Targeting Canadian Online Shoppers

DECEMBER 31, 2008

More than four out of 10 Canadian dollars spent on e-commerce go abroad.

Seeing an opportunity to offset slowing online sales at home, some US online retailers have targeted the Canadian e-commerce market. One approach is to launch a Canadian Website. Another is to allow cross-border purchases. Either way, several retailers executed in time for the holiday season.

Pure-play e-tailer NewEgg, an information technology and consumer electronics retailer, launched a Canadian Website in October 2008. It uses its US facilities for both fulfillment and customer service, and later may opt to enter distribution partnerships and launch a Canadian fulfillment center.

Internet Retailer reported in October 2008 that Saks Direct, the e-commerce division of Saks Inc., would fulfill orders placed by customers in Canada from its US Website. Shoppers in Canada at Saks’ main site automatically see local featured merchandise, promotions, pricing, customer service and delivery options.

In September 2008, Overstock.com, a pure-play online discount retailer, announced it would start serving international consumers in 34 countries, including Canada. International shoppers can purchase any of 600,000 products on the site priced in local currency.

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“Many international markets are underserved by online retail,” said Patrick Byrne, CEO of Overstock.com, in a press release. “With the weakness of the [US] dollar, the time has never been better for international customers to purchase American goods, creating a great opportunity for us.”

Other US-based retailers that already sell to consumers in Canada are beefing up their offerings. In October 2008, Amazon launched a new electronics store on its Canadian Website. Until that time, Amazon had sold mostly books and music on its Canadian site and did not allow products to ship across the border from its US site.

Statistics Canada data revealed the extent of cross-border spending. In 2007, 44% of B2C e-commerce spending in Canada went to foreign retail Websites, up from 37% in 2005. A weakening US dollar caused a surge in Canadian spending on US Websites during 2007’s holiday season.

Of course, money from Canada isn’t a cure-all for US online retailers. Since the US dollar has regained much of its strength over the past year in relation to the Canadian dollar, price is less of an incentive for online consumers in Canada to shop across the border. In spite of US retailers’ marketing across the border, some analysts say there may be a drop this year in the percentage of Canadian online spending on foreign Websites.

“Compared to last year, when the Canadian dollar was at—or above—par leading up to the holiday season, we expect to see a significantly lower number of Canadians spending their holiday budget south of the border this year, which will help out our Canadian retailers,” said Brent Houlden of Deloitte, in a press release.