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Only 24 per cent of Net users made purchase last year

Source: Toronto Star

Posted on March 27, 2001

      Canadians love to window shop on the Internet, but so far that hasn't translated into a sales bonanza for online retailers, a Statistics Canada survey has found.

      While almost three quarters of Canadian Internet users say they searched for goods and services online last year, just 24 per cent plunked down money and bought something.

      The Statistics Canada survey, released yesterday, found that 53 per cent of Canadians aged 15 and older used the Internet in the past year. That's up from 18 per cent in 1994.

      The study was part of Statistics Canada's first major look at how Canadians use a wide variety of technologies, from fax machines and the Internet to automatic teller machines.

      The retail numbers are disappointing, but not a big shock, according to retail analyst Chris Kubas.

      ``It's not quite where people want it to be. I don't think it's super,'' said Kubas, vice-president of Kubas Consultants.

      Booking hotels or buying insurance will likely prove more popular than buying books or washing machines, he added.

      ``Services might be more suitable to the online environment. Anywhere there's significant price competition and a service will be a good bet.''

      Some retailers, such as Bill Di Nardo, CEO of Grocery Gateway, are still holding out hope the market will take off, and say Statistics Canada's study is proof it's starting to happen.

      ''I think 24 per cent is enormous. Once a critical mass is reached, it's going to be a very large business,'' said Di Nardo, adding his company hopes to turn a profit within the next month or two.

      But a look through last year's business news would seem to favour analyst Kubas' gloomier outlook.

      In Canada, book retailer Chapters has laid off almost half the staff from its online division, and is expecting to merge it with Indigo.ca. CDPlus.com, a Toronto-based music retailer which mixed online selling with traditional stores, closed 33 of its locations across the country in February, citing low sales. Cooleh.com, an online shopping site owned by Torstar Corp. and Corus Entertainment Inc., shut down earlier this month.

      In the United States, online retail pioneer Amazon.com has made significant layoffs.

      The biggest barrier to online shopping, Kubas says, is that consumers still aren't comfortable with sending financial information over the Internet.

      ``People want to know when they type in their credit card number where (it) disappears to. Once you get past the security issues, everything else is exactly the same as ordering from a catalogue,'' Kubas said.

      That concern was expressed clearly in the Statistics Canada survey, which found 72 per cent of Canadian Internet users reported being concerned about the security of online shopping and banking.

      Di Nardo suggested security concerns can be circumvented by a cash-on-delivery system. Since his year-old grocery delivery service started taking orders, customers have paid by credit card, debit card or cash only when the order arrived.

      ``When we asked people what their concerns were, security was always right near the top, so that's why we did that,'' Di Nardo said.

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