Going north: Paving your path to the Canadian e-commerce market

Fahrenheit or Celsius, US$ or CAN$. Canadians and Americans do some things differently – but there’s more that unites us. Canada and America share a language, cultural values, and a long and prosperous history of open trade.

For U.S. e-commerce merchants looking to expand, this makes the Canadian market a prime target to fuel growth.

But that’s not to say there aren’t barriers to entry, specifically, the actual barrier to entry – the border.

Despite our strong relationship, international shipping is complex, even if it’s with your next-door neighbour. Navigating these complexities can be intimidating, but the path to Canadian customers isn’t as difficult to walk as it may seem.

The first consideration you’ll have to make concerns the payment of duties: Will you charge the customer at the time of delivery, or in advance at your checkout? Both decisions have costs and benefits. Picking one comes down to the needs of your business.

Option 1: Customers pay duties upon delivery

This option is best suited for merchants early in their growth stage.

The way it works on the merchant side is straightforward. You process your orders into your shipping partner’s network south of the border. On the customer end, when they receive the order, they are responsible for paying any duties, import taxes, or fees levied by the Canada Border Services Agency (CBSA) or the carrier.

This choice is great for simplicity on your end, but that simplicity comes at a cost to the consumer. Passing the expense and inconvenience of duty management onto Canadian buyers makes the prospect of repeat business with you an unlikely one. If your product is offered from other sellers that don’t require the same level of work, you can expect customers will seek them out next time.

If your business relies on infrequent, large sales, this approach may be the way forward for you. Avoid irritating customers with surprise fees by making every effort to inform them of how and why duties are charged before they purchase. Canadian consumers appreciate honesty and are ready to make an extra effort to engage with your brand, so long as they feel they can trust you.

Option 2: Duties are paid in advance at checkout

This option is best-suited for merchants that are growing their volumes to Canada. Duty fees are calculated in advance and included in the final cost paid at checkout.

As the merchant, you’ll have the option of paying the cost yourself, having your customer pay, or rolling the cost into the overall price of your product.

This approach provides a more customer-friendly experience and can secure you a higher cart conversion rate. 42 per cent of online shoppers purchasing from the U.S. will complete their online purchase if provided visibility into shipping costs upfront at checkout.¹

For merchants looking to grow in Canada through customer experience enhancements, including duties at checkout is a clear choice. You can also show an estimate of the cost of duties for an order at checkout by using a third-party e-commerce platform.

With duties covered, there’s still lots to do. You’ve handled payment formalities, so now it’s time to get down to the actual act of trade – logistics.

Duties paid at checkout: Three options available to e-commerce merchants

There are many options available to American e-commerce merchants, large and small, to cost-effectively deliver to Canadian buyers.

As you’d expect, some choices are better than others depending on your circumstances. Picking the one optimal for your business requires you to understand their relative strengths and weaknesses, and evaluate them against your needs.

Here are the three primary approaches available to American retailers interested in to shipping to Canada:

1. Partner with a shipping consolidator

   Shipping consolidators provide a convenient solution to merchants who want to ship internationally, but don’t have the volume to cost-effectively do so on their own.

   By combining many individual consignments from a variety of merchants into one shipment, consolidators provide access to volume-shipping rates without requiring volume.

   If you only expect to ship a handful of orders north of the border, or are uncertain about how many orders you can expect to send to Canada, consolidators are a good fit. Per-unit pricing make costs scale predictably with sales, and offer the flexibility to use the services only when doing so is in your best interest. When volume is low, lean on your consolidator. When it’s high, you’re not locked into a commitment, so don’t hesitate to pick a better option.

   One drawback to working with a consolidator is your loss of control over logistics, which is why it’s so important to develop a strong partnership with your consolidator. Find a provider you can confidently work closely with to stay on top of costs, assess performance, and optimize pricing.

2. Induct to Canada

   Inducting to Canada requires that the merchant transport the orders across the border – and through customs – on their own. From there, they’ll connect to their shipping partner’s network, which will carry their product to the customer.

   This option is good for merchants with both the volume to fill a truck and the infrastructure to bring items into Canada.

   It’s important to know that in order to take full advantage of this method, you shouldn’t go it alone. Here are steps you can follow:

   • Partner with a customs broker

     A customs broker will ensure that your business stays on top of changing regulations for international shipments, and help you continually optimize all customs-related costs. Customs brokerages can also open doors to additional international markets, helping you get more from your partnership.

   • Invest in logistics expertise

     Managing logistics to induct your Canadian orders requires the continued attention of dedicated professionals. An in-house logistics department will establish and manage your induction processes, monitor and respond to changing circumstances that impact shipping, and continually optimize costs.

   • Use solutions for smooth scaling

     Inducting to Canada offers a lot of opportunity, but making the most of it requires a big commitment. Even a little uncertainty concerning the likely outcome of investing all that time and money is more risk than most e-commerce merchants are prepared to accept.

     If you’re concerned that this method of induction into Canada won’t provide a return until after you’ve put the work and investment into developing the infrastructure for your business, think again. Canada Post provides a host of digital tools, services, and software integrations you can use to do the work that would otherwise be done by logistics and customs professionals.

     Using these tools won’t provide the same value dedicated professionals would, but they certainly provide more than enough to be worth using in the interim.

3. Fulfill in Canada

   Connecting your U.S. based inventory with Canadian buyers comes at a cost for every parcel. If you’re consistently sending a lot of parcels, it makes sense to set up inventory in Canada. It takes a big investment to cut the cost of trucking products up north, but it offers a tremendous opportunity for return.

   Evaluate the opportunity of Canadian fulfillment

   Fulfilling in Canada is a big investment, but offers major benefits, especially to merchants expecting to consistently ship high volume in Canada.

   Canadian fulfillment gives you comprehensive control over costs. It takes investment to get there, but potential return is enormous and ongoing.

   Beyond the tangible benefits of Canadian fulfillment is the intangible value of near-complete control over the customer experience. You’ll be able to deliver and complete returns faster, customize your unboxing experience, and provide more information and controls to your support team to address customer concerns.

   Of course, we also need some insight into the costs associated with setting up or managing Canada-based fulfillment. Here’s how to do that:

   • Assess the costs of fulfilling in Canada: The best way to assess the costs for your business to set up fulfillment in Canada is going to require one-on-one time with an expert. Whether a consultant, a prospective team leader, or third-party logistics agency, it’s helpful to come prepared.
   • Learn to speak the language of shipping and fulfillment: Doing so will empower you to articulate your needs, wants, and expectations to produce positive outcomes for your business.

Whatever your business’s size, there’s a border entry method that suits you. From a few orders a week, to a full-fledged distribution centre, U.S. merchants can enter Canada at whatever pace they choose. If the audience is there, there’s a way to reach them.

Sources:
¹ Canada Post. 2018 Canadian Online Shopper Study, CPC 18-200, April 2018.