E-Commerce Boom Leaves Small Business In Its Wake

Canadian small businesses (1 – 20 employees) have been slow to adopt e-commerce as a sales distribution channel, and they’re not alone, with their OECD counterparts showing similar patterns. In spite of the widespread availability of fast internet connections and cheap or free website builder tools, small business owners’ reticence to open their stores to online shopping is isolating them from an ever-increasing share of retailing revenues.

Although 85% of Canadian small businesses have high-speed internet access, just 36% have chosen to make a business website of their own. And while 45% purchase goods online, only 6% have developed an e-commerce strategy by building an online store1.

Though they have one of the highest rates of high-speed internet penetration in the world2, Canadian small businesses are as slow as their overseas cousins when it comes to adapting to the shift in revenues online. In 2007, Canadian retailing revenues totaled C$413.1 billion3, with online sales taking 3.1% - C$12.8 billion - of the total4. To put the figure in perspective, that represents a revenue stream of $C4740 per small-business employee5 that is being almost entirely ignored.

Though some small businesses are poorly adapted to the e-commerce sales and distribution model, most are simply poorly prepared for a 21st century phenomenon that is rapidly leaving them in its wake. Larger businesses have been much quicker to embrace e-commerce, and an exponentially increasing number of online stores, together with widespread penetration of rapid internet connections and connected devices, have encouraged consumers to spend less time in traffic jams around crowded shopping malls and more time – and money – shopping in the comfort of their own home. The explosion in the use of other connected devices, such as smart phones, has only accelerated the pace of transition of discretionary spending from physical stores to virtual ones.

In parallel with the rise in the prominence of e-commerce, has been the availability and affordability of solutions enabling small businesses to make a website themselves, without engaging external contractors, and allowing them to build a website with an online store quickly and with little to no cost. Yet too many small businesses continue to ignore the significance of e-commerce for their business, and – rather than developing an in-house solution – continue to see revenues dwindle.

1 Statistics Canada, How many small businesses use e-business? 2009

2 OECD, OECD Broadband Portal (various data series), 2009

3 Statistics Canada, Retailers Competing for Market Share: 2007 Retail Sales in Review, 2008

4 Statistics Canada, Survey of Electronic Commerce and Technology (SECT), 2008.

3 Statistics Canada, Key Small Business Statistics - July 2007, 2007