The Information Technology Landscape in Canada

About Canada

Telecommunication
Infrastructure

Privatization and Deregulation

e-Commerce

IT Usage

Industry Canada is the primary government agency concerned with e-commerce in the nation.  As defined by Industry Canada, "Electronic commerce refers to the conduct of business activities - including production, distribution, purchasing, sales and other transactions - by means of advanced communications and computer technologies. Electronic commerce also includes transactions involving automated banking machines, credit cards, debit cards, electronic data interchange and the Internet." [Strategis, Industry Canada's Information Source for Canadian Business.]

There are a number of organizations in Canada whose purpose is to further electronic commerce and IT in Canada. Some of these organizations are: the Information Technology Association of Canada (ITAC), Vancouver-based Softworld, the Software Human Resource Council, and the Canadian Department of Foreign Affairs and International Trade. Also, volunteer executives from the public and private sector in Canada join together as members of Electronic Commerce Canada to network, share information, and discuss e-commerce ideas and initiatives.

The Information Technology Association of Canada is the association for 1,300 computing and telecommunications hardware, software, services and electronic content companies in the nation. The information technology industry of Canada annually contributes 500,000 jobs, $100 billion in revenue, $3.6 billion in R&D and $27 billion in exports to the Canadian economy. The 1,300 member ITAC network of companies accounts for more than 70% of these totals. [News Release, Industry applauds the Canadian Principles of Consumer Protection for Electronic Commerce, The Information Technology Association of Canada (ITAC), Toronto, November 9, 1999]

With respect to Internet infrastructure to support e-commerce, world growth is moving at a pace driven by activities in the USA. A leading indicator of the growth of e-commerce on the Internet is the number of SSL servers in a particular country. Of all OECD member countries, Canada has more secure servers than any European country and is number six in the use of secure servers per capita after the US, Iceland, Australia, New Zealand, and Luxembourg. An indicator of the minimum size of a country's public Internet is the number of Internet hosts and Canada is number five in Internet hosts per 1,000 inhabitants following Finland, the USA, Iceland, and Sweden. [Organisation for Economic Co-operation and Development (OECD)]

Canada looks good relative to basic infrastructure indicators, however, as recently as this spring and summer, surveys indicate that Canadian firms are only dabbling in e-commerce and have not caught on to the growing commerce potential of the Internet. The result appears to be that Canadians are purchasing from US web sites. Less than 30% of Canadian business leaders see development of e-commerce as a high priority. Only about 18% of businesses are employing e-commerce, another 18% evaluating the concept, and the remainder is not using e-commerce at all. The highest usage is in business services, finance, and insurance. [(ECTF) Electronic Commerce Task Force Web]

Canada's goal is to make the country a world leader in e-commerce by the year 2000. The government agency, Industry Canada is a primary player in developing e-commerce in Canada and has established an e-commerce task force to focus on the issue. The agency estimates that the world e-commerce market in 2003 will equal $US 3.2 trillion. In 1998, Canadian e-commerce topped $US 5.5 billion and Industry Canada expects that Canada will achieve between 2.1% ($US 67 billion) and 5% ($US 160 billion) of the 2003 world market. [(ECTF) Electronic Commerce Task Force Web]

To capture better statistics, the Canadian government, along with the USA and Mexico, is working to identify a separate code in the North American Industry Classification System (NAICS) to breakout electronic shopping establishments as separate entities. They are now included with non-store retailers, US SIC 596.[(ECTF) Electronic Commerce Task Force Web]

It seems that Canada will have to move quickly to take advantage of the e-commerce market, at least for business-to-consumer. One study and comments from researchers indicates that Canada is lagging behind the United States by as much as 18 months in e-commerce. This is allowing U.S. companies to grab market share and siphon money from the Canadian economy. Consumers appear to be ready to buy on-line and to buy Canadian if there are websites available. As it is now, those who buy on-line are buying from U.S. sites, paying in U.S. dollars and paying customs and shipping charges. These excess costs are causing other Canadians to avoid such shopping.

J. C. Williams Group of Toronto and BizRate.com of Los Angeles just released a survey study that gives insight into Canada's development in the e-commerce marketplace. The researchers found that:

• There are fewer women shoppers, on a percentage basis, on the Internet in Canada (21.7 percent) than the United States (35.1 percent);
• Canadian consumers purchase products and services from a narrower group of retailers;
• The percentage of first-time buyers in Canada (19.5 percent) is greater than in the United States (9.5 percent);
• U.S. Newspapers and magazines are twice as likely to guide consumers to Web sites. More than twice as many (14.1 percent) of U.S. shoppers learn about on-line retailers through print media compared to Canada (6.2 percent).

