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Friday, June 8, 2012

Worried American Retailers Look to Canada for Exciting New Revenue Streams


With the faltering US economy and the resulting drop in consumer spending, many American based online merchants are now scrambling to find new markets to replace income lost as Americans curb their online personal spending. These Web based businesses are looking for new markets that have a "wired" Internet savvy population, with an economy in relatively better shape than the United States and one with a fairly close proximity to the US to keep fuel dependent shipping costs low.

This search for the new world in Internet markets is a relatively new one so where would you start? Well, overwhelmingly online merchants are looking north to Canada for new shoppers hungry for the wide selection and competitive pricing for which US online merchants have become famous.

Why Canada?

These Internet merchants don't have very far to look to find a barely tapped market right on their northern border. Thanks in part to Government funded projects, Canada is one of the most widely Internet connected nations on the planet. The Canadian economy, for the most part, has not been as effected by the recent sub-prime fiasco and Wall Street corporate bail-outs that have dried-up consumer spending in the United States. Canadians are online and spending. The large majority of Canada's population lives within a few hundred miles of the US-Canada border. Toronto (Canada's largest city) is only 480 miles from New York City!

Some Canadian Facts:

Population of Canada: 33,000,000 Language: English (primarily) and French Political System: Stable Parliamentary Democracy Currency: Canadian Dollar (currently roughly at par with the US dollar)

According to Statistics Canada recent data:

64.2% of all households had internet access Total Canadian electronic commerce spending per year is C$3,034,000,000 Total online spending in Canada per year is C$2,093,000,000 Total online spending in all other countries per year is C$941,000,000 Average household online expenditures per year is C$956 Average online expenditure per order is C$144

Look at these facts. Canadian do twice as much online shopping inside of Canada then they do for all other countries combined! Why is this so when they are so close to the United States? Simply stated, it is ignorance and apathy on the part of American online merchants. Typically merchants either consider Canada a fifty-first state or a completely foreign country. This is no way to treat a customer who is trying to buy what you sell. There are obviously hidden hurdles that keep Canadians online shoppers out of American online stores

Hurdles to Canadian cross border shopping

Four things keep Canadians nervous about shopping online in American online stores: Shipping fees, brokerage fees, foreign credit cards and duty.

Shipping and shipping fees: As stated earlier, it is closer to ship an item from New York to Toronto then it is to ship the same item from New York City to Dallas! Why would a merchant in New York offer free shipping to a customer in Dallas but not to the a client in Toronto? Canadians shopping online are frustrated because they run into this problem all the time. Many merchants flatly refuse to ship to Canada for a variety of weak and poorly thought-out reasons...

Brokerage fees: This is the hidden cost that Canadians have come to fear. Many poor shoppers have had online purchases from the US arrive at their doors to discover that the taxes and brokerage fees were twice the price of the purchase! There are shipping methods that can minimize these brokerage fee but many American merchants seem unwilling to adapt their shipping methods to attract new customers.

Foreign credit cards: Some online Merchants are rightfully nervous when dealing with credit cards from foreign countries. Many of these merchants make it almost impossible for a customer with a Canadian credit card to complete the checkout process. Other merchant require foreign card holders to complete the checkout using PayPal - as if PayPal is impervious to fraud.

Duty: Under the North American Free Trade Agreement (NAFTA), any merchandise that is manufactured in Canada, the United States or Mexico can be shipped amongst these three countries duty-free. If a product was made in a non-NAFTA country, the end consumer must pay the import duty on that product. Many Canadian online shoppers have seen duty charges inflate the final price of an item. Again this is a hidden fee that the consumer usually only sees when they receive the shippment.

So what can American merchants do for Canadian online shoppers?

"The first thing American merchants can do for Canadian shoppers is to just be aware of the problem that they (Canadians) face in online cross-border shopping. " says David Cameron of the Canadian oriented online shopping site, "Most American merchants are well meaning but they just don't realize the problems that Canadians face when they try to shop from American Websites. We try to work with American online merchants to educate them about what Canadians need to have the confidence to complete the order process. This usually includes Canadian specific landing pages, changes to shipping methods, coupons to compensate for costs and the addition of a Canadian-only shopping cart. Some merchants are willing to make the small changes - some are not. In time they will have to come around or lose market share to merchants that take the Canadian market seriously. Our Best Practices for American Merchants page has seen an dramatic increase in traffic in the past few months ."

Many of the larger companies like Amazon, Sony, HomeDepot and Apple are already onboard. They have led the way and taken the extra steps of setting up Canadian online stores and distribution centers to capture the already ripe Canadian market. Others like Brookstone, Cooking.com and Sephora use a service by Canada Post called Border Free. With this service Canadian shoppers see exactly what all the various fees amount to in a special Canadian check out area. This is very reassuring to the Canadian consumer as it removes any questions about the final cost and allows for easier online bargain hunting.

"Canadians want to shop online and they want to shop in American stores", says David Cameron, "They're just frustrated with being treated like second class citizens by American merchants and then having to pay through the nose for the right to give them their business."

The Canadian online shopping market is still in it's infancy but with the decline in the American economy it is only a matter of time until we see the trickle of large online merchants doing business in Canada turn into an unstoppable stream. Most of the changes that merchants need to implement will also benefit customers from countries other than Canada. The Canadian online shopping market is an excellent (and safe) opportunity for American online merchants to expand their reach and perhaps in the future move on to other markets further a field.





1 comment:

  1. Internet markets is a relatively new one so where would you start? Well, overwhelmingly online merchants are looking north to Canada for new shoppers hungry for the wide selection and competitive pricing for which US online merchants have become famous.
    Online Shopping Market

    ReplyDelete