There is a lot of talk in Canadian eCommerce & retail circles about the coming push into Canada by American retailers. Many (including me) immediately refer to the warehouse that Amazon opened up in Mississauga as the perfect example. However, a closer look starts to tell a different story… Take Amazon’s direct business here. It’s pretty lacking when you compare the breadth of the product catalog they sell direct in the USA compared to what they sell here in Canada.
The truth is, our country can be more of a challenge for American merchants than many think, and much of it has to do with our culture. We’re a slow-and-steady country, not a boom/bust one. We’ve been slower on the up-take of eCommerce and as such it’s resulted in several of our support systems (i.e. logistics) being quite a bit behind the American counterparts.
Just in the category of logistics I see several hurdles to get over, the biggest of which is cross-border shipping and documentation. Forget just shipping from the USA into Canada on a per-customer order basis, I’m talking about importing your goods in large quantities to be redistributed once here. If you don’t have the documentation and processes automated, the turn around time and cost to getting product up north can be an expensive one.
The second big one is obviously that direct-to-consumer shipping up here is a different beast all together. The USA has greatly simplified it’s shipping zones and because of the maturity and scale of their market, shipping a package from NY to California isn’t too big of a problem (nor is it too expensive). Conversely, ship something from Toronto to Vancouver and you’re in for a completely different ball game. It’ll be quite a bit more expensive and your options aren’t nearly as vast.
Why Does This Matter?
Well, who do you think ultimately pays for the higher costs of shipping up here? The consumer. Whether that’s directly passed onto the consumer through shipping fees or indirectly through increased retail pricing, it ultimately falls on the shoulders of the shopper.
Dealing with Cultural Differences
There are of course, other challenges for American merchants moving into Canada. Some of these are purely cultural. We’re an odd nation when it comes to deal-hunting. Much of our population are quite savvy deal shoppers who won’t buy anything unless they feel like they are getting a deal. This can pose a serious problem if you’re a retailer who rarely marks down merchandise.
Our large retailers here have found ways around this of course. Take Canadian Tire as the perfect example. As the country became deal-obsessed over time, the retailer has been extremely agressive in its promotions and mark-downs. All you have to do is watch their weekly flyer enough to see that certain items are being listed at regular retail much higher than normal (and elsewhere), in order for them to be “marked down” significantly. My own father-in-law knows this and sees it happening but still loves that he’s getting a “good deal”…
All of these small things obviously add up. Just look at the % of GDP of consumer spending is in the USA vs. Canada (70% vs. 55%). That’s a huge difference!
I’m approached frequently regarding strategy for Canadian retailers competing against Americans shipping up here. It’s a complicated topic of discussion, but I like to think that Canadian based retailers have a much stronger grasp on who they are selling to and who they should look to bolster this going into the future.