View the most recent version.

The Daily. Thursday, August 10, 2000

E-commerce and business use of the Internet

A majority of Canadian businesses has embraced the use of technologies such as e-mail and the Internet. One out of 10 companies used the Internet to sell goods and services in 1999, and these sales amounted to 0.2% of their total economic activity.

The total value of customer orders received over the Internet, with or without on-line payment, was $4.4 billion in 1999. Of this total, $4.2 billion was generated by the private sector. This amount represents only 0.2% of total operating revenues during the year, according to the first-ever national snapshot of electronic commerce and the use of information and communications technologies.

In fact, in no industrial sector were estimated Internet sales higher than 1.5% of that sector's total sales. Internet-based sales were 1.3% of total operating revenue in accommodation and food services, 1.0% in information and cultural industries, 0.8% in professional, scientific and technical services, and less than 0.5% in all other industrial sectors.

Manufacturers received orders worth just over $900.0 million on the Internet, about 22% of overall private sector Internet-based sales. This represented 0.2% of manufacturing shipments in 1999.

Note to readers Data from the Information and Communications Technologies and Electronic Commerce Survey are available today. This new survey provides the first set of comprehensive data on the extent of computer use, of Internet use and the availability of Web sites in the private and public sectors. Survey results also provide comparable information on the magnitude of e-commerce - Internet-based commercial transactions - across industry sectors. It is possibly the first economy-wide survey in the world to measure the value of e-commerce. The survey was conducted from October 1999 to March 2000 and collected information for 1999. It covered the entire economy, with the exception of construction, local governments, production of crops and animals, fishing, hunting and trapping. About 23,000 firms received the questionnaire. E-commerce is defined as Internet-based commerce. Respondents were asked to report the value of orders received over the Internet, extranets and electronic data interchange (EDI) on the Internet, regardless of whether the transaction was made with or without on-line payment. Excluded from this were sales via EDI on proprietary networks and other electronic networks. Automatic teller machine transactions are excluded, as are the volume of financial transactions conducted over the Internet. Included are the service charges received for conducting transactions over the Internet.

Retailers, who had Internet sales worth $610.6 million in 1999, and who accounted for 15% of total Internet sales, were in second place. This represented 0.2% of total retail sales in 1999. In the United States, retailers sold US$5.2 billion worth of goods and services on the Internet during the fourth quarter of 1999, and according to the Census Bureau of the Department of Commerce. This represented 0.6% of total sales in the U.S. retail sector for the fourth quarter of 1999.

Information and cultural industries accounted for 13% of all Internet based-sales, the accommodation and food service sector 10%, and professional, scientific and technical services sector just under 10%. All the other industrial categories combined accounted for the remaining 30% of Internet-based sales.

One-fifth of firms in the information and cultural sector made sales over the Internet

While the proportion of Internet-based sales is low, the proportion of enterprises that offers goods and services over the Internet is significantly higher. Ten percent of private sector businesses reported that they used the Internet to sell goods and services in 1999. These enterprises constituted 17% of economic activity for the private sector, as measured by total operating revenue.

Leading the way was the information and cultural industries sector, in which 20% of businesses used the Internet to sell goods and services. The information and cultural industries account for 3.1% of total operating revenue in the economy. This sector includes businesses involved in publishing, broadcasting, telecommunications and information services and data processing. Some are instrumental in providing the services necessary to use the Internet, such as telecommunications carriers, broadcasters and information service providers.

About 17% of businesses in both the private educational services sector and administration and support services sector used the Internet for sales, the second highest percentage. In contrast, only 1% of companies in the forestry, logging and support activities sector did so.

Many factors may contribute to this variability. For example, an industry's way of doing business may preclude the use of the Internet as a sales channel. In addition, the Internet is an open communications network, in contrast to proprietary networks over which several organizations have been conducting business for some time using electronic data interchange. Proprietary networks may be perceived to be more secure.

In the public sector, 14.5% of institutions used the Internet to sell goods or services. A higher percentage of institutions in the educational services sector used it, followed by federal and provincial governments.

A greater proportion of firms made purchases over the Internet than sales

On average, a greater proportion of businesses used the Internet to buy goods and services rather than to sell. In the private sector, 14% of businesses used the Internet for purchasing; these firms accounted for 25% of total operating revenue. Again, ranking first was the information and cultural industries sector, where half of firms reported using the Internet to buy goods or services.

Three industrial sectors reported a significantly greater use of the Internet to sell than to purchase goods: accommodation and food services, administration and support services, and finance and insurance. This suggests that enterprises in the industries that are selling over the Internet have invested resources to facilitate Internet sales, or they have some clients or suppliers who prefer Internet transactions to traditional means. The accommodation and food services sector includes hotels, resorts, casino hotels and restaurants. The administration and support sector includes employment services, telephone call centres, travel agencies and tour operators. Finance and insurance includes banks, securities brokerages, insurance carriers and pension funds.

In the public sector, 44% of institutions used the Internet to buy goods and services. The Internet was more commonly used for purchasing than for selling in all parts of the public sector. About 15% of institutions in the public sector reported using the Internet for buying essential inputs.

Just over half of private sector businesses used the Internet

Fifty-three percent of private sector enterprises used the Internet in one form or another in 1999. These enterprises accounted for three-quarters of total operating revenue. As well, 53% used e-mail, and 22% had a Web site. The enterprises with a Web site accounted for 45% of economic activity. This suggests that larger firms are more likely to have a Web site.

In contrast, more than 95% of institutions in the public sector used the Internet, including health care institutions, education services and federal and provincial governments. About 97% used e-mail and 69% had a Web site.

One-fifth of businesses had a Web site

While 22% of private sector firms had a Web site in 1999, some sectors were more likely to have a Web presence. The information and cultural industries sector led the way, with 62% of enterprises. About 44% of firms in the private educational services sector had a Web site, including private elementary schools, private technical and trade schools, and language schools, followed by just 32% of the manufacturing sector.

In the public sector, 69% of institutions had a Web site. The public educational services sector led the way; 98% of institutions had a site. This sector includes public elementary and secondary schools, community colleges and universities. Eighty-eight percent of institutions in the public administration sector had a Web site.

Far greater proportion of public sector employees had access to the Internet

Fifty-nine percent of employees in the public sector had access to the Internet in 1999, more than twice the proportion of 28% in the private sector. The public sector is characterized by institutions with a larger number of employees than the private sector. The proportion of employees with access to the Internet is higher for large enterprises - public or private - than small enterprises.

Among institutions in the public educational services sector, 90% of employees had access to the Internet, while in the federal and provincial governments 82% of employees had access.

In the private sector, 74% of employees in the information and cultural industries sector had access, followed by private educational services (66%) and professional, scientific and technical services (60%).

In contrast, 13% of employees in the retail trade sector had access to the Internet and 7% in accommodation and food services. These industries also reported a low incidence of employees who had access to e-mail and personal computers.

A working paper tabulating results from key questions in the survey will be released soon. For more information, or to enquire about the concepts, methods or data quality of this release, contact Cathy Bakker (613-951-2929), Science, Innovation and Electronic Information Division.

Use of personal computers, e-mail and the Internet

Value of Internet sales

Use of the Internet, Web presence and use of the Internet to purchase and sell

Percentage of employees with access to personal computers, e-mail and the Internet