On-line paradox: Selling on-line is going down just as online sales are going up

There’s a bit of a paradox brewing in cyberspace the latest Statistics Canada report on e-commerce indicates.

Despite all the hype about the Internet economy, the number of businesses selling on-line is actually going down. Yet sales over the Internet are going up, particularly for the transportation and warehousing industries.

The total value of private sector sales over the Internet, with or without on-line payment, rose dramatically in 2000, while the proportion of businesses selling on-line fell, Statistics Canada’s Survey of Electronic Commerce and Technology, 2000 found.

Canadian businesses received $7.2 billion in customer orders over the Internet in 2000, up 73.4% from $4.2 billion in 1999. However, only 6% of businesses reported selling goods and services on-line in 2000, down from 10% in 1999. These 6% of businesses selling on-line accounted for one-quarter of all gross business income.

Statistics Canada reports that among the businesses that responded to the survey in both 1999 and 2000, for every two that started selling over the Internet in 2000, five stopped doing so. The value of 1999 sales for those firms that, in 2000, were no longer selling on-line was not much more than half the value of sales for new on-line sellers.

Despite the substantial advance, e-commerce sales still accounted for only 0.4% of total operating revenue in 2000, up slightly from 0.2% in 1999. Internet sales represented 2.6% of total operating revenue in private sector educational service industries, the highest share, followed by 1.5% for transportation and warehousing.

Large businesses were more likely to be selling over the Internet, and were responsible for a large proportion of on-line sales. In 2000, 31% of business enterprises with more than 500 employees sold goods or services over the Internet. In contrast, only 6% of businesses with 1 to 19 employees sold on-line. Business enterprises with more than 500 employees were responsible for 43% of sales over the Internet.

Overall, 20% of sales over the Internet were to consumers. Consumers accounted for 88% of Internet purchases in the arts, entertainment and recreation sector, and 73% in the accommodation and food services sector, the highest proportions. However, consumers accounted for only 49% of Internet sales from retail enterprises.

As well, 17% of e-commerce sales were to customers (businesses or households) outside Canada. In contrast, only 3.2% of Internet sales by retailers went outside Canada.

Measured by value, e-commerce sales were highest in manufacturing, followed by wholesale trade, transportation and warehousing, and retail trade.

Manufacturers sold $1.3 billion worth of goods and services over the Internet, 0.2% of their operating revenue. Most of the e-commerce sales in this industry came from transportation equipment manufacturers. Only 3% of manufacturers’ sales were to consumers, while 23% of their on-line sales went outside Canada.

Enterprises in the wholesale trade sector sold $1.0 billion worth of goods and services over the Internet in 2000, 0.3% of their total operating revenue. Machinery, equipment and supplies wholesalers accounted for most of the on-line sales in this industry sector. Twenty-seven percent of all e-commerce sales by wholesalers were direct to consumers, and 14% of all sales went outside the country.

Retailers attracted $890 million in on-line sales in 2000, 0.4% of their operating revenue. Sales by motor vehicle and parts dealers, as well as food retailers, accounted for over two-thirds of e-commerce sales. Enterprises classified as food and beverage stores may contain wholesale establishments that supply their franchisees as well as other food stores or restaurants. Consequently, less than 1% of e-commerce sales by these food store enterprises was to consumers. Overall in retail, consumers accounted for 49% of on-line sales.

For more information, or to enquire about the concepts, methods or data quality of the research, contact Greg Peterson (613-951-3592, or greg.peterson@statcan.ca), Science, Innovation and Electronic Information Division