Surge in Canadian E-Commerce Opportunities for Global Logistics Providers

While Canadian consumers may have been slow to embrace the Internet and online shopping, the trend has caught on with a vengeance, and volume is expected to more than triple by 2015.  And as it does, there will be a corresponding need for qualified logistics providers with border clearance expertise to move those shipments into Canada.

This was one of the key takeaways from a panel discussion that took place during World Mail and Express America’sconference, which was held in Miami in early February.  More than 200 mail, parcel, logistics and business representatives attended the conference, which focused on key trends in mail and shipping patterns.

Integral to that discussion, is the global surge in e-Commerce, and the implications that growth has had on postal and courier systems.  And among the great e-Commerce success stories, has been the rise of online shopping among Canadian consumers.   Consider these facts about Canadian e-Commerce:

• According to Statistics Canada, during 2007, more than 70 million online orders were placed by about 8.4 million Canadians.  The value of those orders was $12.77 billion (CAD).
• By 2010, those numbers had grown to more than 114 million orders placed with a value of $15.3 billion (CAD).
• By 2015, eMarketer predicts that Canadian Internet sales will spike to nearly $31 billion (CAD).

These numbers are even more impressive, when you consider that the population of Canada is roughly 34 million people, versus a U.S. population of 313 million.

Jonathan Routledge, Eastern District Manager for Purolator International, a leading provider of logistics services for shipments to Canada spoke about the surge in Canadian e-Commerce, and noted that, while the trend has created an increase in B-2-C shipments to Canada, there are things about shipping to Canada that should be considered.

Specifically, Routledge focused on four key areas:

1. Border clearance and customs compliance.  Although Canada’s border clearance process is “probably what you would consider ‘normal,’” he noted that there are “unique aspects that differentiate the Canadian clearance process from other countries.”   For one thing, the U.S./Canada clearance process has become stricter in recent years, as each country has imposed new security requirements.   A 2009 report issued jointly by the U.S. and Canadian Chambers of commerce highlights a “thickening” of the border, whereby new or increasing fees and inspections, uncertainty over wait times, layers of rules and regulations from multiple departments, have combined to create a “perfect storm” for border inefficiency.  And while joint-government efforts are underway to try and ease the clearance process, compliance will remain a source of frustration for shippers and carriers.
2.  Trusted Shipper Programs.  Canada has attempted to facilitate the border clearance process for high volume and regular carriers through a number of “trusted shipper” programs.  Once approved, program participants are generally assured of fewer inspections, pre-clearance and minimal wait times.  In fact though, carriers have been complaining in recent years that those perks are being ignored, as CBSA has increased its focus on security.  “But nevertheless,” Routledge said, “any carrier interested in providing regular cross border service into Canada needs to be aware of, and participate in these trusted shipper programs.
3. Tax and Fee Structure.  Canada’s duty and fee structure can be confusing to the uninitiated.  Goods shipped to Canada generally trigger an array of taxes and fees including:  Goods and Services Tax (GST), Provincial Sales Taxes,  Brokerage Fees, Disbursement Fees and Conversion Fees.  In addition, a carrier must be aware of all trade agreements and tariff requirements.
4. Demographics.  An often overlooked fact of doing business in Canada – are the unique characteristics of Canada itself.  “Because the U.S. and Canada have so much in common,” Routledge told the group, “people tend to assume that a Canadian business transaction will mirror a U.S. transaction.   That sort of thinking gets people in trouble.”  Among the key considerations:  Canada is a bi-lingual country with 23 percent of the population listing French as their preferred language.  And while 80 percent of the population lives within 100 miles of the U.S. border, a carrier must find a way to reach consumers living in the more remote regions of the country.

The growth in Internet sales among Canadian consumers presents a strong opportunity for qualified carriers and logistics providers.  But before a carrier markets itself as “Canada experienced,” there are a few things to be learned.  And as Routledge told the World Mail audience, “it’s better to understand the Canadian market going in, rather than face a ‘trial by fire’ upon arrival at the border.”