As a kid growing up in Canada, I spent a lot of time at the shopping mall. Millions of us still do.
Indeed, bricks-and-mortar retail is alive and well in this country — at least for now. But that will change if a trend from south of the border takes hold in Canada.
Although headlines proclaiming a U.S. “retail apocalypse” may seem sensational, they’re all too real. The American retail sector is experiencing seismic shocks that will eventually ripple across the border. Canadian retailers — particularly small and medium-size ones — must either dial up their digital sales and marketing efforts, or risk commercial extinction.
So, how big is the problem?
As writer Derek Thompson notes in a recent article for The Atlantic, U.S. retail has seen nine retail bankruptcies alone, as well as significant downsizings by heavy hitters ranging from J.C. Penney to Macy’s. Even Ralph Lauren recently vacated an exclusive space on Manhattan’s chic Fifth Avenue.
[bctt tweet=”Only 17% of small businesses have an e-commerce-enabled website” username=”AOKMarketing”]
So, the U.S. economy must be tanking, right? Nope. Economic performance in the U.S. is relatively robust.
Unemployment is lingering below five per cent, interest rates are at rock-bottom levels, GDP growth clocked in at 2.5 per cent in Barack Obama’s final quarter in office — although that number dipped to an anemic 0.7 per cent in the first few months of the Trump administration — and even income equality is improving.
As the Washington-based Economic Policy Institute noted in a research paper, “Median wages grew 3.1 percent from 2015 to 2016. The 20th percentile (of Americans) experienced a striking 6.4 percent increase in pay, while the 10th percentile increased 2.9 percent after increasing 3.8 per cent the year before.”
Anecdotally, as a Canadian entrepreneur with a base in New York City and a significant U.S. client base, I can confirm that Americans are ready and able to spend money. So, what explains their brick-and-mortar retail slump, and why should Canadian retailers care?
There are a number of factors, as Thompson points out in the Atlantic piece, including the plethora of U.S. shopping malls and a general dip in spending on material goods. But the chief culprit he cites is the growth in e-commerce sales.
[bctt tweet=”71% of small businesses have no plans for e-commerce capabilities in the future” username=”AOKMarketing”]
According to the U.S. Department of Commerce, fourth quarter e-commerce sales in 2016 were US$102.7 billion — or 8.3 per cent of total sales, up from 7.3 per cent of total retail sales for the same period of 2015. In other words, an increasing number of Americans are shopping online each year, with fewer making the trip to their local shopping mall or main street.
By contrast, Canadian retailers sold $1.7 billion online in December of last year, or 3.4 per cent of all retail sales.
In other words, we Canadians still lag far behind our U.S. neighbours when it comes to online shopping, but that’s slowly changing and our digital adoption rates will continue to accelerate.
Now comes the troubling part.
According to a new survey of Canadian small and medium-size retailers by online transaction-management firm PayPal Canada, only 17 per cent of respondents said they have an e-commerce enabled website, and 71 per cent have no plans to develop e-commerce capabilities in the future.
Respondents cited concerns including online fraud, limited tech knowledge and worries over providing equivalent levels of service online as in store for their reluctance to embrace the e-commerce shift.
Worse, the Canadian Internet Registration Authority reported in 2015 that a whopping 40 per cent of Canadian SMEs lacked a website. It’s not that their online presence was poor — they simply didn’t have one, or at least not their own digital storefront (some small businesses rely on social media platforms such as Facebook to market their products and services).
In my experience, many firms, particularly small retailers, are struggling to attract and retain customers in the digital era. Given statistics such as these, the reason is hardly a mystery.
E-commerce is an essential component of your survival. If you fail to build a robust online presence, you won’t be in business in five years
So, what’s a small-to-medium-size Canadian retailer with a lacklustre e-commerce presence to do?
First off, if this is you, don’t panic — but do get your head out of the sand. Understand that e-commerce isn’t some passing fad. It’s an essential component of your future success, not to mention survival. If you fail to build a robust online presence, you won’t be in business in five years.
Next, invest heavily in digital. Whatever your current marketing budget is, immediately pump 80 per cent of it into the digital arena; start by modernizing your website (assuming you haven’t already) to ensure it’s e-commerce-enabled.
Lastly, develop a digital-first strategy that focuses on everything from building an appealing online brand to developing a strong social media presence that highlights the very best aspects of your products or services and helps nurture a community of loyal customers. Also work on boosting search engine rankings and delivering a user-friendly online shopping experience.
This is remarkably rudimentary advice, I admit, but I’m still stunned by how often I need to make these high-level points to small and mid-sized retailers, most of whom are rapidly losing market share to global digital giants such as Amazon.com and even Canadian online retailers such as Wayfair.ca and Shop.ca.
The bottom-line is this: retailers who want to survive must commit to online success, and that starts by developing a robust digital sales and marketing infrastructure.
This article originally appeared in The National Post
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