The future of seamless commerce in Canada

Globally, the retail industry continues to undergo a significant transformation driven by technology and evolving consumer behaviours. As a result, retailers are leaning on seamless commerce to give customers a consistent experience across multiple touchpoints, whether in-store or online.

According to a new KPMG International¹ report on consumer and retail trends, Canada ranks fourth among eight major retailing countries on omnichannel solutions. While Canada has historically trailed behind other countries, like the United States, in this area, that’s beginning to change. However, despite the accelerated growth retailers in this country have experienced over the past three years, Canadian consumers continue to have high expectations for the future of retail.

For further insight into their specific markets, KPMG in Canada and KPMG US conducted consumer polls at the end of 2023: KPMG US Research 2023, survey of 2,000 consumers² and KPMG in Canada 2023 Consumer & Retail Survey³, conducted research with over 1500 consumers, respectively.

While the pandemic accelerated the move to online shopping, 67 per cent⁴ of Canadian consumers still prefer to shop in-store versus online. A similar storyline is unfolding in the United States, where 70 per cent⁵ of total retail sales are coming from brick-and-mortar locations.

Our neighbours to the south place less of an emphasis on product choice, and focus more on speed, convenience, and personalization when it comes to their e-commerce acceleration. For instance, 49 per cent of the 2,000 consumers in the U.S. cite convenience as the primary factor for shopping online, followed by product availability (37 per cent) and delivery speed (30 per cent). This is perhaps a sign of the larger availability of e-commerce experiences and products in the U.S.⁹

What can be noted for most countries is digital sales are seeing higher growth rates than in-store purchases in the post-pandemic era. In the U.S., the growth of e-commerce outpaced that of brick-and-mortar by one per cent in 2023. This benchmark can be used as a signal to Canada of how the retail landscape is changing.

Although the pandemic can be seen as a key driver in the adoption of e-commerce what has led to its sustainability? As millennials’ and Gen Z’s purchasing power grows and their proportion of the population increases, younger generations will persist in leading the expansion of online shopping. This is why retailers need to continue their innovation in the space.

In North America, ages 18-34 (Gen Z and millennials) expect their online purchases across all retailers to increase by 2026 while ages 55-65+ (baby boomers) expect their online shopping across all retailers to decrease by 2026. Consequently, e-commerce stands on the brink of further expansion, given that digital practices are inherently integrated into the life experiences of younger generations.¹⁰

Percent of respondents in the U.S. increasing online share of spend

While physical stores aren’t disappearing anytime soon, Canadian consumers expect a ‘phygital’ shopping experience, which seamlessly combines the service experience of in-store shopping with the product variety and convenience found online. It’s an area where Canadian retailers are often playing catch-up to their U.S. counterparts.

KPMG’s survey findings show that Canadians are frustrated with both in-store and online shopping experiences. Many Canadians say they prefer to shop in-person but find the in-store selection and merchandise “just doesn’t compare” to what they can find online. At the same time, 62 per cent are frustrated by the online shopping experience, complaining that products are not as advertised and returning merchandise is costly and inconvenient.¹¹

What is holding consumers back with online purchases?

67 per cent prefer to shop in-person, but the in-store selection and merchandise just doesn’t compare to what is available online.

62 per cent are frustrated by the online shopping experience, e.g., either the product is not what was advertised or returning merchandise is inconvenient or costs too much 

67 per cent think retailers need to think outside the box to replicate online that in-store experience

E-commerce capabilities like click and collect and return in-store are becoming must-have services for retailers to remain competitive. U.S. counterparts are taking it a step further, as the physical store operates as a point of sale and fulfillment point for products purchased digitally. For example, 80 per cent of consumers in the U.S. use the store as a fulfillment channel half of the time versus parcel delivery (30 per cent).¹²

But seamless commerce goes beyond that: Almost two-thirds (67 per cent) of consumers surveyed in Canada think that retailers need to “think outside the box” to replicate in-store experiences online, such as virtual reality dressing rooms with augmented reality and artificial intelligence that allow customers to see what an outfit looks like without physically trying it on.¹³

Live social commerce—which allows for real-time buying and interaction during a live video event—is another area where Canada is playing catch-up. This concept is already mainstream in China and most of Asia. In Canada, however, social media is used more for engagement and acquisition, rather than for transactions—though some retailers are experimenting with social commerce on ‘drops’ for new releases.

KPMG’s research found that most Canadians didn’t make purchases from social platforms over the past six months, and that’s not expected to change over the next few years. Indeed, over the next three to five years, only four per cent of Canadians say they intend to use social platforms more frequently to make purchases—while nearly five per cent expect to use them less frequently.

While online shopping isn’t expected to overtake in-store shopping in the next three to five years, it’s still growing. Gen Z and millennials expect their online purchases across all retail categories to increase by 2026. And while live social commerce isn’t yet a major factor, this could change as new seamless offerings come to market.¹⁴

Retailers will need to stay one step ahead by delivering consistent, personalized experiences, whether customers choose to shop in-store, on retail websites or via social commerce platforms. For some retailers, this could mean moving toward a ‘showroom’ concept where they can dramatically lower their occupancy costs, while consolidating inventory, reducing staffing needs, and improving digital experiences.

While the Canadian market still lags behind the U.S. when it comes to e-commerce footwear, one Canadian retailer found success with an omni-channel strategy, focusing on a mix of in-store and online sales. In Canada, 80% of the retailer's products are sold in physical stores, while 20% are sold through e-commerce, a figure expected to rise to 25% within three years. Notably, this is higher than the company’s U.S. e-commerce sales.

One of the retailer's executives, in an interview with KPMG, highlighted increased e-commerce purchases are partly due to the retailer's strong brand recognition within Canada. Additionally, that online sales often involve planned purchases online (versus spontaneous purchases in-store), including limited edition and exclusive products, contrasting with the more spontaneous nature of in-store purchases. Pre-pandemic, consumers were visiting stores with specific purchases in mind. That’s not the case anymore.

The retailer is also exploring social commerce, leveraging platforms like Meta for Shop storefronts and interactive purchasing features, and considering TikTok's potential as an acquisition channel rather than a direct sales channel.

Central to the retailer's strategy is the emphasis on seamless commerce and the necessity of an omnichannel approach, aiming for agility in a market where consumer preferences between essentials and treats fluctuate, leaving little room for products that don't fall into either category. The company's leadership believes that in such a dynamic market, building for agility is more practical than aiming for stability.

These days, an omnichannel strategy is table stakes. Canadian consumers still want an in-person shopping experience—the ability to touch, feel, and try on products before they make a purchase. But almost two-thirds are frustrated with the online shopping experience and want better ‘phygital’ options.

A framework that was developed in KPMG’s global report—the seamless commerce maturity index—analyzes how far along retailers in major markets around the world are in their journey of seamless commerce. The key takeaways for Canada from this index include:¹⁵