October 14, 2014 12:03 pm

Amazon jumps out to lead in Canada’s online shopping wars

Amazon has introduced its Prime subscription delivery service in Canada alongside other measures that have ramped up business.

AP Photo/Ross D. Franklin
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No wonder Canadian Tire, Loblaw and other Canadian retailers are ramping up efforts to sell us stuff online: Amazon appears to be fast-becoming Canada’s shopping mall of the future.

Amazon.ca, the Canadian arm the U.S. online retail behemoth, is attracting roughly five million Canadian shoppers to its website a month, a new report on Tuesday said.

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That’s a sharp increase in the last year that’s helped double the amount of e-commerce business Amazon is winning in Canada.

In a new report, retail stock analysts at BMO Capital Markets estimate Amazon.ca has jumped out to a commanding lead in online retailing in Canada, a position it could further strengthen by increasing several times over the amount of sales it’s winning away from traditional brick-and-mortar stores.

“We believe that Amazon.ca could triple or quadruple its revenues in Canada over the next few years and begin to have a noticeable impact over a broader range of [shopping] categories,” the BMO analysts said.

Amazon’s share of total site visits among Web surfers in Canada has doubled year to date, BMO’s report said, as it has rolled out new products in Canada, such as its Prime subscription delivery service.

Since October of last year, Amazon.ca has introduced key product categories and tens of thousands of new products, including grocery items.

MORE: Amazon steps into grocery wars with online offering

Online sales still account for a relatively small portion of total retail spending in Canada, or 5.2 per cent of the more than $480 billion consumers spent on goods and services in 2013.

But the share is growing at a clip of 17 per cent a year and is expected to reach 7.4 per cent by 2017, according to research firm eMarketer.

And Amazon.ca is in the pole position, according to BMO.

“Our estimates suggest Amazon.ca is the market leader in Canadian retail e-commerce,” BMO analyst Peter Sklar said.

Market leader in laggard market

Sklar estimated Amazon.ca took in about $1.5 billion in sales last year, a “significantly higher” sum compared to chief rivals Walmart.ca, Costco.ca, BestBuy.ca and HomeDepot.ca – all U.S. companies.

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Canada has lagged behind other countries, like the United States and U.K. in online sales in recent years, in part because of lacklustre attempts by national chains to sell over the Web. High shipping fees have also played a role.

E-commerce sales in the U.S. for example were 5.8 per cent of all retail sales in 2013, compared to 4.5 per cent in Canada. That compares to 11.6 per cent in the United Kingdom.

But the race to ramp up digital sales appears to be gathering momentum.

Big Canadian chains like Loblaw and Canadian Tire have refocused on expanding their online businesses.

At an investor meeting last week, incoming Canadian Tire chief Michael Medline said the iconic retailer’s efforts at e-commerce to date have been “disappointing,” but a new three-year strategy includes an “aggressive commitment to digital” at its core.

MORE: Can Canadian Tire win over young shoppers? It plans to

The country’s largest grocery, Loblaw Cos. Ltd has begun trialing so-called “click and collect” shopping, where customers select a basket of goods online for pickup at the store.

Grocery, apparel as well as health and beauty products are areas were Amazon.ca could beef up meaningfully, BMO’s Sklar said.

“Amazon has not yet introduced a significant number of items for the apparel or grocery categories,” compared to its U.S. offering, the BMO note said, “highlighting those sub-sectors as ones that have likely felt limited impact to date and as [product lines] possibly exposed to potential expansion of Amazon.ca.”

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