With peak fast approaching when this article was written, many US e-commerce retailers are wondering how best to maximize sales during Black Friday, Cyber Monday, Christmas, and beyond. Ambitious brands will be shipping parcels well beyond the confines of the USA, looking for sales growth beyond the domestic market. Canada is a very worthwhile target for companies able to crack its various cross-border challenges.
The Canadian e-commerce market is maturing, so now is a favorable time for US brands to grab some of the action. Since the pandemic, millions of Canadian shoppers who had previously only dipped their toes into online shopping have now become committed online spenders, generating strong growth potential for merchants both at home and abroad. At the same time, young, tech-savvy Canadians are seeking exciting new brands and products, citing lower prices and better selection as the main reasons for shopping outside the country.
In recent years, online shopping orders from Canada have ramped up around Halloween to build through the holiday season, continuing well into January. As in so many corners of the globe, newly created online shopping events like Amazon’s Prime Day (July) or Singles Day (November 11, 2022) are also having a noticeable impact on e-commerce spend here.
Various reports state that around half of Canadians’ online purchases are made at foreign retail sites. Canada has many small and medium-sized enterprises but these companies have been slow to enter the e-commerce industry, according the US Department of Commerce, although many are now raising their game to compete with Amazon Canada.
Fashion and footwear items are popular choices for Canadians looking at US brands. But our data gathered from working with US retailers selling into the region clearly shows an appetite for toys and childcare products, too, as well as home and garden equipment, electricals, and – of course – health and beauty products.
How Do You Build Sales Without Risk of Failure and Facing Excessive Costs?
As US retailers are well aware, international shipping and customs regulations are constantly changing and vary from region to region. This, coupled with the consequences of the COVID-19 pandemic, can make logistics seem like an impossible mountain to climb. However, supply chain and e-commerce experts are doing everything in their power to assist.
Here are some tips for US brands targeting Canada to build e-commerce sales:
Offer the Right Online Payment Options
Be totally up-to-speed about the various methods used to collect payment in Canada. The most popular are credit card-based, specifically Interac Online, MasterPass, and PayPal.
In 2020, the credit card was the most common payment method, accounting for 55% of the e-commerce transactions. Digital wallets ranked second with a share of approximately 25%. Some online vendors also offer prepaid card or prepaid voucher options.
According to a 2020 survey, Canadian consumers were interested in Buy Now, Pay Later (BNPL) payment for their online purchases, with the highest interest of 65.4% in the group ages 35-44 and least popular for consumers from 65 and older (47%). Offering a BNPL option could be attractive at a time when the majority of consumers will be struggling with a cost-of-living crisis during late 2022, early 2023.
Choose the Fastest Parcel Shipping Lanes
One major challenge is the physical movement of parcels into and across Canada’s vast land mass, particularly at a time when consumers expect super-fast receipt of their purchases. Northbound freight management and final-mile routing needn’t be complicated from the US, but it will help to work with a parcel shipping partner that knows North American supply chain routes, as well as cross-border tariff and customs compliance procedures, inside out.
Working with a parcel operator that has access to plenty of trucking lanes into Canada and links with local postal services will also ensure timely and consistent e-commerce shipping to newly engaged shoppers.
US retailers, whether east or west coast-based, should spend time with their third-party logistics provider (3PL) to design delivery services using fast, efficient routes, and conveniently-positioned facilities located nationwide. Ideally, the chosen 3PL will have multiple entry points to Canada, comprehensive freight management and customs clearance services, and direct entry into the Canadian final-mile network.
Offer Delivery Choices and Customer Care to Suit All Needs
To encourage repeat purchases, US vendors should aim to offer home delivery to Canadian customers within two to six days, to major points.
If you can, offer a choice of transit options; for instance, a low-cost standard delivery within six days, as well as an expedited or ‘express’ delivery service for a two-day delivery window, ideally enhanced with tracking and visibility. Real-time order tracking and other customer service enhancements will make Canadian customers more likely to pay for premium delivery services. However, many consumer research studies show that Canadians love free, or at least low-cost, shipping.
Naturally, after-sales care is vitally important if you’re building a new customer base abroad, so make sure you have sufficient call center capability, plenty of website communication about returns and lost parcels, and – of course – be sure to offer a French language website if you are targeting Québec. It’s worth noting that French is the first official language for 22.8% of the population of Canada.
Master Canadian Customs Clearance
The USA, Canada, and Mexico signed a trilateral free-trade agreement in 2018, known as the Canada-United States-Mexico Agreement (CUSMA). This creates a free-trade system among the three countries.
US companies shipping to Canada should be aware of the raised tariff thresholds. Canada’s de minimis threshold – within which goods may be imported free of duty – was raised in July 2020, from $20 to $40, and the threshold for duty-free shipments is increased to $150. The changes stemming from CUSMA help to lower costs for shipping small- and medium-sized e-commerce orders cross-border to Canada.
A new law came into effect July 1, 2021 stating that non-resident vendors whose annual sales of taxable goods in Canada exceed $30,000 CAD now need to register for Goods and Services Tax (GST) and Harmonized Sales Tax (HST).Regardless of country of origin, brands and retailers must always properly classify goods entering Canada to avoid any cross-border delays.
Don’t Stint on the Customer Experience
Clearly, US web merchants eyeing Canada have plenty of hurdles to overcome before sales come flooding in. Help is certainly on hand from the right logistics suppliers, and the best will share a wealth of market knowledge and in-house digital services to support exciting growth plans.
The final piece of advice is to pull out all the stops and offer a customer-friendly e-commerce experience to your new Canadian customers. Shoppers are becoming more web-savvy by the day, and expectations are rising fast. Communicate clearly so they know upfront how much their purchase and shipping will cost them, when and where they’ll receive it, and how easy it will be to make a return.
I’m confident we’ll see US merchants winning thousands of new fans north of the border in the coming years. As long as your products, prices, and customer services are up to scratch, amazing opportunity exists to grow your e-commerce brand into Canada.
Douglas Longobardi is Executive Vice President, Sales of Asendia USA.
This article originally appeared in the 2022 Cross-Border and Global issue of PARCEL.