A firm believer in customer service, Carson Stong doggedly delivered groceries by horse and buggy throughout Depression-era Vancouver. So Cori Bonina figures that her great-grandfather would be proud of her efforts to tap the Internet on behalf of her family’s landmark grocery store. Almost four years after Stong’s Markets Ltd. first ventured on- line, its Web site offers 14,000 products to the 500 regular Internet customers who rely on its deliveries. And although Stong’s e-commerce division is not yet a money-maker, it now accounts for almost three per cent of sales for the 71-year-old firm. To cut costs, president Bonina is simplifying the process: clerks wielding price-scanners will transfer the products directly from shelves into delivery boxes instead of passing them through check-out. And she predicts that e-patrons will triple and profits materialize before the end of the year. “It’s a way of expanding our store without expanding the bricks and mortar,” she says. “Time is a vital issue for people. Almost 95 per cent of our on- line customers are new ones. I can see this business exploding in the future.”
To the visionaries like Bonina go the kudos. And the profits. All those gimmicky little dot-coms may have drowned in puddles of red ink. But the Internet is now an integral part of the economy. Major firms such as automakers purchase their supplies on-line, truck drivers crossing the continent with perishable or just-in-time shipments communicate through on-board computers, and grocery stores can take orders for everything from dairy goods to celery on-line. Or, as David Pecaut, chairman of the Canadian E-Business Opportunities Roundtable, says in a report to be delivered to Ottawa this week: “E-business matters more than ever because the new economy has become the whole economy. Technology is still driving much of the wealth creation in Canada.”
The report is the final output of a remarkable, voluntary task force of high-level business executives and federal officials who want Canada to be an e-commerce star. And while the document lacks the specific recommendations of its two predecessors, it is a pointed chronicle of how far Canada has come in the three years since the Roundtable’s inception — and how far it has to go. In particular, the report singles out three areas for attention:
Governments on-line: Provincial and federal jurisdictions have been slow to exploit the Net to deliver services remotely. On-line specialists, for instance, could guide rural family doctors as they perform surgery. And both levels of government must figure out how to export health-care and education services — such as university degrees obtained through on-line learning — in return for much-needed cash.
Help for start-ups: The good news is that venture capital spending dropped at a lesser rate in Canada than in the U.S. last year. But Canadian pension funds — which manage massive pools of money — have been reluctant to dabble in new enterprises, the report notes. Only 11 per cent of new Canadian venture capital came from pension funds in 2000 — compared with 40 per cent in the U.S.
That money can be vital. Three years ago, Toronto’s Paul Chen realized that companies could use e-mail to market themselves. He developed technology that allowed clients to go to his Web site and send out targeted promotions to their own customers. It worked. He sold Flo Network Inc. last year for US$51 million. But he couldn’t have got there without venture capital backing. “We had to grow as fast as possible because our competitor was growing very, very fast,” he says. “And we could not have done that without cash.”
Ottawa has been listening. John Eckert, managing partner of Toronto- based McLean Watson Capital Inc., praises successive budget measures that have lowered corporate and capital gains taxes, allowed individuals to roll over capital gains into new firms and changed the treatment of stock options to ensure that taxes are only paid when the shares are sold. Such measures, which previous Roundtable reports urged, sound like technical fiddles — but they could be critical over the next decade. “Canada will become a very popular place to invest,” says Eckert. “To me, this is a big green light that has to be communicated.”
Getting on the Net: Small and medium-sized firms are far slower to adopt e-commerce than their U.S. counterparts. In 2000, such firms in Canada made two per cent of their sales on-line — compared with 10 per cent for U.S. companies. “Somebody you compete with could decide they are going to expand their market through technology,” warns Michael Murphy, senior vice-president of the Canadian Chamber of Commerce, which has been aggressively prodding small businesses into the on-line world. “They could easily take your market share.”
The six-page Roundtable report comes on the heels of Ottawa’s discussion paper last month on innovation, which aims to boost research spending, increase the skilled labour pool — and help universities and businesses forge partnerships to develop new technologies. That document was delayed by the Sept. 11 terrorist attacks — and then plundered for ideas in the December budget. Its debut fell flat. So the Roundtable report injects life into the quest to ensure that Canada can compete in a rougher and tougher world. Over the next six months, Industry Minister Allan Rock will hone that campaign at regional summits with key economic players, concluding with a national summit in early November. “Governments cannot do this alone,” says Rock. “We want to know if our targets are aggressive enough. And frankly we want to know whether business, labour and academia are prepared to make the necessary commitments.”
The Roundtable’s report is a final contribution from a group that laid out much of Ottawa’s e-commerce strategy. Pecaut hatched the idea when he realized that Canada had the ingredients, such as telecommunications and software expertise, to be an e-commerce star — but lacked plans for everything from tax changes to strategic investments. He approached then industry minister John Manley, who jumped on the idea. “This issue is close to my heart,” Manley, now deputy prime minister, told Maclean’s. “The Roundtable created momentum, making e-business an important issue for government. You do not have many memoranda to cabinet that are signed by a dozen ministers. But we were able to produce that common view.”
The Roundtable will leave a legacy. The chamber of commerce will issue reports on how well smaller firms are adopting e-business. The Canadian Venture Capital Association will ferret out tax policies that discourage investment. Roundtable member Peter Nicholson, chief strategy officer at BCE Inc., says the group caught a wave when it tackled the glamorous, high-profile issue of e-commerce. “The policy landscape had not solidified: we had the excitement of pioneers,” he recalls. “This group made a helluva lot of progress — and e-business is not the only beneficiary.” The future may belong to Rock’s initiative — but the Roundtable pointed the way.