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Online shopping a growing part of Christmas experience

But there’s as yet still plenty of room for traditional brick-and-mortar retailers, say experts crunching the numbers

Whether you’ve already got something for everyone on your list or you’re the last-minute shopper, there’s a growing chance online purchases are part of the mix.

Online shopping is on the rise in Canada, and it’s radically changing the way consumers engage with retailers, suggests an upcoming study by KPMG LLP, a tax and auditing advisory firm.

“Technological disruption has fundamentally changed the retail experience, but many Canadian retailers are still playing catch up,” said KPMG’S Willy Kruh in a report released this week.

“Retailers today not only have to compete with fierce e-commerce competitors, including large global platform companies, but also respond to rapidly shifting shopping expectations driven by new technologies and demographic changes. Recognition is only half-way to doing something, and too many Canadian retailers are not keeping pace with the fact that consumers and their shopping habits are undergoing a sea-change.”

The numbers alone paint a convincing picture. According to Statistics Canada, in 2017 e-commerce sales in the final two months of the year topped $3.8 billion – a 20 per cent jump from the year before. However, that amount still paled in comparison to conventional retail during the Christmas season, which went in excess of $100-billion in those same two months.

“We certainly have been seeing the rise of online over the last number of years,” noted Brad Davis, associate professor of marketing at Wilfrid Laurier University’s Lazaridis School of Business & Economics. “It’s much further developed in the U.S. Part of what’s holding it back in Canada is in the U.S. there are a lot of small- and medium-size businesses that offer online shopping because they have greater population densities, so it’s just logistically possible. Whereas in Canada, it’s less so.”

The observation is mirrored by KPMG, which says Canadians are steadily embracing online shopping they are also less trusting with their personal information on the internet, more leery of misuse of their private data, and are slower to adopt technology than their counterparts elsewhere in the industrialized world.

A survey by the company found that 46 per cent of respondents said they were concerned about unauthorized tracking of their habits online, while 64 per cent said they did not trust behaviourally-tracked ads. In contrast, only six per cent  of respondents said they trusted retailers with their information.

“Companies must begin to appreciate that the modern customer is highly aware of the worst ways in which their data can be misused,” said KPMG’s Kruh. “From hacking to unwarranted tracked advertising, customer are rightly worried. Transparency and better communication will go a long way to reassuring customers that their data is in safe hands and that it is being used in their benefit.”

But data analytics can still provide retailers of any size with valuable insights into their consumers – an advantage that of online retailing that businesses shouldn’t ignore.

“Particularly, very important [is that] you can build databases of who your customers are and then you can target specific messages to them, specific deals, etc. So there is also a lot of benefit to having that kind of online capacity,” said Davis.

Less clear cut, however, is the advantages of social media. Even with the rise of generation selfie, 42 per cent of Canadians surveyed by KPMG found a brand’s social media presence to be unimportant – 11 per cent higher than global consumers surveyed. Still, half of respondents changed their tunes, somewhat, saying they would react positively if they were offered deals and discounts through on social media.

“Certainly millennials or under-35s are engaged dramatically on social media constantly. So there’s a huge, huge group there that you can try to reach,” said Davis. “The flip side is [you have] some of these really large companies who are investing heavily in social media, and they don’t quite know why they do it other than everybody else is, and that’s where everybody is now.”

It’s a technology that even the big companies are still unsure how to use, says Davis, while many are still relying on the old models of television and media advertising, and adapting it to the new forum.

The upshot is that traditional stores aren’t going anywhere just yet.

“Consumers still like the tactile experience in shopping,” said Davis. “In a lot of cases,  they like to see it and shake it and take a look at it, physically feel it. There’s a social component to bricks and mortar. Just getting out there, either going out friends or just going out and interacting in that environment. We’re a social species so we need that interaction.”

But the ideal state for retailers might lie somewhere in between the traditional and contemporary models – a hybridization of online and in-person experiences.

“A number of companies that started solely online are now beginning to introduce physical ‘showrooms’ to offer virtual-physical experiences for customers,” notes KPMG. “For instance, some players in the grocery space are eyeing even more locations in the years to come. Indeed, retail companies are developing new business models, or rethink existing ones, in direct responses to the ‘new normal’ in the shopping world.”

“Amid disruption from the Amazons of the world, retailers should focus on creating value and innovating on the links between online and physical shopping,” added Kruh. “Today, consumers are most keen on digital experiences that improve and complement the physical environment around them.”

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