Why Online Retailers Should Be Heading North of the Border
Canadians are the ultimate online shoppers. They've been shopping with gusto since the start of the e-commerce boom, and digital buying has become ingrained in their daily behavior.
We recently gave Canada the highest rating — five out of five possible shopping carts — in our Borderfree Index and delved into Canada's e-commerce potential in our recently released Canada Country Report, in which we named Canada an "Ideal Market" for retailers looking for cross-border e-commerce opportunities.
Canada was listed as the No. 1 market in 2013 by merchandise volume, and it's easy to see why. Canadians love to shop online, especially from U.S. retailers.
Part of what drives Canada's penchant for shopping from the U.S. is proximity. The majority of Canada's 34.8 million residents live within 100 miles of the U.S. border and cross it regularly, generating strong brand recognition for American retailers. Another reason is Canada's high population of internet users. Around 80 percent of the population (27 million people) is online, and more than half of those people made at least one purchase online in 2014.
Canadians are relatively affluent, too, with an average household disposable income of $82,800. Average annual purchasing is around $1,100 per shopper, with 25 percent of cross-border online dollars being spent in the U.S.
Availability of ground freight shipping allows for even more convenience for the Canadian online shopper. This makes shipping and returns easier and less expensive for customers, and opens up new opportunities for retailers. For example, Sephora now ships cosmetics and fragrances to Canada, whereas much of its merchandise can't be shipped to other international destinations due to air shipment restrictions and regulations.
As in most cross-border markets, Canadians contend with duties and tax on purchases. Canada has an average duty and value-added tax of 18.5 percent, which is high, and a low de minimis of $20 Canadian dollars, both of which can deter shoppers. However, Canadians are well aware that both pricing and merchandise is superior in the U.S. even with duty costs, and that factors into their buying decisions.