Electronic commerce and technology

Online sales by Canadian companies and government departments grew substantially for the fifth consecutive year in 2004, but e-commerce still accounted for less than 1% of total operating revenues for private businesses.

Combined private and public sector online sales increased 49.7% to $28.3 billion. Online sales by private firms increased 45.5% to $26.4 billion, while those by the public sector more than doubled to $1.9 billion.

Private sector firms accounted for 93 cents of every dollar of goods and services sold online, while the public sector accounted for only 7 cents.

Electronic business is still concentrated in large firms. Only 7% of private companies engaged in e-commerce last year, unchanged from 2003. These firms represented 27% of gross business income in Canada.

Data from the survey also show that almost three-quarters of Canadian firms were using high-speed (broadband) Internet in 2004, up from just under one-half in 2001.

Business-to-business sales drive growth

A large proportion of the gains in e-commerce last year resulted from increased sales from one business to another, rather than sales to households.

Sales from business to business amounted to $19.8 billion, which represented about 75% of total e-commerce by private firms, up from only 68% the year before.

For many firms, e-commerce is one of many steps involved in fully integrating business practices using the Internet. The majority of online purchases occur between businesses because the potential economic gain is the greatest for them.

Sales from one business to another are still concentrated in large, private sector companies. In 2004, these large firms accounted for 63% of business-to-business sales. Smaller retailers were more likely to sell to households.

Sales to households accounted for less than 24% of the value of online sales by large firms. Small firms, those with fewer than 20 employees, reported that 41% of the value of their online sales was to households.

Wholesale trade sector still leads e-commerce

For the fourth consecutive year, the wholesale trade sector accounted for the largest value of e-commerce sales. Wholesalers sold just over $6 billion worth of goods online last year, nearly one-quarter of total private sector e-commerce.

Firms in the transportation and warehousing sector were second with about $4.6 billion in sales, or 17% of the total.

Four sectors alone (wholesale, transportation and warehousing, manufacturing and retail trade) accounted for two-thirds (68%) of online sales by private companies in 2004, virtually unchanged from the year before.

Firms in manufacturing and wholesale trade were most likely to engage in online sales between enterprises. In 2004, 95% of online sales made by the manufacturing sector were between businesses, as were 86% of online sales made by firms in wholesale trade.

Firms in wholesale trade had online sales of just over $5 billion to other firms, an increase of just over $2 billion from 2003.

Even with the increased focus on the danger of viruses and other attacks linked to the Internet, the number of firms citing it as a reason not to get involved in e-commerce did not increase over the previous year. Fewer than one in five firms that used the Internet, but did not sell, listed it as a barrier.

Web site adoption and complexity continues to increase

The use of Web sites and their complexity continues to increase among Canadian companies.

In 2004, 37% of Canadian firms had a Web site, steady growth from 34% in 2003 and 32% in 2002. These Web sites have developed in capability also, as firms now offer more features than ever.

Nearly 8 out of every 10 large firms had a Web site last year. These large firms were more likely to have incorporated advanced features, such as secure portals to collect information, interactivity and digital products for the user.

For the second year in a row, the industrial sector with the highest proportion of enterprises with a Web site (78%) was educational services. The information and cultural industries were in second place with 71%.

Just over one-half (51%) of firms in the wholesale trade sector had a Web site, up from 45% a year earlier.

Broadband use and online purchasing rise

The proportion of Canadian firms using broadband Internet keeps rising. In 2004, 72% used high-speed Internet, up from 66% in 2003, and a large jump from less than half (48%) in 2001.

Firms using broadband technology are more likely to adopt other advanced information and communication technologies (ICTs) such as Web sites, Intranets, Extranets and online sales.

Companies are also moving towards making more purchases online. In 2004, 42% of firms made purchases online, up from 37% in 2003. Large firms were most likely to do so.

Basic technologies reach saturation point

By 2002, basic ICTs such as computer use, e-mail use and Internet access had been adopted almost universally by all but small private firms. Even so, the overall proportion of firms using these ICTs has crept up slightly over the past two years, as smaller firms continue to implement them.

In 2004, 82% of firms used the Internet, up from 78% in 2003. It appears that only the smallest firms do not use the Internet, as those that do accounted for 97% of gross business income.

Just over three-quarters (77%) of firms used e-mail, up from 74% in 2003 and 66% in 2001.

The public sector, comprised almost exclusively of large organizations, had high rates of use for all basic technologies. In 2004, use of Internet and e-mail was universal in the public sector, while 93% of public organizations also had a Web site.

Available on CANSIM: tables 358-0007 to 358-0011 and 358-0014 to 358-0016.

Definitions, data sources and methods: survey number 4225.

For more information, or to enquire about the concepts, methods or data quality for this release, contact Bryan van Tol (613-951-6663, bryan.vantol@statcan.gc.ca) or Mark Uhrbach (613-951-2856, mark.uhrbach@statcan.gc.ca) Science, Innovation and Electronic Information Division.