Canadian Dollar Aiding Online Retailers
The ritual has resumed, as it always does when the Canadian dollar rises against the United States dollar. Large numbers of Canadians cross the border in search of lower prices and greater selection at American stores. But when the Canadian dollar reached parity with American currency last week, there was a new twist: online sales now let Canadians bargain-hunt in the United States without leaving home.
If early indications hold true, some of the biggest gains from the Canadian dollar’s strength — it settled in New York late Thursday at 99.87 cents — may be at online retailers based in the United States. Because Canada’s small population compared with the United States, some 33 million versus 302 million, makes online operations less cost-effective, relatively few Canadian retailers, less than a third by some estimates, sell on the Web.
That limited local competition, combined with the strong Canadian dollar and the moderate cost of expanding into Canada, make the country a tempting target for American electronic retailers.
No one measures Canadian crossborder spending, virtual or otherwise, but Paulina Sazon, a direct-marketing strategist at Canada Post, said the volume of shipments through the Canadian postal service’s special service for American retailers increased 38 percent over the last year. A spokeswoman at UPS Canada, Christina Falcone, said her company had also registered "significant growth" as a result of the strengthened Canadian dollar.
Representatives of retailers tell the same story, including those from L. L. Bean, Crate & Barrel and Brookstone: all posted noticeable increases in sales to Canada in the last few months. Carolyn Beem, a spokeswoman for L. L. Bean, said double-digit growth had prompted the company to increase marketing efforts aimed at Canada and to begin advertising in this country.
Several retailers, including Amazon.com, declined to discuss their Canadian trade, while others, like Lands’ End, did not respond to requests for comment. In some cases, American retailers could not say how much of their increase in Canadian sales was attributable to the weak American dollar and how much resulted from increased marketing efforts.
Ms. Sazon of Canada Post said that research conducted by her office in conjunction with a retailing research firm, NPD Canada, showed strong interest among Canadian shoppers for buying online from the United States — but not from just any American retailer. According to the study, Canadians are most interested in buying clothing online from Target. But Target does not ship to Canadian customers and has no Canadian stores. Target did not respond to a request for comment on the policy.
The Gap also denies Canadians special access to online shopping, but the company does operate stores in Canada.
Other American retailers who court Canadian customers through the Web, including Amazon, Wal-Mart Stores and Home Depot, have set up separate online operations in Canada. Since shoppers on those Canada-based Web sites are not making crossborder purchases, they do not benefit directly from the weaker dollar. But they do benefit from falling prices on many American products.
Although Canada and the United States share a free-trade agreement, crossborder trade is hardly free. All merchandise entering Canada is inspected by Canadian Border Services, which adds federal sales taxes, provincial sales tax (except in Alberta) and, in the case of some products made in third countries, duty.
In addition, the companies transporting the packages have border handling fees of their own, which on a USD 300 item can exceed 40 Canadian dollars. Canada Post adds a flat fee of 5 Canadian dollars.
To avoid those charges, L. L. Bean and several other companies use a Canada Post service that brings their parcels across the border in bulk rather than individually. The American retailer collects Canadian taxes at the time of the purchase and the customer is not surprised by border fees at the doorstep. The service also enables a shopper to return items to a Canadian address.
U.P.S. operates warehouses in Canada that hold inventory from American online retailers, including Crown Premiums, a collectible model-car maker in Bonita Springs, Fla. Orders placed on Web sites in the United States are filled with merchandise from the Canadian warehouses.
The J. C. Williams Group, Canada’s leading retail consultancy, estimates that American companies account for about a third of all Canadian online shopping. Canada Post said that reached about 60 percent at the height of the shopping season last year.
Jim Okamura, a senior partner in J. C. Williams, said that growing business in Canada might allow retailers to offset an increasingly saturated market.
And Canada could perform another role for American retailers. For many companies, Mr. Okamura said, “Canada is really being seen as the first step in a broad international expansion plan.”
