Practical Ecommerce

Canada: Opportunity for U.S., U.K. Ecommerce Merchants?

Canada is the top choice of 84 percent of U.S. merchants who sell cross-border, according to the 2014 Multichannel Merchant Outlook report. Obvious advantages are a common language (most of the 10 million French speaking Canadians are bi-lingual), uncomplicated shipping, and high credit card penetration.

Benefits to Selling in Canada

Sixty percent of Canadians already make purchases from American web merchants and Canadians comprise 37 percent of global cross-border shoppers, says cross-border transaction processor Payvision. Additionally, tax laws and regulations are harmonized in most provinces.

Why are the vast majority of Canadian online purchases from merchants outside the country? Canada simply does not offer a lot of domestic choices for online shopping. Remarkably, the country that is home to Shopify, one of the most popular ecommerce platform providers, is a laggard when it comes to the Internet and ecommerce. Only 46 percent of Canadian businesses have a website according to The Internet Association and ecommerce sites are even more rare.

Why are the vast majority of Canadian online purchases from merchants outside the country? Canada simply does not offer a lot of domestic choices for online shopping.

According to Cameron Schmidt, PayPal Canada’s General Manager, only 20 percent of Canadian businesses engage in online selling. Also, products coming from the U.S. are often priced lower than domestic products. About two-thirds of Canadian consumers who shop online make their purchases from U.S. or UK websites.

Canadian Consumers Embrace Online Buying

Conversely, consumers in Canada are avid Internet users. They view the most web pages of any developed nation, according to online research firm comScore, and 93 percent of Canadians investigate products online before buying. More than half use the web to purchase goods or services. Online research firm eMarketer reports that Canadians purchased $22.97 billion worth of goods online in 2014. The average order is over $100.

Amazon’s Canadian website, Amazon.ca, is the biggest player in ecommerce. It controls about 7 percent of the Canadian online retail market while Costco.ca and Walmart.ca, have 1.6 percent and 1.5 percent of the market respectively, according to BMO Capital Markets.

In 2013, Amazon.ca introduced 14 new product categories, including packaged groceries, cosmetics and office supplies. It provides a French version as well as an English version. French-speaking Canadians are considered to be the most price conscious.

While Amazon.ca now offers 58 million items, the number is well below the 266 million offerings on Amazon.com. Therefore, many Canadians shop on the U.S. Amazon site. Together, the two sites have a 29 percent share of online sales in the country, according to research firm Euromonitor.

Third-party merchants can sell on Amazon.ca, just as with Amazon.com, and the company provides a currency converter tool. Shop.ca, a small domestic competitor to Amazon.ca, also accommodates sales by third-party merchants.

Amazon.ca offers 58 million items, well below the 266 million offerings on Amazon.com.

Amazon.ca offers 58 million items, well below the 266 million offerings on Amazon.com.

PayPal’s Schmidt indicates that one-third of Canadians have PayPal accounts and Apple Pay is now also available in the country.

What Do Canadian Consumers Expect of Online Merchants?

Canadians like promotions and discounts. Misko Kancko, director of international strategy for Canada Post, claims that 60 percent of shopping cart abandonment is attributable to lack of these two offers. They also want a clear returns policy and easy returns. Failure to provide a return policy accounts for 34 percent of shopping cart abandonment.

Businesses can buy software to create Canada Post return labels that can be emailed to customers directly. It streamlines the process of returns so customers can simply attach the label to their package and drop it off at their local post office.

On May 31, 2015, the U.S. Postal Service switched to zone-based pricing for Priority Mail International shipments to Canada. Shipping rates are now determined by the U.S. origin ZIP code and Canadian destination postal code, rather than a flat rate. This is similar to how the U.S. Postal Service ships packages domestically. Shipping from large cities with international service centers will be less expensive, but costs from smaller cities will increase.

Mobile Shopping in Canada

Canadians are avid mobile users. Eighty-one percent of them subscribe to a wireless service, and 52 percent of these subscribers use smartphones and tablets. comScore estimates that 49 percent of the time Canadians spend online is on a mobile device. Thus, it is important to provide a good mobile buying experience.

Bottom Line

Canadian consumers have shown their willingness to buy online and for whatever reason, Canadian merchants have been slow to adopt ecommerce. Canada represents a good opportunity for online merchants in the U.S., the U.K., and other countries, either selling directly or utilizing a marketplace such as Amazon.ca.

Marcia Kaplan

Marcia Kaplan

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Comments ( 4 )

  1. James Haggarty July 9, 2015 Reply

    Canadian consumers and retailers are picking up their pace in online shopping. While retail sales have increased 2-3% per year, e-commerce sales have been increasing 17% per year (eMarketer). SHOP.CA’s sales have increased by multiples of this because we’ve added merchandise across 20 categories, there’s no foreign currency costs or duties and we provide free shipping. Canadian retailers & distributors are embracing the benefits of SHOP.CA’s marketplace business model as being a complimentary sales channel. James Haggarty, ceo, SHOP.CA

  2. Sean BP July 14, 2015 Reply

    For e-commerce retailers here in the UK, my experience has been that Canadian customers are eager to buy but there are two significant barriers which need to be solved.

    The first is that Canadian Customs have a fearsome reputation for rejecting or confiscating packages on the slightest pretence (we’ve had items confiscated because the airmail sticker was top left rather than top center of the package…).

    The second is that Royal Mail have a significant price difference between their standard airmail/parcel prices, and their tracked services. If an item is sent to Canada untracked, the loss rate is comparable to that we see in Italy. I don’t know if that is down to Canada Post losing things of an “if I didn’t sign for it, it’s free” mentality on the part of buyers.

    Once the combination of postage prices and high loss rates are solved, it’ll be a joy to sell to Canada !

  3. Melody July 14, 2015 Reply

    While Canada is a vast, wide-open market, it is important to note that you must know that market to have measurable success in it. That applies to offline or online businesses looking to sell to the Canadian consumer. Target can tell you all about that. Check out sites like CanadiansInternet.com Business and hire Canadians if you want to rock this market.

    • Marcia Kaplan July 14, 2015 Reply

      Thanks Melody, CanadiansInternet.com is a great site — lots of useful data.