05/14/2012 12:08 EDT | Updated 07/13/2012 05:12 EDT

Why Are Canadian Companies so Late to the E-Commerce Party?

Did you know that Canadians spend 25 per cent more time on the Internet than Americans do? It's true! Yet, companies and their online marketing campaigns have failed to take advantage of what is quickly becoming, or rather, has become, the best, easiest way to advertise.


After having spent 15 years working abroad, including seven years in Silicon Valley as an entrepreneur, angel investor and founding member of the C100 group, I'm thrilled to be back living and working in Canada. It's wonderful to reconnect with family and friends, rediscover the city of Montréal, and live in a wonderful community of great people.

It's also enjoyable to live in a country where citizens are so tech savvy. Indeed, Canadians are the most avid Internet users in the world. We spend more time on the Web, watch more online videos and use social networks more than anyone else on the planet. In fact, we spend 25 per cent more time on the Internet than Americans.

I was surprised to find that Canadian companies have yet to view this as a significant opportunity for growth. While Canadians spend more time online each week than they do watching television (or listening to the radio, or reading newspapers and magazines), Canadian companies spend less than one fifth of their advertising dollars online, favouring newspapers and television disproportionately. Worse, a lot of the money they do spend online is not being spent effectively.

Digital marketing can hold significant advantages over traditional advertising because it is highly measurable and interactive. It can also be complementary to offline advertising; as recent studies have demonstrated, online ads amplify the effects of offline messages. Unfortunately, it seems that most Canadian companies still treat advertising online as a secondary measure, a box they need to tick, but one they don't truly understand.

This lack of digital understanding is putting Canada at a competitive disadvantage. The Internet is causing economic borders to disappear, opening up a global marketplace for any business that wants to compete. Canadian companies' reluctance to adapt to this new reality risks impacting their bottom line, and may also restrict their ability to innovate and compete in the world market.

Since e-commerce is only a small part of the economy in Canada today (it's less than two per cent of all retail sales, compared to 15 per cent in the UK), Canadian companies have made the mistake of sitting on the sidelines, failing to understand that consumers today are making most decisions on the web before purchasing nearly anything.

While Canadian retailers still rely on printed circulars to reach their customers, the best-in-class retailers around the world have developed sophisticated Internet marketing strategies that are more powerful and speak to customers at the "moment of truth," when they are researching on the Internet. For instance, Macy's now sells two billion dollars of merchandise online, and they have discovered that every dollar spent online influence six dollars in purchases in stores within 10 days. As a result, their same-store sales are up more than five per cent this year in a tough economy.

The good news is that it's not too late to remedy this problem. At Google Canada, we have tested this approach with a few key companies, and have seen immediate results. Over the past few months, Quebec retailer Archambault significantly increased its investment in online marketing. As a result, online sales grew 25 per cent and, more importantly, in-store sales grew seven per cent year over year for the categories of products featured in their online ads. Over 12 weeks, Archambault realized a return on their marketing investment of close to 360 per cent.

There are three key things that Canadian companies should be doing immediately to step up their engagement in the digital economy:

1. Ask tough questions: Every dollar of marketing spent should be made accountable. It's no longer enough to say that an advertising campaign was good for "branding". What were the measured results How do these results compare to what could have been achieved online? Companies that build a culture of marketing performance and measurement will win.

2. Start testing today: One of the greatest advantages of digital marketing is that it can be tested quickly and inexpensively. Companies should immediately start testing different digital marketing tactics (search, display, video, social, mobile, etc.) and focus on the initiatives with the highest payback.

3. Study international peers: Canadian companies should examine the digital strategies of their best-in-class peers from markets where the digital economy is more fully developed, such as the U.S. and the U.K. By doing so, they can avoid the mistakes other companies made in the early days of digital marketing, and adopt their best practices here at home.

At Google, we like to say that it's never too late to be early. Well, it's no longer early, and Canadian companies are in danger of being very late to the party.