E-commerce posted a big gain in 2003 for the fourth year in a row, but online sales still accounted for less than 1% of total operating revenues for private businesses.

Combined private and public sector online sales in Canada soared almost 40% to $19.1 billion, following a 27% jump in 2002. The gains were driven by an increase in domestic sales of over $5.7 billion.

Private firms accounted for the vast majority of sales, $18.6 billion. Online sales by public sector enterprises rebounded from a decline in 2002, jumping 56.3% to $511.4 million.

About 7% of private sector firms sold goods or services online last year, virtually unchanged from the year before. These firms accounted for 29% of gross business income in Canada.

Internet sales, however, are only one key element of the e-commerce picture. There are many other important aspects to consider when examining technology access and use by Canadian firms. Websites, high-speed Internet access, purchasing, intranets and extranets are also key measures of business connectivity.

Broadband catches on quickly

A major factor in rising e-commerce, particularly in the private sector, is the adoption of high-speed access to the Internet. In 2003, two-thirds (66%) of all private companies used broadband to connect to the Internet, up from 58% the year before, and only 48% in 2001.

The use of high-speed Internet access enables many other technologies to be utilized more effectively. The effectiveness of a firm hosting a website, selling online or having an intranet or extranet all depend on broadband Internet.

Both broadband access and online sales are concentrated in large private companies, those with more than 500 employees. Of these large firms using the Internet, 95% had high-speed access, and accounted for 45% of online sales in 2003. One out of every four large firms sold goods or services online.

Domestic online sales up, foreign markets off

Domestic sales increased 55.2% last year to $16.6 billion, accounting for all of the growth in online sales. Sales for export fell slightly from $2.9 billion in 2002 to $2.4 billion in 2003.

As a result, the domestic market accounted for 87% of total sales, up from 78% in 2002. The share headed to foreign markets fell from 22% to 13% in 2003, continuing a trend from previous years.

Manufacturers accounted for the highest value of exports, shipping $753 million of online sales outside the country, about 30% of their total online sales.

The dollar value of business-to-consumer sales rose 51% to $5.5 billion in 2003. Business-to-business sales reached $13.1 billion, up 35.2%. About 30% of the value of online sales last year was to consumers, up from 27% in 2002, and 22% in 2001.

Firms in retail trade sold $1.7 billion in goods and services online to consumers, the largest volume. This represented 82% of their total online sales. Although the arts, entertainment and recreation sector sold only just over $160 million online to consumers, this accounted for 92% of their total online sales, the highest proportion of any sector.

Online sales highest in the wholesale trade sector

In total, the value of e-commerce sales was highest in wholesale trade for the third straight year. It was followed by transportation and warehousing, manufacturing and retail trade. In 2003, these four industries accounted for 67% of e-commerce sales in Canada.

Firms in wholesale trade sold $4.5 billion worth of goods and services over the Internet in 2003. Still, this accounted for only just over 1% of their total operating revenue. In 2003, 93% of e-commerce sales by wholesalers were to other firms.

Of companies that do not sell over the Internet, about 47% said the largest obstacle was that their products do not lend themselves to Internet transactions, although this proportion was down marginally from last year.

More than one in three firms that do not sell online said e-commerce was incompatible with their current business model, and they would prefer to follow their existing strategy. Other concerns included security issues and the cost of creating and maintaining an e-commerce-enabled website.

Continual increase in proportion of firms purchasing online

While the proportion of firms selling online remains relatively low, the proportion of firms making purchases online continued to grow rapidly. About 37% of firms made purchases online in 2003, up from 32% last year and more than double the proportion that did so in 2000.

Businesses that made purchases online accounted for 68% of all gross business income nationally.

The proportion of businesses purchasing over the Internet was highest in professional services (60%), while 56% of information and cultural industries made purchases over the Internet.

More websites come online

In 2003, about 34% of firms had a website, up slightly from 31% in 2002. These businesses accounted for 85% of all gross business income in Canada. Websites were becoming more complex and sophisticated, as firms realize the importance of online access.

Large firms are more likely to have advanced features necessary for e-commerce on their website than small firms. Nearly all those with 500 or more employees used broadband, making it easier to adopt these features.

Such features include interactivity, a secure portal for collecting information and digital products and services that can make a website much more functional. Both costs and specific knowledge are involved in setting up and maintaining a site with these capabilities.

Industrial sectors with the highest proportion of enterprises with a website were educational services, and information and culture. More than 70% of firms in the educational services sector had a website.

While only 61% of firms in information and cultural industries had a website, they accounted for 97% of the sector's gross business income. This suggests that only the smallest firms in this sector do not have a website.

Basic technology use continues to rise

By 2002, large firms had almost universally adopted all basic information and communication technologies (ICTs). However, the overall percentage of firms using basic ICTs rose steadily as small firms continued to adopt ICTs such as e-mail and Internet.

In 2003, 78% of firms used the Internet, up from 76% the year before. Firms that used the Internet accounted for 97% of gross business income.

Three-quarters (74%) of firms used e-mail, up from 71% in 2002. Most of the growth in basic ICT use was a result of small firms adopting these technologies.

Canada's public sector has fully embraced ICTs, with almost universal use of e-mail, Internet and websites. Nearly 93% of public-sector firms had a website in 2003, up from 88% in 2002.

For the fourth consecutive year, nearly 100% of firms in the public sector used both the Internet and e-mail.