SIZE OF CANADIAN ON-LINE E-COMMERCE COMMUNITY NOW 12.9 MILLION

NEW STUDY ESTIMATES CANADIANS SPENDING UP TO $1.3 BILLION ON INTERNET E-COMMERCE PER ANNUM

VAST MAJORITY (90%) OF CANADIAN ON-LINE SHOPPERS HAVE APPETITE FOR CANADIAN WEBSITES TO MAKE PURCHASES, BUT END UP GOING ELSEWHERE BECAUSE OF LACK OF CANADIAN SITES: FOUR IN TEN (38%) ACTUALLY PURCHASE FROM A CANADIAN COMPANY

SIZE OF CANADIAN ON-LINE E-COMMERCE COMMUNITY NOW 12.9 MILLION

This National Angus Reid/Deloitte & Touche poll is based on 1,157 web-users on the Angus Reid Group Internet Panel. Panelists are chosen through random telephone surveys conducted on an on-going basis across Canada. In all, two thousand panelists were invited to participate in the poll therefore acquiring a response rate of 60% between February 15th and March 1st. These data are statistically weighted to reflect the population proportions of on-line users by length of access to the Internet, regional distribution of established on-line users, as well as demographics such as age, sex, and income. With a national sample of 1,157 one can say with 95 percent certainty that the overall results are within +2.9 percentage points of what they would have been had the entire population of Canada's established on-line users been polled. The margin of error will be larger for sub-groupings of the survey population.

E-commerce has become a dominant theme in both the mainstream media and trade publications in recent months. In fact, e-commerce transactions have an estimated worth in Canada of approximately $1.1 to $1.3 billion yearly. In total, the Canadian on-line e-commerce community is calculated to be 12.9 million - the first ever Canadian-based on-line expenditure figures. Canadian on-line shoppers (90%) look for Canadian websites to make purchases over the Internet. The fact that only 38% actually make their purchases from Canadian companies is indicative of the potential growth in this industry for Canadian-owned companies. Loyalty is another piece in the e-commerce puzzle, as nearly three quarters (72%) say they will purchase from the same merchants in future.

The following are the highlights of an Angus Reid Group/Deloitte & Touche web-based survey conducted between February 15th and March 1st, 1999 among 1,156 panelists from the Angus Reid Group Internet Panel. With a national sample of this size, one can say with 95 percent certainty that the overall results are within +2.9 percentage points of what they would have been had the population of established on-line users been polled.

Spending On-line

Average annual expenditures are significant. With an average spending of $422 in the past 12 months, e-commerce expenditures in Canada are estimated to be between $1.1 and $1.3 billion in 1998.

• This average is driven upwards by a small proportion of individuals (6%) who spent over $1,000 in the past year.
• Among those who have ever made a purchase, a relatively small proportion have purchased only once on-line (18%) in the past year, and 39% have purchased four or more times.

The past month of expenditures and how recently the last purchase was made also provide some indication as to the level of growth expected.

• Nearly seven-in-ten indicate that their most recent transaction was in the last three months.
• Average spending in the past month was $55, which annualized equates to $660.

E-Commerce Satisfaction and Loyalty to Familiar Websites

Satisfaction with various elements of the purchasing process is very high, with less than 10% providing dissatisfied scores (less than 4 on a ten-point scale).

• 86% indicate they are very satisfied (8 to 10 on a 10 point scale) with the convenience of on-line purchases.
• Eight in ten (78%) are very satisfied with the ease of conducting the transaction, while seven in ten (72%) indicate they have been very satisfied with the quality of the product ordered.
• Experienced on-line users provide higher ratings on cost-savings, perhaps indicating that are more convinced that they are receiving it, or they have simply developed better shopping strategies.

An analysis of spending levels indicates the extent to which experienced users are driving the market.

• Average expenditures of experienced users are almost five times higher than for new users, and nearly three times higher than users who have been on the Internet from one to three years.
• Although experienced users represent only 26% of Internet users, they represent 40% of on-line transactions and 38% of total e-commerce expenditures in the past year

The vast majority (90%) of Canadian on-line shoppers consciously look for Canadian websites when on-line shopping, but relatively few actually conduct their transaction with a Canadian company (38%).

• Loyalty to individual web sites that provide e-commerce options is high, with nearly three-quarters (72%) indicating that they will purchase from the same merchant in the future.
• America is taking the lead with on-line purchasing, with the majority of most recent transactions being completed on a USA-based site. This has significant implications for on-line providers in Canada, who are passing up potential income simply because of a lack of availability of Canadian sites.

The potential for growth of e-commerce is evident given the rather narrow set of goods and services that are available on the Internet at this point in time.

• Over four-in-ten transactions are computer-industry related, with purchases of software leading all other categories by a significant margin (30% of the most recent transactions); Internet services (4%) and Hardware (3%) also included in this category.
• The other broad category is print materials - books (19%) and information (2%) - followed by CD's (8%), and tickets (airline/concert/rail - 5%).

High Levels of Satisfaction with On-line Shopping

The main advantages of on-line shopping are not only related to convenience (72%), but there are significant tangible competitive advantages relative to retail shopping.

• These include accessibility to the global market of products and services - to items that are not available locally (56%) or only available on the website (26%).
• There is also a perception and expectation that prices are cheaper on-line (33%), that one doesn't have to put up with sales agents (20%), and that delivery is faster than mail or phone ordering (17%).

Website Security

Website security continues to be a crucial issue for on-line shoppers.

• The majority (58%) indicates that their last transaction was secure, and of that group, 73% would not have made the transaction if that weren't the case.

Likelihood of Purchasing On-line In Future

Past on-line purchasers are convinced that this is a purchasing behaviour that they will repeat -84% say they will definitely/probably buy on-line in the future. Future spending on-line will be driven to a large extent by those who have shopped on-line in the past, but never actually made a purchase (23%). However, this group remains somewhat skeptical, with only 41% committing to "probably'' buying on-line in the future, and 26% committed only to saying they "might or might not".

• The 24% of Internet users who have never comparison-shopped or purchased on-line remain unlikely to do so.

Barriers to On-line Purchasing

Despite the expert's assurance of security and privacy of on-line transactions, this by far remains the single largest barrier to e-commerce.

• Nearly 90% of past shoppers and those who have never shopped or purchased indicate that this is the main barrier. Even among experienced on-line purchasers, this is the number one barrier.
• Other major concerns relate to the intangible nature of on-line purchasing (64%), concerns about recourse (58%), and the reputation of merchants (44%).

For further information, please contact:

Steve Mossop
Senior Vice President
Angus Reid Group
(604) 257-3200