Industry Committee on May 28th, 2013

[Mary Anita Bezeau]

It was launched a year ago, in November.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Great.

How do we, or you, help SMEs become aware of this program?

[Mary Anita Bezeau]

There are two mechanisms primarily.

We have our front-line account managers, who are lending officers throughout the country. We have roughly 400 account managers who are meeting every day with small businesses. So they would introduce these loans to SMEs in this way.

In addition, we use Smart Tech as a vehicle. We're using social media and other means to promote Smart Tech, and then entrepreneurs can learn more about our financing and consulting services that way.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Great.

Why do you think demand for this lending program has been brisk, as you describe?

[Mary Anita Bezeau]

I think there is a need that is not being serviced in other ways, the need for financing related to technology. So there's been a gap for this kind of financing, particularly on the low end.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Great.

In your presentation you indicated that the barriers to increased adoption of digital technology amongst SMEs are threefold: complexity, risk aversion, and shortage of time. How do you know that? Have you surveyed SMEs? What has led to that conclusion?

[Mary Anita Bezeau]

This is based on our engagements with clients, our experience with the clients that work with BDC. If I start with the 300 consulting engagements that we've done, for the most part they tell us they don't know where to start and are not comfortable with a lot of the language related to technology adoption. So it's an aversion to not knowing where to start or when, and not being entirely sure how to do it.

In many cases they have other conflicting priorities.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Great. Thank you very much.

Was any concern expressed about the regulatory environment through any of these consultations?

[Mary Anita Bezeau]

Not that I could comment on.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

All right.

Mr. Kiru from TABIA, in your slide presentation you indicated that “40% to 60% revealed that they priced products while inside the store and then left to purchase elsewhere.”

How are people purchasing in this case and what does this say about changing human or consumer behaviour?

[John Kiru]

What they're purchasing and how they're purchasing is effectively “showrooming”. That is the terminology commonly used, where people like Amazon encourage you to go to a retail brick and mortar store, try on that shirt or piece of equipment and then effectively scan the bar code. They will provide even a further discount than the best possible price you can find online. That's the way people are purchasing; it is becoming a showrooming option out there.

They're finding that it's not just main street that's facing this. That's why a lot of the multinationals have gotten into the e-commerce world. Most of them have a site where you can go shopping, etc.

You're absolutely right that the technology has offered great opportunities and advantages to shopping on your own time. Take a look at Seoul, Korea, where you can stand at a subway station and on the wall immediately behind you is a supermarket aisle made up just of a photograph that you scan with your phone to make a purchase. You literally scan Coca-Cola and order six Cokes and any of the other supermarket initiatives, then you cash that purchase out through your phone and that material is delivered to you the next day, or sometimes even the same day. It's that convenience, the importance of personal time where people will do this stuff while waiting for that new train, that's all coming down the road.

Once you've got the technology and once you've got the—

[The Chair, Conservative, David Sweet]

Thank you, Mr. Kiru. That's all the time we have.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

I had one final great question.

[The Chair, Conservative, David Sweet]

I'm sorry, but that's all the time we have.

Mr. Harris now, for seven minutes....

[Dan Harris, NDP, Scarborough Southwest, ON]

I'm sure I won't get to ask all of my great questions either. I'll be sharing my time with Monsieur Lapointe.

Thank you for coming today.

Mr. Geist, you mentioned that there have been many studies done. I think I detected some frustration in your voice, that perhaps there has been too much study and not enough action.

Do you believe there is currently enough data collected to actually develop a digital economy strategy?

[Dr. Michael Geist]

Absolutely. All I mentioned were the committee-based reports. I didn't mention the fact that the government itself launched a full digital economy consultation with the public and got large numbers of responses from the business community, the public, NGOs, and others back in 2010.

Of course, the Office of the Privacy Commission has launched studies on these issues. The CRTC has held hearings. I really don't think we're talking about a lack of data right now. In fact, we're practically the last major economy that hasn't set out a clearly defined digital economy strategy.

What that means is that on issue after issue after issue, years go by and you start seeing the consequences. Let's take, for example, the wireless sector where, without a broad-based digital economy strategy, we're now facing real concerns with respect to the level of competitiveness. The new entrants that came into the marketplace are now being bought up. We've got a forthcoming spectrum auction with real questions about how all of that fits into the broader picture.

