On the late-June morning that staff at Ontario's government -owned liquor and wine stores announced they might go on strike, independent online retailer Aaron Bick, co-founder of WineOnline.ca,received a record number of orders -- 250 cases. Twenty-four hours after the strike was called off, his online traffic plummeted.
Online retailers' digital proximity to clients puts them on the economic front lines, but it also puts them on a knife's edge when it comes to consumer confidence. When confidence is high, so are sales, but when buyers are feeling the economic blues, online retail traffic ebbs away. Small wonder business online are forced to be rapid responders.
When Bay Street bonuses were flowing, WineOnline built its clientele by stocking difficult-to-get, high-priced wines in the $50-plus range from Europe. But the economic downturn has forced Mr. Bick to overhaul his inventory. Today, more than 40% of wines on offer at his site are priced under $20. It means more work on his part: "The amount of orders we've had to fill to keep revenue has increased," he says.
There are pluses:Mr. Bick is leveraging his new customer base by adding social networking and interactivity tools to his website. Next up: a new blog featuring commentary from winemakers and critics.
Online retail sales were showing promising growth in Canada. Sales hit $12.6-billion in 2006 -- a 61% rise in three years -- according to a 2007 Statistics Canada report. Online sales rose only 3% in 2008, says Raleigh, N. C.-based media marketing company Sage Works, but are up 9% for the first eight months of 2009.
Despite glimmers of hope, Canadians have not embraced online shopping with the same verve as Americans. Freight charges are a big factor. Darrell MacMullin, general manager PayPal Canada, says "56% of buyers abandoned online carts because of high shipping fees." Fear of credit card fraud is another issue. "Canadians have one of the highest sensitivities globally when it comes to security," he says.
What is winning over more reluctant shoppers is the rise of specialty brands online.
Traditional players such as Amazon Canada, Sears and Wal-Mart Canada still move the most merchandise in the cyber-world, says Heather Dougherty, an analyst at the online marketing research firm Hitwise.
But a unique trend has emerged in Canada: Many big-box retailers, including Canadian Tire Corp., use online sites to market rather than sell product. That has left room for local small businesses to shoot through the canopy, particularly those offering specialized discounts and sales, she says.
"Folks are looking to save money by buying products onsite ... and are looking for fire sales," Ms. Dougherty says. Of all online visits in June, 1.4% were made to online classified ads, and the most popular site was the Canadian site Kijiji, on which people sell used goods. Craigslist came in second.
Another Canadian company doing well in the recession is RedFlagDeals.com,which helps consumers find online bargains in Canada. Its founder says traffic grew 40% last year. Raman Kashyap, owner of the online mall cybershopping.ca,admits this has been a tough year for online sales; traffic is down 10% and he has seen about 15% of his affiliate clients, many of them clothing and jewellery sites, disappear. To work these days companies must be very niche-oriented and have strong social networking programs, he says.
Cybershopping.ca,MaternityCorner.comand ssense.com.fit that profile. Annie Cavicchi built her online site, MaternityCorner.com,the same time she opened a store in Nelson, B. C. In seven years, business has quadrupled. Sales have not tailed off with the recession, in part, because she has no other competition in Canada. Despite growth, the online business still makes up only 20% of total revenues. Ms. Cavicchi admits she prefers to focus most of her attention on her physical store because she loves "dealing with people face-to-face" and has limited her Internet site to a selective inventory of cloth diapers and baby products. "There just isn't enough hours in the day" to grow the business, she adds. Rami Atallah, president of ssense.comhas taken the opposite view of his site. A former computer programmer, Mr. Atallah opened a store selling high-end fashion brands in Montreal in 2003 before launching his online business in 2006. Today, ssense.comis considered one of the fastest growing companies in Canada with growth of 120% year-over- year, he says. Unlike Canadian Tire, which uses online as a marketing opportunity for its stores, Mr. Atallah uses his store as a marketing device for his online service. Today, his physical store only makes up 1% of his total revenues.
Stores like Saks and Barneys don't develop their site to maximize sales, Mr. Atallah says. "They still want their physical store to be the focus."
He attributes his success to several factors including product exclusivity, free shipping in Canada, and a flexible return policy. Connectivity is high on the list: Mr. Atallah taps into blogs, buys banner campaigns on niche fashion sites, and has a web of affiliate programs on sites such as cybershopping.cathat promote his site for a commission. "You have to attract people to talk to you... the more you are linked the more you have people visiting your site," he says. For newbie online retailer Lisa Rotenberg of rocketfuelcoffee.com,niche is key. The average coffee drinker wouldn't be bothered to spend $20 online for a pound of great coffee, so her site caters to genuine connoisseurs. But getting the message out to high-end aficionados has cost her a lot of java beans.
Ms. Rotenberg, who sources coffees such as Hawaiian Kona and Jamaican Blue Mountain from a roaster in Toronto, has been trying to carve an online space through the blogosphere by sending out free samples to online critics. One "professional cupper" in Canada received her beans less than three weeks after it was roasted and he wouldn't even try it. "He said it was a waste of time because it was old and stale," she says.
"That was a very difficult pill to swallow when you are trying to get [my coffee] ratings," says Ms. Rotenberg, adding that her coffee roaster said the critic's comments were nonsense.
Still she's plowing ahead because the people she's trying to impress with her product read these blogs and sell to each other. "I'm learning the lessons very fast."
kmazurkewich@nationalpost.com---------
CANADIANS SLOW TO EMBRACE ONLINE SHOPPING:
Canadian retailers ranked by online sales growth*
Electronic Shopping 9%
Grocery Stores 7%
Specialty Food Stores 6%
Health and Personal Care Stores 5%
Sporting Goods, Hobby and Musical Instrument Stores 3%
Lawn and Garden Equipment and Supplies Stores 3%
Automotive Parts, Accessories and Tire Stores 2%
Beer, Wine, and Liquor Stores 1%
Electronics and Appliance Stores -1%
Office Supplies, Stationery and Gift Stores -3%
Furniture Stores -3%
Clothing Stores -4%
Other Miscellaneous Store Retailers -4%
Other Motor Vehicle Dealers -5%
Building Material and Supplies Dealers -6%
Jewelry, Luggage and Leather Goods Stores -6%
Home Furnishings Stores -8%
Automobile Dealers -11%
* Between Oct 15, 2008 and July 15, 2009
Source: Sageworks Inc., Andrew Barr / National Post