• In the United States, on-line sales are expected to reach $53.8-billion this year, compared with $21.6-billion in 1998 and $5.95-billion in 1997.
• In Canada, sales will climb to just $1.14-billion this year from $690-million in 1998 and $270-million in 1997.

Many of the better known businesses in Canada such as Canadian Tire Corp. of Toronto, Mountain Equipment Co-op of Vancouver, Dylex Corp. of Toronto, and Mark's Work Wearhouse Ltd. along with Forzani Group Ltd., both of Calgary, are not in the e-commerce marketplace. In fact, only 25 percent of Canada's top retailers are on-line compared to 50 percent in the United States. This makes it difficult for smaller, less well known businesses to do business on-line and build a customer base. The risk/return ratio is too high at this time and keeps businesses from starting up, the incentive is low for getting people to shop on line because salaries and populations are lower than in the U.S. so the potential revenue is lower Also, a successful web site can cost many millions of dollars and that, coupled with the risk and an unfavorable Canadian tax structure, is disincentive for many.

All of this aside, consumers indicate they are ready to buy Canadian if the merchandise selection is comparable. Some shopper comparison statistics are presented here:

Additionally, a number of U.S. companies are doing well in Canada including Amazon.com, and catalogue retailers J. Crew Group Inc. and Lands' End Inc. In fact, Amazon was receiving over $US 20 million in revenues until Canadian competitors Chapters, and Indigo Books & Music Inc. entered the market. Other Canadian companies are getting aggressive and attempting to compete individually or in alliances. Hudson's Bay Co. has closed (probably a bad move) its upscale outdoor goods niche operation, "Outfitters", which targeted upscale consumers, and is pursuing specific on-line categories such as toys, baby supplies and gift registries through its Bay and Zellers units. Now the company is trying to determine how to best run its Web businesses.

"The Boston Consulting Group's Mr. Pecaut says there are encouraging on-line developments in Canada but, sadly, it is not an across-the-board phenomenon. "Canadian retailers fall into two camps," he says. "One group is in gear and we'll see much more exciting and well-developed sites. The other group's frozen in the headlights. They see the Internet as costly and don't know what to do."" Those camps are reflected in this chart:

Although a few companies are competing well, some mindsets and marketing approaches need to be changed so more companies can compete successfully:

• Many retailers need to move from marketing to technically-oriented males between 20 and 45 years old and also pick from the money tree of women and teenagers.

• Companies need to develop Web sites using marketing people and techies together, instead of using only people with technical skills.

• Companies should target underserved market niches including pet supplies, food, automobiles and toys.

[Evans, Mark, E-Shopping Trickles Into Mainstream]

And now, a little about business-to-business (B2B) e-commerce in Canada. That is where the money is and much of the e-commerce focus in the country, for a variety of enterprises, from a farm co-op to a health care group. Companies are buying, selling, billing, trading, and doing business with the government on-line. In 1998, this market spent over $ 3.9 billion (86 percent of Canada's on-line spending) and the amount is expected to be $67.7 billion by 2003. B2C expenditures are predicted to be only $12.8 billion by that time. In the United States, the forecast for 2003 is up to $1.3 trillion in the B2B marketplace, and $108 million for B2C.

The co-op is Belgrave Co-op in Belgrave, Ont, a company that orders things like seed, feed, and fertilizer from electronic catalogues like the one from Growmark, Inc. in Bloomington, IL, USA. The Growmark on-line catalogue was created for them by a Canadian company, EDS Systemhouse, Inc. of Toronto. The Calgary Health Authority uses its Internet-based procurement system to purchase $400 million in goods and services for its five hospitals. The procurement system was implemented by Oracle Corporation Canada, Inc., also from Toronto. Oracle reports that companies employing these systems are realizing up to 130 percent ROI and payback on their investment in just six months. Two major competitors in these types of systems are Oracle and SAP AG of Germany.

Thoughts are that this market will skyrocket as entire value chains move to on-line B2B domestic and international transactions. The vision is for communities and e-commerce intermediaries, vertical and horizontal hubs to facilitate e-commerce in the B2B world. [Marron, Kevin, Where the real action is]