In 2017, online purchases accounted for 7.8 percent of all Canadian retail sales, according to eMarketer Inc. research, but by 2020, that number is expected to hit 10 percent, with a value of more than C$55bn; not a million miles from the predicted 11 percent of all sales in the U.S. by 2019.
Who will serve these new e-commerce consumers? Until recently, Canadian retailers were failing to keep pace with the market, and have been largely unable to meet consumers’ expectations for selection, price and service. That’s opened the door for U.S. retailers, who are already finding their stride in Canada, with the U.S. International Trade Administration reporting that a full one-third of Canadian e-commerce dollars are going to U.S.-based retailers. In the last year, more than 9.2 million Canadians made at least one purchase from a U.S. website.
The opportunity for U.S. online retailers is tremendous. But a business must do its homework to understand the nuances of operating in the Canadian market, gain insight into Canadian consumers’ expectations, and make sure they are savvy and prepared to meet the challenges of cross-border fulfillment.
In many ways, the demands of Canadian shoppers are similar to those of U.S. consumers. They, too, saw the evolution of shopping from home develop from catalogs and direct mail into e-tailing. But the U.S. has always been a pioneer in making the experience of dealing remotely with a retailer an intuitive, pleasant and efficient one. That particular competitive edge is absolutely crucial, worldwide, in online sales today. And the complexities of cross-border order fulfillment mean that delivering an excellent experience by actually getting goods to customers, where they want them and — perhaps more than ever — when they want them, is more challenging than ever.
Logistics providers can help, and the industry is flexing and adapting to better serve the new markets and customer demands. From Purolator International’s perspective as a cross-border logistics provider, we’ve had to rethink our approach. In the past, we said: here’s the geography we serve and this is the transit time associated with our different pricing levels. From there, it was up to the customer to figure out whether they wanted to use our services or not. Now, instead, our first order of business is: how do we integrate our shipping technology into our customer’s shopping cart so they can ship with us? We’re cognizant of the fact that, if we can’t get past that hurdle, the consumer experience is not going to work. Via the miracle of smart web forms and application programming interfaces (APIs), shipping is a fundamental part of the online shopping experience now. It’s absolutely integral, and that makes us so much more than just a delivery service. Customers expect choices and they want their stuff faster than ever. They want to be assured that they’ll get their goods exactly when the retailer has promised them, which makes what we do extend way beyond delivery. Sometimes, we’ll even get a request from an online retail customer to address a complaint that was generated by a consumer in a chat room or blog and it’s a pure IT problem; not even a delivery issue! But, because everything now contributes to the delivery experience, we need to be invested in doing everything we can to help enhance every customer experience. Our customers now explicitly want and expect our help in delivering a better experience, not just a package.
Be forewarned: if your logistics provider isn’t talking this way, you need to start looking around. Peter Sondergaard declared in the Gartner Symposium keynote in 2013 that every company is a technology company, and he has been proven spectacularly right. By the same token, with the increased need for expedited fulfillment of online orders, every e-commerce company delivering physical goods has become a logistics company. The challenge is that, for most, expedited logistics is not a core competency — it’s a whole different skill set. We’ve seen over the last 20 years a massive increase in businesses seeking outside help with their IT; the same should be the same for pursuing true logistics excellence by employing a third-party business partner who can help to drive impressive results.
U.S. e-tailers employ a lot of bright people who know how to build websites that sell and make ordering truly easy. But in a lot of cases, they rush to market and forget that Canada is another country. Returns can be especially difficult if you haven’t thought of such matters as pre-classifying your SKUs with Customs to facilitate returning SKUs to a U.S. distribution center. Failing to anticipate the vagaries of cross-border trade can be disastrous. For example, we had a customer who, before they came to us for help, had 100 skids held up for a full year! U.S. shoe e-tailer Zappos, whose excellent reputation rests in part on its no-questions-asked return policy, floundered partially because of this issue, and they were forced to pull out of the Canada market in 2011 after they just couldn’t make the logistics work. Most companies need help anticipating issues with serving the Canadian market, and considering the logistics solution as a fundamental part of the customer experience, including Customs brokerage and returns.
The challenge is that while the U.S. and Canada are pretty harmonized in terms of their respective regulatory regimes, and their Customs services have a genuinely good relationship, you can’t get around factors that cause delays, such as the fact that they often classify goods differently. While your potential market in Canada expands, so does this problem. You can try to take short cuts, or keep your fingers crossed, but a far better approach is to spend the time and money up front to get it right. An experienced cross-border logistics provider can get you thinking about where to position inventory on the U.S. side for fastest fulfillment in Canada (Canada’s a big country), as well as making the most of the less-congested border crossings. This can seem counterintuitive, but Purolator International’s clients often realize higher order fill rates by fulfilling orders from their U.S. inventory where they carry more stock less expensively.
Take a lesson from Zappos: If you don’t get it right up front, the customer is going to have a poor experience at the other end. No consumer likes receiving a package with a Customs bill attached or, even worse, being forced to go to a Customs office to pay to rescue their order when there are better options available to them today. They’re not going to order from you again. Building all costs into a flat fee that includes all Customs and duties makes a huge difference to a Canadian consumer.
Even the U.S. Commerce Department reports that the top reason U.S. businesses fail in the Canadian market is because they don’t take the time to do the necessary research and planning. Logistics is a crucial part of the total customer experience. Enlisting a capable third-party partner ensures you’re delivering the best overall experience for your customers and is well worth the time and effort.
Resources: Purolator International
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