Large retail chains in Canada are facing a lot of pressure from online retailers. Just as big-box chains used competitive pricing, large selections and quality service to beat out smaller competitors, online retailers are quickly taking away customers from the large sellers by offering a new online shopping experience. The Canadian retail sector is going through a very shaky time as more American competitors like Target and Nordstroms enter the market while online sellers like Amazon innovate and offer new ways to shop.
The physical store of large retailers are being used as a show room by customers who walk in to physically check out products before they purchase them online. Smartphones and tablets are the weapons of choice for these savvy consumers who can quickly purchase an item online after comparing prices and other features.
The growth of Canadian e-commerce is expected to stay in the double digits for the next five years while standard retailers have shown that they grow only 3% per year. As more and more consumers go online to purchase goods, physical store will become less significant and have lower sale numbers.
The fundamental change in retail is already having an effect in the country. Best Buy Canada recently stated that they were shutting down eight Future Shop locations along with seven Best Buy stores in Canada on the last day of January, 2013. In the same period, Amazon.com claimed it hit US$21.3-billion in sales for the last quarter of 2012.
For now it seems that the downward spiral is a major problem for electronics retailers. Canadian sellers of televisions, stereos and appliances saw 4.7% drop in sales by the end of November, 2012. The industry sells expensive branded items which can be found in many locations and consumers end up comparison shopping for these high value items. Online retailers usually offer better pricing and win over customers. Another factor that has led to the drop of the electronics market in Canada is that smaller retailers have started selling electronic accessories at lower prices and have also taken a bite out of the big retailers customer base.
Source: Financial Post
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