Just how sophisticated are Canadian consumers and how digital is their path to purchase? A new Deloitte global survey, released this March, shows that, contrary to some preconceived notions, when stacked up against others, our U.S. neighbours in particular, Canadians have remarkably similar shopping preferences when it comes to the use of digital channels.
More than 2,030 Canadians participated in the 2015 global survey exploring how consumers around the world are using, and want to use, digital devices and channels during their in-store shopping journey. The survey reveals that Canadian shoppers are just as keen to shop online as Americans, yet the overwhelming majority of Canadians still shop in brick-and-mortar stores. This behaviour is the result of a lack of innovation in the last mile delivery, an emerging sophistication in supply chain, and early-stage omnichannel infrastructure, particularly in e-commerce and mobile capabilities, the survey indicated.
While the shopping preferences of Canadian consumers are leaning more and more to digital, their ability to shop that way in the Canadian market is limited. Canadian retailers are struggling to keep pace with digital innovations, global marketplaces and international competition to meet the rising expectations of consumers, causing a digital divide.
There is a gap between how consumers want to shop and what retailers in fact provide. This divide is particularly pronounced in Canada in relation to the U.S., where retailers simply have more digital capability than those in Canada.
Consumer expectations in digital are on the rise with rapidly increasing technological capabilities, necessitating an adjustment from retailers on their business models. Responding to the massive shift in consumer behaviour, retailers have been investing in e-commerce, social media, mobile and data analytics to better understand their buyers. They’re striving to develop and implement an omnichannel strategy “that delivers a compelling, engaging and seamlessly positive experience to consumers who have more information and choice than ever”, the study said.
Canadian retailers have also been embracing the challenge to serve the connected, empowered consumer-in-chief. The question is: will they be able to keep up with the pace of change needed to be relevant in the digital and global marketplace? The survey suggests Canadian retail executives need to consider amplifying their digital efforts in order to take advantage of the digital impact and influence on total channel sales.
According to a Forrester Research report of online retail in Canada, Canadians spent $22 billion online in 2014, which accounted for about 6% of total retail sales in this country. With research showing Canadian retailers are lagging their global competitors in omnichannel offerings and distribution options, it’s clear there’s an opportunity for exponential growth in this space.
Global e-commerce sales are expected to double by 2018, and retailers with the right digital strategy and sound investment in omnichannel are positioned to reap the rewards and pull ahead of the competition.
Foreign-based global retailers, competing for consumer dollars, are luring shoppers from across borders everywhere-including Canada-with a wide selection, competitive pricing, easy shipping and fast and convenient shopping. Keeping up with the ever-shifting digital landscape presents many new opportunities for retailers in this country-challenging, yes, but not insurmountable. If Canadian retail companies are to thrive and grow well into the future, they must continue to embrace the speed of digitization while improving the online customer journey and investing in the consumer experience, the survey suggested.
Canada–U.S. divide: The experience gap
The survey shows few differences between how consumers on either side of the border like to shop if given digital options.
‘Digital’ runs the gamut from desktop and laptop computers to smartphones and tablets, from social media channels and retailers’ apps to in-store interactive devices like touchscreen walls. A quarter of shoppers in both Canada and the U.S. (24% and 25%, respectively) prefer to discover and learn about new products by using digital, while 27% of Americans and 25% of Canadians use them to evaluate products when they’re on the cusp of deciding which one to buy.
Almost the same number of consumers (38% in Canada, 40% in the U.S.) prefer to make their purchase with a digital device, be it a mobile wallet or a retailer’s app. As for how they want to get their goods home, slightly more Americans than Canadians (20% vs. 16%) prefer non-traditional methods, such as having their merchandise shipped to their home or picking up the goods themselves at a convenient location.
The difference between Canadian and American consumers grows when it comes to how much influence the use of digital has on consumers as they decide what to buy, how to buy it and how to get it home, which Deloitte calls the digital influence factor. Forty-one percent of Canadian respondents say they were swayed by digital at some point, compared to 49% of Americans. An even greater difference arises when it comes to the mobile influence factor: the use of their mobile device influenced less than one in five (17%) of Canadian consumers along the purchase journey and almost one in three (28%) of Americans.
An opportunity exists for Canadian retailers choosing to focus on investing in digital and mobile payment tools, in-store and online, to take advantage of the resulting higher conversion rates and increased spending. More choice and ease of doing business could stem the loss of consumers going to foreign retailers that have a strong online presence and a robust distribution channel.
While an increasing number of Canadians are turning to digital channels to do their shopping, the majority continue to shop in physical stores. Of these, two-thirds (67%) want to take the goods they buy home with them right away. However, only 55% say they typically can walk out the door with their purchase in hand: often, the merchandise must be ordered from another store or warehouse, presumably because it’s not on the shelves at that location. This represents a 22% shortfall in service between a customer’s preference and a retailer’s ability to meet expectation.
According to the study, the gaps between how shoppers would prefer to get their goods home and what is currently available to them are greater in the digital shopping sphere. Almost 33% of consumers who buy online would prefer their goods to be delivered to them at their home or office, while only 17% are able to do so. That’s a 94% shortfall in meeting customer expectations. A slightly narrower gap, of 80%, exists between online shoppers who’ d choose to pick up their purchases at the store if they could and 18% would like to click-and-collect but only 10% say they have the option.
Of course, Canada’s sheer geographical size and modest population density have long posed distribution headaches for any company that needs to move goods around it. Those working in retail find it no less challenging. Canadian retailers must operate with fewer distribution centres serving larger geographic areas than those in the U.S.
Product ubiquity needs to be improved in both traditional and online channels. Location is an important factor for those who want to obtain their merchandise at the store, whether shopping in person or online. Effectively predicting consumers’ digital shopping behaviours and fulfillment preferences will be key to meeting their expectations in the future, while providing them choices to buy any way they want through avenues such as click-and-collect. The question is: how do retailers strategically use their stores to act as micro-distribution centres to accommodate this consumer behaviour?
The result is that retailers in Canada are becoming increasingly vulnerable to losing consumers to those that are keeping pace with digital advances. To keep Canadians spending at home, retailers should focus on driving brand experience, integrating analytics into the core of their business and strategically understanding the omnichannel consumer’s changing path-to-purchase.
In fact, customers who use social media before, during or after buying an item are four times more likely to spend more money than they normally would have. Meeting customers’ expectations and connecting with them in the digital sphere can lead to increased visits to brick-and-mortar stores, too.
The next generation of omnichannel will be based on strategic and predictive analytics capabilities, and the ability to offer a fully customized and personalized experience. These capabilities, in turn, increase basket size, deepen customer loyalty and drive brand experience. Consumers reveal an extraordinary amount of information about themselves when they use a retailer’s digital channels, providing data that can be potentially very profitable—if retailers understand how to get and effectively use the insights, that is. Investing in the right resources to do so would be well worth the costs in the ROI.
Retail companies in this country do face unique and difficult challenges, some of which are beyond their control. They can’t change the higher costs associated with distributing goods, for example, or the fact that they don’t have economies of scale relative to their U.S. competitors. But with challenge comes opportunity. Retailers can get ahead by identifying how to make the most of their existing digital assets and where to make new digital investments. They can focus on bringing digital in-store to enhance the consumers brand experience, giving them a unique in-person advantage.
Whatever strategies Canadian retailers are considering in this shifting digital landscape, what is certain is that they will need to implement them soon to stay the course against new and non-traditional competitors. Finding ways to close the digital divide can prove to be a competitive advantage for Canadian retailers.