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More Canadians shift to online shopping as holiday season begins

Shoppers walk through Toronto’s Eaton Centre.

Chris Young/The Canadian Press

E-commerce is taking over in the United States as the holiday shopping season goes into full swing, and Canada isn't far behind.

Online shopping sales are set to overtake in-store sales for Christmas gifts for the first time, according to one survey. Deloitte asked U.S consumers how they plan to spend their money during the holidays and found that, on average, 51 per cent of a shopper's gift budget will go toward online purchases.

A similar poll in Canada by Ebates.com found that the Canadian shoppers are also increasing their e-commerce purchases, with consumers here saying they plan to spend 38 per cent of their gift budgets online this year.

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Tom Quinn, a national retail analyst at Deloitte, says the disparity between the two countries and their e-commerce trends is shrinking as Canadian retailers start to invest more in the online marketplace.

"Canadian retailers were a bit more cautious in investing in the technology that it took to develop e-commerce platforms and to make mobile apps a reality," Mr. Quinn said.

"But in the last five years, they've increased the attention and are starting spend more in trying to understand the consumer and how they prefer to shop."

Derek Colfer, head of technology and digital innovation at Visa Canada, points out that the Canadian market is at an advantage because it boasts one of the highest rates of card-based payment in the world – 70.7 per cent of personal purchases are made by card in Canada, compared with only 40.3 per cent in the United States. Mr. Colfer says it's much easier to get consumers to shop online when they're already paying by card.

"You can't take your physical cash and make a digital payment," Mr. Colfer says.

"So that card-based … penetration is critical when you look at the kind of shift that's happening in digital commerce."

Mr. Colfer says Visa Canada expects nearly $1-billion in spending to shift from physical to digital this holiday season.

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In the United States, around 10 per cent of sales are done online, and the online market experienced a growth of 24 per cent from last year, according to Slice, a U.S. market analysis company. The number in Canada is smaller at 7 per cent, with an 18-per-cent growth from last year, according to NPD Group, a market-analysis company.

Armin Begic, director of retail analysis at NPD Group, said the Canadian online shopping market has historically been lower owing to a lack of cheap shipping options and a consumer base that is less inclined to give away credit-card information.

He noted that the Canadian online market is now being driven by an increase of shoppers using their phones to make purchases and by retailers who are seriously investing in online sales.

While he's not sure whether the 50-per-cent mark will be broken this year, he believes it will inevitably happen in coming years.

However, Mr. Quinn pointed out that Deloitte made a similar estimate last year, forecasting that online sales would make up 40 per cent of a shopper's budget for gift giving. The figure ended up being accurate, he said.

Regardless of whether online overtakes in-store sales for gifts, analysts agree that online shopping is a force to be reckoned with for retailers around the world.

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"Shoppers are empowered like never before because of online," said Ken Cassar, a retail analyst at Slice, which aggregates online spending data from consumer e-mail receipts. "They have broad visibility into the best price and they're increasingly able to get that best price.

"From the merchant standpoint, it's never been harder."

Mr. Cassar says businesses used to be able to focus on their in-store model, but now have to constantly innovate on their approach to stores, website design and their distribution models for online sales.

A significant growth in the use of phones and mobile apps has also made consumers much more savvy when it comes to ensuring that they're receiving the best price.

"Over half of consumers report that they actually browse for prices on their mobile device while shopping in store," said Mr. Begic, citing a recent NPD Group study. "What's more interesting is that half of the people that do that would leave the store if they found a better price somewhere else."

The online model does present new opportunities when it comes to better understanding the customer, thanks to information that can be gathered about a customer's buying habits and preferences.

Mr. Begic says the bright side is that consumers are becoming more open to online advertising. A survey in 2016 by NPD Group found that just less than half of Canadian consumers were put off by targeted online ads about retail product. In 2017, that figure dropped to a quarter of consumers.

The Ebates survey is considered accurate plus or minus three percentage points, 19 times out of 20. The Deloitte survey's margin of error is plus or minus two percentage points.

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