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Canadian Small Retail Businesses Optimistic About Growth

October 15, 2018

Author: HIR Staff

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Despite 2018 bringing new challenges and uncertainties to the Canadian small- and medium-sized business (SMB) community, eBay Canada's annual ‘SMB Optimism Index’ report reveals that optimism among small retailers is on an upward climb, hitting 76 points – a consistent one-point-per-year increase since the Index launched two years ago.

The report, which explores business growth trends, challenges, and opportunities among Canadian retail SMBs, reveals that those who export are among the most optimistic, scoring 79 points on the Index. Nearly half (47 per cent) of exporting retailers project their export sales will increase over the next five years (13 per cent anticipating a significant increase), and they are far more likely than their non-exporting counterparts to believe that there are new market opportunities for their business, both international and domestic (79 per cent versus 49 per cent, respectively).

Selling specifically to the U.S. plays a critical role for retail SMBs, with a quarter of exporters reporting the majority of their sales coming from our neighbours to the south, and the rate of SMBs exporting to the U.S. increasing by 50 per cent since last year (57 per cent versud 38 per cent in 2017). Further, though the report was fielded before the United States-Mexico-Canada Agreement (USMCA) was finalized, it is clear that Canadian retail SMBs value a continued trading relationship with three-quarters (74 per cent) of respondents believing that a trade deal with the U.S. is at least of some importance to the success of their business; jumping to 87 per cent among those who currently export.

Key To Unlocking Growth Opportunities

“Exporting is key to unlocking growth opportunities, and technologies like eCommerce and global marketplaces like eBay are democratizing global trade like never before – there is good reason for increased optimism among the Canadian SMB community,” says Andrea Stairs, general manager of eBay Canada & Latin America. “Given its size, proximity, and similarities to Canada, the ability to tap into U.S. market demand is particularly vital for Canadian SMBs looking to scale.” 

While 54 per cent of SMBs believe increasing exports is important for continued business growth, the vast majority (93 per cent) cite challenges to selling internationally. Shipping costs (50 per cent), efficient shipping options (34 per cent), trade policies and tariffs (30 per cent), and Canada's cross-border trade relationship with the U.S. (30 per cent) were cited as the most common barriers. Further, out of all general businesses challenges cited by SMBs, the only issue that increased in probability in 2018 was exporting barriers and border policies.

“As an enabler of international trade, eBay Canada has long been an advocate for reducing the frictions faced by SMBs looking to engage in the global economy,” says Stairs. “Canadian retail SMBs are thinking globally and have the tools and technology available to them to reach customers around the world, but some fundamental infrastructure and policy issues persist that constrain their ability to participate in global trade.”

Optimism Varies Across The Country

British Columbia is the most optimistic province, with an Index score of 80 and the biggest increase since last year (up six points from 2017). The Prairie provinces saw the largest decline in optimism this year, with Saskatchewan and Manitoba dropping to a score of 71, and Alberta dropping to 68. Rural-area businesses gained three points to 77, now on par with urban and suburban respondents' optimism score.

Overall, exports for Canadian retail SMBs has doubled year-over-year, with 57 per cent of businesses currently selling internationally. Nearly half (47 per cent) of exporting retailers project their export sales will increase over the next five years; 13 per cent anticipating significant increases, and only eight per cent anticipating a decrease.

The U.S. continues to grow as Canada's largest export market; there was a 48 per cent increase in the number of retail SMBs exporting to the region from last year alone. Of those businesses currently exporting, one quarter see the majority of their sales coming from the U.S., with retail SMBs projecting similar rates for 2019. Some of the most likely to export to the U.S. include businesses located in Ontario or in urban areas, and entrepreneurs under the age of 35 or born outside of Canada.

The majority (54 per cent) of retail SMBs see increasing sales to markets outside of Canada as important for growth, but 93 per cent cite barriers to expanding exports globally.

Top export barriers cited include shipping costs (52 per cent), lack of efficient shipping options (34 per cent) international trade policies (30 per cent) and U.S. trade relations (30 per cent).

SMBs have many challenges in terms of growing their business in general, but the only one that increased in probability since 2017 was exporting barriers and border policies.

Strong Optimism Among eBay Sellers

Retailers that sell on eBay scored higher on the Optimism Index than those that don't use the online marketplace (80 versus 75, respectively). According to eBay Canada sales data, 99.9 per cent of SMBs export, and to an average of 18 international markets. eBay sellers are more likely than those who don't use the platform to believe that their export sales will increase over the next five years (60 per cent versus 40 per cent, respectively). As well, eBay sellers are twice as likely as non-eBay sellers to indicate that international sales are performing well for their business (64 per cent versus 26 per cent). Two-thirds (70 per cent) of eBay sellers currently export to the U.S., versus 39 per cent of non-eBay sellers.

For more information on the ‘SMB Optimism Index,’ visit eBay

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