E-Commerce and the Digital Transformation of Canada’s Economy

What are the internet trends that have impacted SMEs, particularly in terms of e-commerce? 

The most prominent story of commerce, which has been especially true throughout the pandemic, is that in the last five years, the internet has become a much friendlier place for small businesses. It has become a place where small businesses are able to thrive, compete and see a path towards long-term success. That space is where Shopify spends a lot of its time. That is what we build products for: to try to level the playing field and make the internet structurally better for small and independent businesses.

“Technology, by and large, has become democratized in the last number of years.”

In the early years of online commerce, there was a huge requirement for companies to build technical infrastructure. A company could really only access this technical infrastructure to reach consumers online at scale if they were able to build a lot of that themselves. However, technology, by and large, has become democratized in the last number of years. Take the example of a new entrepreneur. That entrepreneur can now have an idea for a business, create their product and by the next day, sell it on an online store or through social media. Small businesses now have many of the same tools and technologies that were previously only available to larger players. This has been an incredibly powerful force to make small businesses effective online.

With that in mind, let us look at what happened during COVID-19. We had a huge acceleration of consumers shifting online. Simultaneously, stores had to close, and because of the culture around COVID-19, there was a strong movement to buy local to help support businesses that needed help. Couple that with the fact that small businesses were already ready for this moment. They were already spending the last number of years digitizing. A huge uptick in traffic we saw through COVID-19 disproportionately went towards independent brands as opposed to large marketplaces. 

What must brick and mortar companies do to get online and what are the hurdles they face in doing that?

That is a great question and an important one for the future of the Canadian economy.

“There have been great programs by all levels of government to make it easier for offline businesses to shift online.”

We have been trying as much as we can to partner with the government over the last two years to accelerate the shift of businesses online. There have been great programs by all levels of government to make it easier for offline businesses to shift online. The barriers that we continue to see include access to high-speed internet. This is specific to certain communities but high-speed internet access is a must-have for access to online commerce. There is a general comfort with anything online with older, more established legacy businesses, and so Shopify and the government need to be able to do more to educate and make that transition easy for smaller businesses. 

Another barrier we see is the ability to make that transition successfully. Running a brick-and-mortar store is a very different undertaking from running an online store. You need different skill sets and expertise. The more of an e-commerce ecosystem we have in Canada, the more businesses can help other businesses online and the better off we will be. That ecosystem is very vibrant today because of the number of e-commerce companies in Canada but it could be even broader in helping small businesses. 

Making things easier for small businesses is the best way to overcome these barriers. For example, in the early days of COVID-19, we made it free for businesses to shift online to Shopify. The first 90 days were free and as a result, there was an influx of traditional offline businesses joining Shopify for the first time. Largely, that was COVID-19 driven, but making it free and easy is important.

“Extending services to new businesses to help them figure out the basics of setting up online stores and things like online marketing is incredibly powerful.”

Another thing we found really powerful is to have a big team of support advisors who are there 24/7 to speak with businesses and help them build their online stores and be successful with Shopify. Extending services to new businesses to help them figure out the basics of setting up online stores and things like online marketing is incredibly powerful. We need to take that concept and think about how we can scale that to more new businesses and businesses beyond Shopify.

What will be the key e-commerce trends going forward?

Through COVID-19, Shopify saw a doubling of the number of businesses selling online in Canada, and a huge number of those businesses were new businesses. One of the things we saw that is really encouraging for the future is that the new businesses that started selling online for the first time during the pandemic have been our most successful cohort of new businesses ever. They reached a certain number of sales more quickly and had better longevity. There are a lot of signals from the pandemic that suggest that we may have just gone through an explosion of new entrepreneurs and businesses that have adopted a new business model. These businesses were relatively successful in their early days, and so that might be the seed for many more waves of this in the future and sustained growth in that sector.

What we saw through the pandemic was not so much the emergence of new trends but rather the acceleration of a lot of existing trends that will continue. The first of these trends is the melding of the online and offline worlds. In retail and commerce, the online and offline worlds have been quite separate but through COVID-19, they really came together. We have more consumers and businesses doing things like buying online or picking up in-store. There is more integration of storefronts and online shopping in various ways. That trend predated COVID-19 but will continue to accelerate. Increasingly, storefronts in the physical world will incorporate online elements but online businesses will also continue to see value in physical retail and storefronts. Those worlds will come closer together.

“The days of just shopping on an online store are likely behind us as there are many new places online where that experience will ultimately be integrated.”

The second trend is there has been a proliferation of places or channels where people shop. I do not know what platforms you are on but if you spend any time on TikTok or Instagram, you will have seen how in the past number of years, shopping through those platforms has proliferated. There is also video commerce and a number of other new ways that have emerged in the last five years to facilitate shopping. That proliferation of channels through which people can shop will continue to happen. The days of just shopping on an online store are likely behind us as there are many new places online where that experience will ultimately be integrated.

The third trend is the nature of who is selling online and what the business models look like. Through COVID-19, we saw the character of who was selling online change a lot. Many new demographics became much more prevalent in online commerce. There are more voices and independent entities. There is a resurgence of small businesses and shopping local. Retail has become more diverse, inclusive and values-based, and all those trends are coming to the fore. 

What advice would you give to small businesses on how to get fully online?

The fundamentals have always been true. Know who your customer is and build a product or service for that customer. All the tools exist now for you to be incredibly focused on connecting with that customer emotionally, logistically and in all the ways that matter for businesses. The tools are there for you to bring a unique vision, product or voice to your customer and know that you are going to be able to reach them. That is always the encouragement we give entrepreneurs and businesses out there. Businesses should lean into what has always worked and build something great for a customer that they know well. Trust that all the tools are there now to make that vision come to a reality.

What would you pitch to make the digital transformation of the Canadian economy successful?

That is a great question. Canada is among the global leaders in the digital and internet economy transition. We have a great small business segment that is digitized as well as some great large companies that are leading the way in their industries. However, we are not yet the world leader and our position in that future is not yet secured. We must invest as a country in training our workforce and future leaders to be technically geared in understanding how the internet economy works. We have the opportunity to have generations of economic growth and a continued place of leadership in the world. We need deep investments in engineering programs and computer engineering as well as all the peripheral aspects of the internet economy. Investing there from an educational point of view is probably the most powerful thing we can do that will pay off over 50 years.