Canada, that sprawling landmass bordering America’s northern rim, presents a unique blend of allure and mystery for U.S. businesses. Its 33 million citizens purchased $204 billion worth of American goods last year, again more than any other non-U.S. country. But what exactly are Canadians buying? How can your company tap into a this consumer base roughly the size of the population of California?
Unlike Californians, though, Canadians aren’t know to clamor for the trendiest new consumer product. They do have significant spending power—income is on the rise and the Canadian dollar now about equals its American counterpart. But that’s not the whole story.
“American businesses have a very strange misconception about Canada,” says Richard Steffen, senior commercial officer of the U.S. Commercial Service center in Ottawa. “They think because Canada looks big on a map, it has a big consumer population. It doesn’t.”
Instead, spending on imports in Canada is highest in non-consumer industries. Still, our northern neighbors do love American products and have the savvy and persistence to find them. Not to mention Canada hosts a bustling e-commerce market, making it by all accounts the easiest and safest country for American companies to export to in the world.
Selling Your Product in Canada: Know Yourself and Analyze Your Market
“Canada is a very good place to start if you’ve never exported before, as long as you a have a product that fits the market,” Steffen says. Flourishing sectors include automotive, manufacturing, technology, clean energy, and environmental products, he says. Canadians are particularly responsive to products that benefit the environment and make their work more efficient.
Spin Screed, a purveyor of concrete-laying equipment based in Quincy, Illinois, found a favorable response to its wares in Canada. Even before it launched an export initiative in 2006, the company began receiving orders from Canada due to its presence in trade magazines that drifted northward. As word spread those orders picked up even more, and now 25 percent of Spin Screed’s business comes from across the border. “Our product has been very well received in Canada,” says Joe Churchill, the company’s co-founder and owner. “They love it because of its simplicity.”
The Small Business Administration and your local Commercial Services center can provide specific market research to give you a better idea. Advisors like Steffen can get you started and also help you refine your strategy.
Selling Your Product in Canada: Capitalize on Marketing Opportunity
As Churchill at Spin Screed found out, much of Canada’s marketing thrust comes from trade publications and business or interpersonal connections. Canadian companies especially appreciate face-to-face contact with American business representatives.
“Canada is driven by trade exhibitions and trade shows,” Steffen says. “These are, unfortunately, underappreciated by American companies.”
To help facilitate these exhibitions, the U.S. Commercial Service will host a “Bridges to Canada” event in Toronto this March. The gathering is open to businesses in all industries, as Canadian companies will vet the marketability of your products and may form potential partnerships. For $700, Steffen calls it “very good chance at dipping your toe into Canada at a very low cost.”
Ultimately, enhancing your exposure on the Web and through other forms of media is your best shot at reaching the Canadian consumer directly. Due to the close proximity and language integration, Canadians are very familiar with American brands. Around 90 percent of the population lives within 160 miles of the border. Most of them will not hesitate to place an online order for a unique, quality product from the States.
“Let’s face, it’s cold up here and Canadians are very Web-savvy,” Steffen says. “Very often they would rather order on the Web than attempt to get their cars started when it’s 20 below.”
Selling Your Product in Canada: Cut Your Losses
Completing paperwork, comprehending tax laws, and complying with customs procedures involved with exporting can be difficult—and time consuming. If your company is small, or if you intend to make substantial product shipments before you have time to do all the research yourself, companies like FiftyOne Global Ecommerce and Canada Post BorderFree can help facilitate that process.
Though he generally works with larger clients such as Drugstore.com and Pacsun, FiftyOne CEO Michael DeSimone says the cross-border approach is a great opportunity in a place like Canada. “It’s a very good interim step if you eventually want to go whole hog into Canada, especially for small businesses,” DeSimone says.
FiftyOne manages the shipping logistics and handles the customs filings and other paperwork for e-commerce platforms in the United States. Since a company might not have the resources or the time to do so, FiftyOne draws from its database to estimate costs and convert to the local currency, taking a percentage of the sale.
Even if you can’t afford a service like his, Desimone still says it might be worth it to ship items across the border, as Canadians typically have much less product selection in their local stores.
“It doesn’t matter where you go or where you look, sometimes it’s just not there,” says DeSimone, who was born in Ontario. “So if you have products, people will pay a premium to get them.”
Selling Your Product in Canada: Grasp the Gab
Before deciding whether launching a Canadian campaign is even worthwhile, look into the costs and restrictions of doing so. The U.S Commercial Service and SBA can help, but ultimately you need to determine how much value the Canadian market will bring to your overall margins.
The first and most obvious consideration is currency—how much you are gaining or losing simply from the rate of exchange. The value of the Canadian dollar has soared in recent years, primarily due to the country’s energy commodities. That means Canadian businesses and customers are more likely to buy products from the United States, due to the better value. “This is a big difference in terms of purchasing power,” DeSimone says.
But take warning: He says the U.S. government prohibits the export of certain items, such as citrus fruits or GPS systems outside our borders. Canadian consumers may also be liable to pay extra duties before they can receive the product. “In Canada, online sales, whether you have a physical location or not, are subject to sales tax,” Desimone says.
Transport costs and relationships are also crucial. At Spin Screed, founders Joe and Marlene Churchill have located trustworthy customs brokers to take care of all the paperwork for a fee of around $200. Marlene, who manages the company’s shipment network, says to be wary of Canada’s goods and services tax (GST). From there, the freight costs with a company like FedEx or UPS are similar to domestic shipment prices in the States.
To make sure your sale remains profiting, experts recommend keeping the shipping costs at 10 to 15 percent of the order value. And consider the customer’s ordering sensibility, too: Canadians living in remote areas often like to buy in bulk where they can get a free shipping promotion, which can be more valuable than a discount.
Returns can also create complications in the e-commerce world, especially in the Quebec province, which requires both English and French labeling. Services such as FiftyOne and BorderFree provide local Canadian addresses so the customer doesn’t have to absorb an exorbitant international shipment fee to send back, Desimone says.
“Somebody has to work a little more,” Desimone says. “Either the consumer has to pay more or the retailer has to provide more service for the equivalent [U.S.] order.”
Selling Your Product in Canada: Sell to Canadians, But Not in Canada?
If all else fails, or if you’re not truly ready to go international with your company, consider moving your product into some Canadian border territories, such as upstate New York, norther Michigan, and Washington.
Steffen at the U.S. Commercial Service has lived in both the United States and Canada advising companies on exporting. It wasn’t until he lived in Canada, he says, that he realized how many Canadians do their shopping in the United States. Especially now with the exchange rates nearly negligible, the 90 percent of Canadians hugging the border will easily travel to find cheaper goods, at a greater selection than at home.
“It’s a little bit counter-intuitive,” Steffen says. “If you really want to sell a consumer good in Canada, the best way to do it is to get into a Wal-Mart or Sears in New York or Maine.”