meanwhile, total retail sales in the country will continue to grow
at only ~2% annually throughout the forecast period…

6. Category Penetration
Source: CIRA 2016 Factbook

7. Channel Preferences
Clothing, Shoes &
Accessories
Home Goods Food
Brick & Mortar 67% 69% 95%
Online 29% 29% 3%
Other 4% 2% 2%
Source: Emarketer

8. Channel by Gender
All Ecom Most Ecom Same Most B&M All B&M
FEMALE
Footwear 4% 12% 16% 24% 45%
Apparel 4% 17% 16% 35% 28%
MALE
Footwear 3% 19% 19% 29% 36%
Apparel 3% 23% 23% 34% 21%
Source: Body Labs, 2016 Apparel & Footwear Retail Survey Report

9. Cross-Channel Interest Up
Female Male 19-35 36-50 51-69
Buyers who would like to purchase online and pick up in store
2014 36% 45% 34% 42% 45%
2015 50% 58% 63% 57% 41%
Source: King Retail Solutions Report

10. 50%
Of Consumers
Showroom
The channels are often seen as competing against each other
Winning retailers and customers’ treat them as complementary
65%
Of Consumers
Web-room
However…
Source: Forbes

11. The showroom and web-room features of each channel complement to
strengthen brand, loyalty, and acquisition strategies…
“The big benefit of the flagship stores: they’re terrific marketing vehicles”

12. Brand vs. Retailers
Apparel Electronics Overall
Brand 57% 56% 37%
Retailers 43% 44% 63%
Source: Brandshop 2015 Report
Overall, 78% of US digital buyers surveyed said they shopped at Amazon.
For 58% of buyers, Google was the top digital source for researching products,
followed by brand websites (23%) and digital retailer sites (15%).

13. The rapid expansion of the online channel added extra competitiveness
to retail while empowering consumers with extra choice and increasingly
high standards regarding product selection, price, and shopping
experience
Leading retailers understand the complementing role of each channel
and invest accordingly, creating integrated brand and commerce
environments
In Sum

14. US Impact on
Canadian Ecommerce

15. In 2014, 51% of total digital spending in Canada remained in Canada.
The US accounted for 34%, Asia-Pacific 10%, and Europe 3%
Canadians’ Geo Preferences
Source: CIRA 2016 Factbook

16. Financial reasons may play a larger role than reported
Canadians’ Geo Preferences
Source: CIRA 2016 Factbook

17. Canada has a very aggressive policy of protection against cross-border
online shopping
Canada’s current de minimis level is $20, meaning that all purchases
above this threshold pay an additional up to 30% in duties and fees
Significantly lower than NAFTA peers, US ($800) and Mexico ($300)
It costs the federal government close to $170M to collect $40M in duties
and taxes for shipments valued between $20 and $80
Duty Protection

18. ~9K signatures to date
12 US Senators involved in discussion

19. Canada is being pressured by the US Government, Canadian consumers,
and the poor economics of this policy, to rise this threshold - the 2017
budget could reflect these changes
Regardless, US retailers still enter the Canadian market with their brick
and mortar and online stores at once (Saks, Nordstrom, etc)
Trade barriers will not prevent laggards from suffering competition, both
national and international
In Sum

20. Ecommerce
Pitfalls

21. In 2016, still over 40% of Canadian small businesses do not
have a website
Canadian Retailers Lagging
Source: CIRA 2016 Factbook

22. Ecommerce Benchmark
Q2 2016 CA AVG
Order Value $134
Conversion Rate 1.45%
Cost per Click $1.5
Cost per Acquisition $103
New Visitors 51%
Transactions/mo 386
Source: Magento Canadian Benchmark

23. 1 - Lack of Differentiation from Competition
2 - Disproportionately Small Investment vs Brick and Mortar
3 - Non-converting Website (poor speed, design, content, navigation, security…)
4 - Poor Online Marketing Strategy and Environment
5 - Poor Inventory Management
Top Reasons for Failure

24. Many e-commerce businesses did not launch, or launched with the false
assumption that it would be cheaper to operate than B&M
The cost per acquisition slightly below the average order value, repeat
purchases are key for success
Cost reduction as a main driver does not create ecommerce success
stories, excellent customer experiences do
Consumers require great UX and high offer pertinence so they keep
engaged, end up buying , and come back for more
Overview

25. Minimizing Retail Risk
In the Digital World

26. Failure Risks & Mitigation
RISK MITIGATION
Lack of Differentiation Go-to-market Strategy
Small Investment ROI Planning
Non-Converting Website Analytics & CRO Processes
Poor Online Marketing Strategy, Environment, Services
Poor Inventory Management Business Intelligence

27. Increase
Conversion
Rates
Leverage
Behavior-Driven
Custom
Campaigns
Automate
Customer
Segmentation
and Profiling
(new and existing)
Enable
Consistent
Cross Channel
Experiences
Deliver
Dramatic
Sales Growth
Generate
Insights &
Personalization
at the
Individual
Customer level
Communicate
With Pertinence
on a 1 to 1
Basis
Business Requirements

28. Extra Insights
on Product Line
Expansions
Monetize the
CRM Database
Reach a Mobile
Audience
Obtain
Strategic Online
Marketing
Support
Fully Integrate
Store and
Online
Experiences
Optimize
Cross-Sell and
Site Navigation
Ensure Easy
and Thorough
Web Analytics
Tagging
Business Requirements(cont’d)

29. CONVERSION
RATE
AVERAGE ORDER
VALUE
TRAFFIC
Tactical KPIs

30. DISCOVERY ROADMAPPING EXECUTION
Strategic Governance
Goals
Current KPIs
Environment
Capabilities
Benchmarks
Go-to-market Strategy
Technology
Processes
Services
Capacitation
Acquisition / DB Growth
Personalization
Automation
Conversion Optimization
Lifecycle Management

31. Minimizing risks in retail credit, including for sports apparel, involves
understanding the level of ecommerce-readiness of each player
Retailers who do not venture online, or do so with poor planning and
governance, have increased risks of failure and obliteration
Retailers’ level of differentiation from competition, appropriateness of
investment and cash flow, quality of online presence and digital
marketing governance is directly correlated to their overall credit risk
In Sum

32. Thanks!
Reach out today to
fabiana@brainpulse.ca
Let’s talk about your digital marketing
and grow your online revenue!