Online shopping has gone from incremental to exponential, but Canadians still lukewarm

A veteran retail analyst says growth in online shopping is exploding around the world, but Canadian retailers will have to up their game to cash in.

"It is growing at an astonishing rate," Doug Stephens told Daybreak Alberta this week.

"The retail sector, globally, usually grows at a rate of about four to six per cent a year. Online shopping is growing at more than 20 per cent a year, so it still represents a relatively small proportion of retail but it's growing at a rate that suggests it is going to be a larger and larger per cent of retail."

Stephens points to a record-breaking single day for a China-based online retailer.

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"Alibaba.com had a big $20-billion sales day," Stephens said.

The retailer, similar to Amazon, shattered sales records for its Singles Day promotion in November.

"To give you a sense of how that day went down, in the first hour of that sales day, $5 billion worth of merchandise was transacted. That runs at a rate of about $83 million a minute which is about what two Home Depots sell in a fiscal year, every minute of the first hour of that sale," Stephens explained.

"These kinds of figures are not unusual anymore. All of the records in the U.S. got shattered for online — Thanksgiving, Black Friday, Cyber Monday, you name it. This is a phenomenon. It has gone from incremental to exponential now."

But, Stephens points out, online shopping as a percentage of overall retail sales is still fairly small in Canada.

"Stats Canada just announced some figures saying only about two per cent of total retail purchasing is actually online, which is surprising," he said.

"Deloitte did a study and they looked at retailers on both sides of the border and they said it was pretty clear. Canadian retailers just aren't playing, they are just not in the game, they are not giving consumers the ability to shop online the way U.S. retailers do."

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Stephens says a challenge for all retailers, is a better-informed consumer.

"They are shopping more intelligently, they are scouring the internet for deals and sales and better pricing and they are gravitating toward the convenience," he said.

"A lot of this growth now is happening as a consequence of better mobile applications. It is infinitely easier today to shop on a mobile device than it was even a few years ago due to bigger screen sizes and better content."

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For the brick-and-mortar stores, they are going to have to improve their offerings.

"Really good malls, really good retailers out there are going to do fine, they are going to continue to do fine and online is going to continue to grow. What is really suffering are the regional malls, the smaller regional malls that don't have the assortment of brands, they don't have the fancy food court and nice restaurants and nice atmosphere. They are really having a difficult time and they will continue to," he said.

"Stores are necessarily going to have to become better experiences."

Some stores are combining a data-mining in-store experience with an app that drives people to it.

"Retailers like Costco are a good example," Stephens said.

"They are membership based. Everything you do online or in a store, in terms of your buying behaviour, is captured and it is understood. They are very good at feeding you promotions online that would drive you to a store."

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With files from Daybreak Alberta