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Canada lags in e-commerce, report confirms

Despite Canadians being among the most prodigious users of the Internet, they really aren't doing much online business-wise.

(Photo:  Richard Drury/Getty)

The government’s Standing Committee on Industry, Science and Technology has released its report on e-commerce in Canada, titled “Pursuing the Promise,” and it paints the same picture we’ve known for some time now—that despite Canadians being among the most prodigious users of the Internet, they really aren’t doing much online business-wise. But with the amount of effort the government has put into this area, a more accurate title for the report might be: “E-Commerce in Canada: Half-Assedly Pursuing the Promise.”

Canadian businesses are investing 40% less in information and communications technologies, or about $2,400 less per worker, than American businesses, the Committee heard from witnesses. Some of that has contributed to the fact that only 1% of retail expenditures in Canada are from online transactions, compared to 8% in the United States.

That’s bad because, as the report says, the ability “to reach customers beyond Canada’s borders helps businesses alleviate the challenges associated with operating in a relatively small domestic
marketplace.” Also, “the effective use of technology and networks can help a business reduce
costs, improve efficiency, ultimately leading to increased productivity.”

So why is Canada lagging so badly? Depending on your perspective, the paper reads either as a list of reasonable explanations, or as a litany of excuses.

There’s the familiar refrain about the lack of access to capital. With Canada being a smaller country, there aren’t as many sources with deep pockets that can fund the necessary expenditures on new technologies needed to drive e-commerce. In some cases, such as with telecommunications, this problem is further exacerbated by foreign ownership restrictions. Thankfully, the government is finally taking action on those.

Also, Canada is predominantly a country of small and medium-sized businesses. As some witnesses suggested, it’s more costly for such companies to invest in technological upgrades than it is for big businesses. “It costs businesses that are a lot smaller a lot more,” said Diane Brisebois, CEO of the Retail Council of Canada. She also said that it’s hard to find tech-savvy people who want to work for small companies; they’d rather work for big, multinational corporations.

Others brought up concerns with security and consumer protection. With neither of these measures being strong enough, they’re acting as obstacles to getting e-commerce options up and running. Broadband issues were also raised, with the Canadian Chamber of Commerce saying the country’s e-commerce infrastructure is no longer “world class.”

Last but not least, a number of commentators said credit card transaction and postage costs are too high.

The Committee wrapped up its report with 16 recommendations, which generally followed the same uninspired script of virtually every similar paper: the government should serve as an example to businesses and adopt e-commerce itself wherever possible, it should move to modernize payment systems, cut red tape, encourage digital literacy, boost security, yadda yadda.

More informative was an addendum from the NDP at the end, which suggested specific courses of action. These included defining an innovation and economic development policy with broadband and e-commerce adoption as a priority; the spending of proceeds from the upcoming spectrum auction on rural broadband, StatsCan reinstating the Survey of Electronic Commerce and Technology, which was discontinued in 2007; and new regulations for electronic transaction fees—among other things.

All in all, even with the milquetoast official recommendations, it’s hard not to come to a singular conclusion after reading the entire report. It’s almost like the Committee is telling the government: “The reason Canada’s e-commerce situation sucks is because of your inaction, so let’s get to that long overdue digital strategy.”

The digital strategy is, as Michael Geist—the Canada Research Chair in Internet and E-commerce Law at the University of Ottawa—puts it, the government’s Penske file, so named for George Constanza’s non-existent work project on Seinfeld. Moreover, Canada remains the only G7 country without some sort of broadband plan, never mind an actual digital strategy. To say it’s overdue when Japan had such a plan 11 years ago is a gross understatement.

If Canada’s e-commerce situation is woeful, it’s a case of the digital chickens coming home to roost.