Canadian small retail businesses optimistic about growth and highly reliant on U.S. exports

Exports considered key for success but come with challenges, new data reveals

TORONTO, Oct. 11, 2018 /CNW/ - 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.

eBay Canada Retail SMB Optimism and Exporting Report (CNW Group/eBay Canada)

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%) of exporting retailers project their export sales will increase over the next five years (13% 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% vs. 49%, 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% vs. 38% in 2017). Further, though the report was fielded before the United States-Mexico-Canada Agreement was finalized, it is clear that Canadian retail SMBs value a continued trading relationship: Three-quarters (74%) of respondents believe that a trade deal with the U.S. is at least of some importance to the success of their business; jumping to 87% among those who currently export.

"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%) cite challenges to selling internationally. Shipping costs, (50%) efficient shipping options, (34%) trade policies and tariffs (30%), and Canada's cross-border trade relationship with the U.S. (30%) 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," said 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." 

KEY 2018 SURVEY FINDINGS:

Optimism higher among key groups

• The Index uses survey responses to create an overall optimism score out of 100, plotting on a scale from very pessimistic (0-15) to very optimistic (91-100) and based on four key statements:

1.	Overall, I am optimistic about my business prospects for 2018.
		• 80% agree; those under 35 years of age or have been in business for less than five years are among the most likely to agree.
2.	I believe there are new market opportunities for my business, either domestic or international.
			• 66% agree; women and those who sell online are among the most likely to agree.
3.	Canada is a good country in which to run a small or medium-sized business.
			• 77% agree; those in rural areas or whose business generated less than $100,000 CAD last fiscal year are among the most likely to agree.
4.	I am encouraged by new technologies and innovations that will have a positive impact on my business.
			• 75% agree; those from B.C. or who export are among the most likely to agree.
			• Among the most optimistic are:
				o  Women (78)
				o  SMBs with an online presence (78)
				o  SMBs who export (79, +1 point vs. 2017)
				o  Entrepreneurs under 35-years old (81)

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.

Rate of exporting increased significantly this year, particularly to the U.S.

• Overall, exports for Canadian retail SMBs has doubled year-over-year, with 57% of businesses currently selling internationally.
• Nearly half (47%) of exporting retailers project their export sales will increase over the next five years; 13% anticipating significant increases, and only 8% anticipating a decrease.
• The U.S. continues to grow as Canada's largest export market; there was a 48% 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.

International sales considered key despite significant barriers

• The majority (54%) of retail SMBs see increasing sales to markets outside of Canada as important for growth, but 93% cite barriers to expanding exports globally.
• Top export barriers cited include shipping costs (52%), lack of efficient shipping options (34%) international trade policies (30%) and U.S. trade relations (30%).
• 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 vs. 75, respectively).
• According to eBay Canada sales data, 99.9% 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% vs. 40%, respectively).
• eBay sellers are twice as likely as non-eBay sellers to indicate that international sales are performing well for their business (64% vs. 26%).
• Two-thirds (70%) of eBay sellers currently export to the U.S., versus 39% of non-eBay sellers.
• A quarter (25%) of SMBs on eBay who currently export to the U.S. see the majority of their overall revenue from this market – with 27% of SMBs projecting their majority of sales coming from the U.S. in 2019.
• Four out of five (80%) eBay sellers think a trade deal with the U.S. is important for their business, versus 53% of non-eBay sellers.

For more information, or to download the infographic, visit the eBay Canada Press Room at eBay.ca/pressroom.

About the eBay Small Business Optimism Index

Leger conducted a survey of 304 Canadian small retailers with <$13,000 in 2017 sales and a maximum of 99 employees online between August 10-22, 2018 with a margin of error of +/- 5.6 using Leger's online panel.

About eBay
eBay Inc. (NASDAQ: EBAY) is a global commerce leader including the Marketplace, StubHub and Classifieds platforms. Collectively, we connect millions of buyers and sellers around the world, empowering people and creating opportunity through Connected Commerce. Founded in 1995 in San Jose, Calif., eBay is one of the world's largest and most vibrant marketplaces for discovering great value and unique selection. In 2017, eBay enabled $88.4 billion of gross merchandise volume. eBay is visited by more than 8 million unique Canadians per month (comScore Media Metrix: August, 2018). For more information about the company and its global portfolio of online brands, visit www.ebayinc.com.

SOURCE eBay Canada

Nicole Macharacek, eBay Canada, 416.969.2581, [email protected]; or Amanda Federchuk, Ketchum Canada, 416.355.7410, [email protected]