Unless you're creating some sort of clear vision about where it is you want to go and ensure that your policies are there so there's regulatory certainty for business and so that we've got clear initiatives leading us to a particular goal, you're going to end up floundering or, as we're hearing, even worse, declining relative to many of our competitor, peer countries.

[Dan Harris, NDP, Scarborough Southwest, ON]

That was very good because you answered my next question, which is whether it's about a lack of planning and vision. I think you addressed that.

I'm very happy with the Business Development Bank of Canada. You hear about the Smart Tech program, and you heard what was being said because we do know that Canadian businesses are only spending about 68% of what their American competitors are on ICT.

I hope that you've also had a chance to look at the CFIB's surveys of its own members, because they've done extensive research on that as well.

Unfortunately I'm going to have to pass my time to Monsieur Lapointe. It goes fast when you only have seven minutes.

Thank you, to the other witnesses, for being here.

[François Lapointe, NDP, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Thank you.

You said that only one in five retailers were really involved in e-commerce. You also talked about the fact that people can go to a store, scan the bar code and get the same item at a much lower price. What can be done to support the efforts of brick-and-mortar retailers, which pay for commercial spaces and wages?

What kinds of initiatives can the government implement and support to help people join the IT movement instead of being sunk by the changes? That's important for the vitality of our downtown areas, among other things.

[John Kiru]

I think the most important thing is to remember that small business people are very stubborn. But we need to drag them into the 21st century, kicking and dragging, if we have to.

The first thing is an acknowledgement that there is an issue that small businesses need to address. If they are to survive on main street, they need to address this issue. Support: provide for education and training. I think a number of the other speakers have said the same thing. We need to acknowledge this and provide a mechanism to show these business people in our neighbourhoods that doing business in the traditional way is no longer the norm.

I can envision a business where the front third is the traditional hangers and shelves, where we go in. But you walk into the back half of that business and there are people stuffing boxes in bags, and at 4:30 the UPS truck shows up to pick that up. It has to be a combination of brick and mortar and e-commerce with new technology.

It's acknowledging that. It's doing a study the way they did in the U.K. Prime Minister Cameron over there retained the services of Mary Portas to retake the state of high streets.

I think the time has come to determine what the state of the main street is in Canada. I think we will all be shocked with what we find in all of our communities. This is not Toronto-centric, it's small-town Ontario, small-town Quebec. We are seeing a shift, and that shift needs to be addressed through education and training.

[François Lapointe, NDP, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

So you think it would be very important to conduct a study of high streets and provide small businesses with training on new technologies. We hope that will also encourage your people to increase the amount of business they do online in order to stay afloat. That will also necessarily increase the number of credit card transactions.

The Retail Council of Canada is one of the many groups claiming that the fees imposed on merchants are too high.

Could that be an impediment? Could that make us consider implementing regulations to ensure that credit card fees are not too onerous for merchants?

[John Kiru]

I think that's a discussion, in my opinion, for another topic.

But absolutely. Anywhere where you can reduce costs, whether it's taxes, whether it's fees, including supplier fees, which the banks effectively are...absolutely. Visa, MasterCard, all those fees are significant when your margins continue to diminish. So absolutely, that is a component within the structure.

[François Lapointe, NDP, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Mr. Kiru, I will use some of your comments to formulate a question for Mr. Connell.

There is a projet that is more or less in line what Mr. Kiru is asking for. Ireland currently has a dedicated fund for the development of e-commerce. It is mainly aimed at small businesses and microbusinesses.

Do we have a true counterpart when it comes to investments and results?

[The Chair, Conservative, David Sweet]

A brief response.

[John Connell]

I would say that some of the initiatives we have at BDC do target that particular group, with the level of loans that we've talked about—those below $150,000—and some of the very small consulting mandates that we have. So the BDC overall has allocated about $200 million for our ICT initiative and we'll continue to deliver that.

[The Chair, Conservative, David Sweet]

Thank you very much, Mr. Connell and Mr. Lapointe.