Canadian companies sitting atop the world’s largest consumer market should view cracking that market as an opportunity rather than a daunting challenge, according to a leading business strategist.
"There are several advantages for Canadian retailers to expand internationally by first going to the U.S.," says Sheila Berry, vice-president of New Business Strategy and Development with ecommerce technology, fulfillment, and logistics provider Newgistics.
Sheila Berry of Newgistics discusses the opportunities that U.S. customers pose to Canadian retailers.
Being geographically connected is the most obvious and compelling, she says. “There is a huge advantage to being able to truck things across the border.”
There is also language affinity. English is the official language of the United States and is the majority language in Canada.
Finally, throw in a currency tilt that is decidedly in the favour of Canadian exporters, who can book most of their costs in the lower loonie and sell to American customers in the higher priced U.S. greenback.
"U.S. consumers are increasingly seeking out Canadian retailers," Berry says. "Just in the last year alone, the number of Americans shopping on the Canadian Amazon site has doubled." Estimates peg annual spending by U.S. consumers on Canadian retail sites at $3.5 billion.
The U.S. market is the world’s largest national economy, with a GDP estimated at $18.6 trillion. A 2015 global retail e-commerce index by global management consulting firm A.T. Kearney ranks the United States as the world’s most attractive online market, and retail ecommerce sales last year amounted to US$342.96 billion. That figure is projected to reach $500 billion by 2018, and $600 billion in 2019.
An attractive challenge
There are some challenges, she notes, for Canadian merchants looking to sell their goods in the U.S. Within the last year, U.S. regulations have changed to allow goods up to $800 USD to be imported duty- and tax-free.
However, some categories are restricted and subject to regulation, such as food items, pharmaceuticals, and vitamins. "Those can take a little bit more work to import into the United States but if you find the right customs clearance partner, those can be easily overcome," Berry says.
When planning for expansion into the States, Berry says Canadian retailers should focus on the total logistics cost and consider hiring a US logistics partner such as Newgistics that has workshare agreements with the U.S. Postal Service. "These will often be more flexible than setting up your own program. They tend to have shorter implementation time frames and can represent pretty significant cost savings over traditional [delivery companies] while still reaching the vast majority of American consumers in a short period of time."
The rise of omni-channel
Looking ahead to trends in international commerce, Berry says the "globalization of the omni-channel experience" that sees online retailers launching brick-and-mortar stores, and manufacturers getting into direct ecommerce, are expected to become cross-border phenomena.
A Canadian retailer opening a brick-and-mortar store in the United States can make that supply chain "look pretty different," she says. "They might be able to fulfil orders from U.S. retail sites and they might even be able to draw on inventories across multiple countries at the same time."
"So the concept of omni-channel as it relates to global ecommerce is becoming much more important."