The Canadian Retail Marketplace
Home and Houseware May 31, 2012
Why It's Worth It!
I had a very frustrating shopping experience this weekend, and it got me thinking about the opportunities Canada can present, for companies willing to invest a bit of time into a logistics strategy designed to conquer the 'Great White North'. Trying to enjoy the sunny weather in my backyard this weekend, I discover I've got a major Ant invasion around my patio so, off to the Hardware store I went, to get some Ant spray. Price tag - $28.95. The next day, I drove down to Bellingham, and was in a grocery store, which just happened to carry the same brand for a shocking $12.95!
One of the recurring themes in Canadian news is this big difference in retail prices, compared to the US. We worry about the huge lineups of shoppers at the border every weekend, and what that must mean for our domestic retailers. Although my particular example is extreme, prices are consistently 10-20% higher for the same products, with the rational being that the supply chain burden is higher, therefore this must be passed on to the consumer. But this is meeting an increasing level of skepticism, all the way to outright anger, from the average Canadian consumer. After all, more than 80% of Canadians live within 100 miles of the border, so you're not really shipping that much farther.
My Ant spray example is an extreme one, but these types of price differences usually stem from the supply chain being run via costly cross border LTL and courier shipping. But it's important to understand that domestic LTL and courier shipping are not that much more expensive than domestic freight in the US. Many potential customers I speak with often question the value of setting up a Vancouver Logistics or Toronto Logistics operation, because their Canadian sales currently do not warrant it. The answer is that once the supply chain costs go down, the retailer's costs go down, and so do the prices; and sales go up! This appears to be a consistent pattern with our US clients, who find themselves depleting their initial stocking much quicker than anticipated, and find their growth in Canada exceeding what they'd expect in similar US environments. On top of this, Mass Retailers like Wal-Mart, Canadian Tire, The Bay, etc., really like it when you show that you're serious about our marketplace and invest the time and money to have product close at hand. A 3PL like McKenna that specializes in handling hardware product logistics in both Ontario and Vancouver would be a great fit!
This leads to the next point, which speaks to the quality of Canada as a sales region for you. Since most of your competitors have not been as smart as you, and given some thought serious thought how they are going to build sales with the mass retailers in Canada, the retail space you will find your products in is very different. The Canadian hardware store, where I paid more than double, had only one other brand of similar product beside it, also at a similar price point meanwhile, the US grocery store, which doesn't even specialize in that type of product, had 5 brands to choose from! Fewer brands, and many of them being overpriced, mean you can make quick inroads, and the opportunity for much higher per capita sales is very real.
So as much as I enjoy visiting the US, I just want you to know that I would be even happier to buy your product down the street too unless your competitor, who's reading this article as well, beats you to it!