In Fort Wayne, Ind. lies a data centre that used to be a Target. On Chicago’s south side, there’s a 127,000 square-foot room humming with servers that up until June 2013 was a Sears.
Across the United States, servers housing petabytes of website data and other digital info are invading shopping centres and former department stores.
The reason isn’t altogether surprising: American shopping habits have shifted substantially in the last few years, away from bricks-and-mortar stores and into the “omni-channel,” an industry term to describe shoppers buying in a variety of new ways from a retailer other than just in store, such as online or through their tablet or mobile phone.
E-commerce sales in the United States are expected to total $306 billion this year, according to eMarketer. That figure is approaching double the online spend just four years ago in 2010.
That pie, massive and getting more so, is one reason why Walmart, Target, Sears and other big U.S. retailers are dramatically scaling up their online sales capabilities this year. Another is illustrated above – traffic to U.S. stores is falling steadily.
“In the U.S., e-commerce is currently nearly 10 per cent of total retail sales and growing,” said Doug Stephens, principal analyst at Retail Prophet. “It’s no longer an afterthought, but rather a core aspect” of American shopping.
Canada lags
In Canada, big retailers like Target aren’t being nearly as aggressive in their collective shift to offer sales through multiple channels. The Canadian arm of the U.S. department store didn’t launch e-commerce sales here when it arrived in early 2013 and Target Canada still doesn’t sell online.
There’s a reason for that of course: Target knows it will still be years before online shopping truly becomes mass market in Canada, according to experts.
“Canadian retailers will, in our view, enjoy two or three years of ‘lag time’ to make the transformation to omni-channel,” analysts at Desjardins Securities said in a research note this week.
The main reason for the delayed roll out is that the local scene hasn’t exactly forced Target’s hand.
“The majority of Canadian brick-and-mortar stores have been reluctant to develop their online channels,” retail experts at financial services firm Raymond James said in a recent research note.
While Canadian retailers have largely eschewed online efforts (until recently), U.S.-based rivals have rushed to fill the void. Amazon has leapt to the head of the pack in online sales in Canada, according to BMO Capital Markets.
“Our estimates suggest Amazon.ca is the market leader in Canadian retail e-commerce,” BMO analysts said in October.
BMO estimates 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.
MORE: Canadian retailers are getting their butts kicked online
Entering 2015, it appears Amazon and Walmart are poised to keep their lead atop the Canadian e-commerce market place – both are continuing to offer free shipping to many customers, while Walmart plans to offer “lockers” at stores across the country that online shoppers pick orders up at.
Online initiatives at Amazon.ca and Walmart Canada “are ramping significantly faster than is widely appreciated,” Raymond James analyst Kenric Tyghe said.
Still, in comparison, the U.S. market is moving at light speed. Amazon said Thursday it will begin offering not just same-day delivery – but same hour delivery on 25,000 products in certain locations for subscribers to its Prime service. Two hour delivery is free.
Watching for now
Such moves are setting the stage for a digital dog fight among big U.S. retailers this year, experts say. “We continue to be of the view that the 2015-17 period will witness the showdown in the U.S.,” Desjardins analysts said.
Back in Canada, big retailers are talking up a meaningful push into online this year. Figures from eMarketer suggest e-commerce sales are poised to jump 17.4 per cent for 2014 (including the current holiday season), to $24.6 billion.
Michael Medline, the chief executive for Canadian Tire said at the iconic chain’s annual meeting in October the business was embarking on an “aggressive commitment to digital,” with the introduction of an “enterprise wide strategy” that “will take us from the old world to the new.”
Canadian Tire’s timeline: three years.
And some competitors are similarly taking the long view. “We understand the importance of e-commerce and it is part of our long-term plans,” a spokesperson for Target Canada said by email. “But right now our focus is on delivering a great in-store experience.”
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