When the pandemic stormed the country last March, The Scottish and Irish Store was one of the fortunate retailers.
Because the operation sells food, Ontario considered it essential. And so it was permitted to stay open.
However, such was the early fear of the virus, it didn’t really matter at first. There was so little in-person traffic at the shop along St. Laurent Boulevard that owner Michael Cox closed it temporarily. In-store revenues collapsed at his other outlet in Bells Corners.
The store’s saving grace: online sales. Overall revenues from January to September were down just nine per cent from last year. The online component made up 25 per cent of the total compared to five per cent in 2019.
By yearend, Cox estimates, “We expect to recapture any sales we lost because of the initial lockdown.”
Related
The Scottish and Irish Store was able to capitalize on electronic commerce in part because it’s been taking online orders since 2007 and has created a reasonably well-known brand. Not all retailers were so well-placed at the start of the pandemic, either by experience or product line.
Even so, Cox’s experience in key ways mirrors that of the retailing industry as a whole.
The impact of COVID-19 came in three distinct stages, almost directly in line with infection rates.
- In the first few months after the pandemic struck, Canadians more than doubled their online spending at local merchants year over year, according to Statistics Canada.
- Starting in July, as the rate of COVID-19 infections dropped, the volume of online purchases receded to average year-over-year gains of 65 per cent.
- In September, the ratio climbed once more to 74 per cent as the incidence of COVID-19 started to surge in central and western Canada. For the year, e-commerce revenues for Canadian retailers are expected to approach $37 billion, up nearly 70 per cent from 2019.
There are two messages in here. The first is that online shopping is here to stay — at significantly higher levels than before the pandemic. At the same time, it seems clear that when safety concerns are met, most people still prefer in-person shopping.
Certainly that’s been the case at Farm Boy, the Ottawa-based grocery chain acquired two years ago by the parent company of Sobeys Inc. Earlier this year, Farm Boy set up its Fresh Online delivery and pickup service. By late June, with most of its shoppers arriving in person, Farm Boy began phasing out the service at many of its nearly three-dozen stores across Ontario.
Coincidentally, Farm Boy and The Scottish and Irish Store both use Shopify technology to power online sales — as do hundreds of other local retailers, according to BuiltWith, a consulting firm specializing in e-commerce data.
The initial rush to online services was a shot of adrenalin for Shopify as well as for online retailing giants such as Amazon, Walmart and Apple. The specialty magazine eMarketer estimates revenues from e-commerce in the U.S. will reach US$795 billion in 2020 — up 32 per cent from last year.
The biggest gains are being registered by some of the best-known brands. For instance, eMarketer estimates Best Buy and Target will see a doubling of online revenues this year while Walmart and Home Depot will witness online sales increases in excess of 65 per cent compared to 2019.
The industry’s heavyweight, Amazon, is expected to report a relatively modest 39 per cent gain in online business, but this is on top of some very large numbers. Online revenues this year at Amazon should approach US$310 billion, giving it a 39 per cent share of the total market. The next biggest e-commerce retailer? Walmart, with a less than six per cent share.
In its presentations to investment analysts, Shopify last year claimed the No. 2 spot in the e-commerce market in the U.S. with a 5.9 per cent share compared to 36.9 per cent for Amazon and 4.7 per cent for Walmart.
Shopify’s self-ranking is based on the amount of business done by the one million-plus U.S. retailers who use its technology. Unlike Amazon, Shopify does not sell directly to consumers — it builds and hosts websites for retailers who do.
Since Shopify is expected this year to see its U.S. customers improve online sales by more than 80 per cent, which includes many new customers added during the pandemic, the Ottawa firm should see its share of U.S. online commerce market jump to more than nine per cent.
Shopify’s continued ascendancy is not a given, however. Its competitors are many, as are the number of ways to do e-commerce — as illustrated by two of Ottawa’s more successful and longstanding retailing operations.
“We looked at Shopify,” says Jason Yarrington, a co-owner of sporting goods retailer Trailhead Paddle Shack, “but we decided to stay with Lightspeed, which gives us greater certainty about what our costs will be.”
Both Shopify and Montreal-based Lightspeed sell technology that gives retailers the ability to manage online operations, accept payments and track inventories, among other things. But Shopify charges fees for each of the different aspects of the online operation while Lightspeed’s technology platform is more like an operating system that pulls together multiple other software specialists. Most of its customers opt for subscription fees of a year or more, making it easier to estimate operating costs.
Lightspeed POS launched about the same time as Shopify. Yarrington says Trailhead has been using Lightspeed’s technology for nearly a decade, which was a factor in sticking with it. He adds that his firm’s online sales so far this year are up more than 80 per cent compared to 2019. The result: Trailhead’s online business will make up roughly 30 per cent of total revenues this year compared to less than 12 per cent in 2019.
It’s been a similar story at Lee Valley Tools, which began offering online shopping in 2000. Last year, it gave its website a makeover with technology provided by Sitecore Experience Commerce, a U.K.-based outfit that specializes in customizing websites. This is in contrast with Shopify, which offers retailers a more limited number of templates to distinguish particular sites.
“Our goal is to inspire and enable the “look what I made” moments in our customers’ lives with exceptional content,” notes chief operating officer Jason Tasse.
The transformation of the company’s website was timely. Since February, Lee Valley’s online sales have doubled, which explains why its Ottawa fulfilment centre has been pushed to keep up with the volume.
It helps that Lee Valley and Trailhead focus on products that happen to be popular in a time of COVID-19 — gardening and woodworking tools in the case of Lee Valley, and outdoor sporting gear in the instance of Trailhead.
As for the Scottish and Irish Store, food has been the item most difficult to keep in stock. “COVID appears to have created an urgency for people to ensure they have enough food in their homes,” Cox says. “We are seeing people place online orders, not for one or two of each item at a time, but for six, 10 or 12 of an item.”
Which naturally leaves less for in-store shoppers. At least for now.
Copyright Postmedia Network Inc., 2020
