For the forth consecutive year e-commerce sales* have grown by over 38%, with the 2005 sales outpacing overall retail sales growth six fold, according to the 2005 Survey of Electronic Commerce and Technology.

In 2005 online sales by private sector firms grew to $36.3 billion, while public sector transactions increased 55.4% to $2.9 billion.

Large firms, defined as firms with over 100 employees, are more likely to have an e-commerce website than smaller firms and account for 62% of total online sales. While just 7% of all private firms sell online, 16% of large companies are engaged in e-commerce.

Four industries lead online sales, cater to Canadian consumers

Fours industries - wholesale trade, retail trade, transportation and warehousing, and manufacturing - dominated online sales in both 2004 and 2005, accounting for 68% of overall sales by private firms in 2005.

Canadian firms are now more likely to sell to Canadian rather than foreign consumers. While 28% of e-commerce sales were made to foreign customers in 2002, in 2005 just 18% of online sales were made outside of Canada.

Manufacturers were most likely to export their products online, with almost half of their online sales going to foreign customers. Businesses in the retail and wholesale trade sectors were the least likely industries to sell abroad, with roughly 12% of their online sales reported as exports.

Technology adoption stabilizes

While there have been steady year-over-year increases in the dollar value of online sales, the rapid adoption of technology seen in recent years stabilized in 2005.

The number of private sector firms using the Internet (82%) was unchanged from the previous year. Email use was also unchanged since 2004.

The number of private sector firms with a website increased to 38% in 2005, up just 1% from 37% in 2004. Forty-two per cent of firms in retail trade had a website, up from 38% in 2004. Overall firms operating in the sectors of education, information and cultural industries, and manufacturing were most likely to have a website.

Similarly, while the percentage of firms using the Internet did not change the number of firms with broadband access rose substantially last year, reaching 81% in 2005 up from 71.7% in 2004. All large firms have embraced broadband access and about 79% of small firms, defined as those with fewer than 20 employees, subscribe to broadband Internet services.

Firms with high speed Internet access are more likely to use other advanced Internet communication technologies such as a website, Intranet or Extranet.

"In effect, Canadian businesses have crossed the digital divide and now have the capability to engage in e-business activities," notes the 2005 Survey of Electronic Commerce and Technology.

Barriers to e-commerce adoption

When asked to identify the major factors that prevented firms in the private sector from adopting e-commerce, the appropriateness of the product or service being sold, followed by a lack of interest in changing the firm's business model, were identified as the predominant factors.

Over half of the organizations not engaged in e-commerce felt that the products they sold did not lend themselves to Internet transactions. Meanwhile, just over 35% of companies that had not developed an online sales channel said that they preferred to maintain their current business model.

In the latter case, the survey authors note that the reluctance to change to an e-commerce business model may be due to an issue of comfort. It could be that the firms are not ready for possible technical problems associated with e-commerce deployment and that they see no reason to change their current model.

Security concerns were cited by just 18% of respondents who had not adopted e-commerce. This proportion has remained constant since 2002.

* E-commerce sales are defined as sales over the Internet, with or without online payment. Included is the value of orders received where the commitment to purchase is made via the Internet. Excluded are sales using electronic data interchange over proprietary networks; transactions conducted on automatic teller machines; and the value of financial instruments transacted on the Internet such as loans and stocks are not considered e-commerce sales. Service charges received for conducting financial transactions over the Internet are included.

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