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Welcome to another episode of Business Over Borders with your host, Leo Tucker. This is our mini series on consumer behavior, and I'm joined again by Matt Steinbrecher. Matt, welcome again to the show. How are you doing?
Matthew Steinbrecher:Good, man. How are you doing?
Leo Tucker:Doing pretty good. I'm, I'm excited to be talking about consumer behaviors, and I think, I think Canada is our country du jour. How do you feel about that?
Matthew Steinbrecher:Love it. Let's kick it.
Leo Tucker:So last time we talked, we we had a conversation about the US and their buying habits. There are some similarities. There are some differences. Let's let's pick apart some of those differences of spending habits, consumer behaviors in Canada. Let's start with payment methods.
Leo Tucker:Big on credit cards?
Matthew Steinbrecher:Yeah. Definitely. I would say a lot of people are still pretty credit heavy. You know, PayPal is obviously another preferred method that a lot of people in Canada have too. Interact, I would say, is big, but probably not used on everyday purchases when it comes to, like, buying stuff online, particularly for, like, online retail.
Matthew Steinbrecher:But for sure, credit card is king.
Leo Tucker:Okay. So let's let's talk then about pricing. I remember growing up and going into a bookstore, and I would see two prices on the labels. It would say, you know, US, $10, Canada, $12. So there was always that sort of dual pricing there across the board.
Leo Tucker:Are there any you know, what are consumers like to see when they go to the stores online? Is there more of a trust of buying things of the US dollars, or how does that, how does that work?
Matthew Steinbrecher:Yeah. I think most Canadians, the the vast majority of the country is going to want to purchase in Canadian dollars. However Sure. They don't want to buy something in Canadian dollars that's marked up. So they don't wanna pay in their local currency and have the convenience of that, which is, you know, the amount that they'd be more familiar with in the US dollar rate, but they don't wanna pay a premium to do so.
Matthew Steinbrecher:So they would rather just pay the US dollar rate if they're not actually getting any value for paying in the Canadian dollar amount. So one of the things that a lot of US retailers have struggled with over the years is being able to localize to Canadians while giving a very competitive exchange rate and also giving the convenience of making it a seamless transaction, for the Canadian shopper on their checkout. So overall, Canada and US, it's it's actually quite interesting because Canadians are so savvy about what the current exchange rate is between Canadian dollars and US dollars. Whereas most Americans have zero idea what the value of the Canadian dollar is on any given day. But, you know, I think it's what, like, 90% of Canada lives within, like, a 100 miles of the US border.
Matthew Steinbrecher:So naturally, there's so much trade that happens, you know, and and I think that most Canadian shoppers are just used to seeing both prices because there's obviously a ton of imports into Canada that come from the US. So, yeah, I think having the the preference is always purchasing in Canadian dollars, but knowing what that exchange rate is and not having to pay a huge markup for it is crucial.
Leo Tucker:Right. That's a good point. Let's talk a little bit more about international purchases. And I'm talking here about, DDU, DDP. You know, when you order something from FedEx and they call you or message you and say, hey.
Leo Tucker:You owe duties on this. This just got more expensive. Let's talk about that strategy for Canadians.
Matthew Steinbrecher:Yeah. Canada is actually one of the most unique countries in the world with shopper experience. So it's a cool one to talk about for sure. Obviously, you know, leaving out the foreign exchange aspect to it. The other interesting part is the duties and taxes.
Matthew Steinbrecher:So most Canadian customers, well, I guess backing up quite a few years, it was really common in Canada that you could buy goods and import them into the country. And unless it was a very high value, you would be able to get it without having to pay any duty and taxes on that product. So it would clear customs. It would come through. It gets delivered to your door.
Matthew Steinbrecher:Maybe about, you know, 8 years ago, 10 years ago, it started getting to a point where a lot of customs brokers were starting to stop more and more packages. Then the experience is basically, you don't pay your duties and then the experience is basically you don't pay your duties and taxes. Your delivery guy comes to your door, leaves a note on your door and says, hey. You owe me, like, $40 for duties and taxes on this particular product. The customer doesn't love that experience because not only do they have to pay that $40 to the government to pay for the duties and taxes, they also then have to pay a surcharge to pay that delivery guy for his time to go and collect the extra money and go through that whole process of, like, coming back and redelivering it after the money was collected.
Matthew Steinbrecher:So it kinda creates this huge disruption in the supply chain from buying a product from, like, let's just keep it simple with the US based business, getting it delivered to, you know, your doorstep in Calgary. From a proximity perspective, it's it's not that far typically to get the the item delivered or wouldn't be any further than going from New York to LA, for example. But as soon as you cross that border, duties and taxes get introduced. And I think there are a lot of different types of products that are also under the NAFTA agreement, which was passed, you know, in the early nineties to basically create free trade and stimulate trade between the US and Canada and and Mexico as well, which basically absolved the need to have any duties applied to most everyday goods that Canadians were purchasing from America. And so you kind of put these two things together and you start to have this change in experience where Canadians are used to not having to pay for all these duties and taxes and that they're able to just kind of pay the surface level face value for it, or whatever the retail price is for that T shirt or dress or whatever you're buying and not have to pay the additional duties tax.
Matthew Steinbrecher:As we fast forward it, of course, the Canadian government is wising up because they want to make more money on imports. You know, why wouldn't they? Every government wants to. And so even with the free trade agreement between the US and Canada, there are still a lot of products that do have duties applied. But regardless of a free trade agreement, the Canadian government wants to collect taxes.
Matthew Steinbrecher:It's GST or HST.
Leo Tucker:Yep. Yep. PST. We got all we got them all. All the STs, we got them.
Matthew Steinbrecher:So in recent years, the Canadian government started to wise up and stop a lot of these packages and charging all these customers at the final mile through their carrier, and that introduced a ton of friction in the purchasing process. And I really think that for the most part, Canadians now have wised up to understanding the types of products that they can buy and not have to pay duties and tax on. On the flip side, you also have globalization rising and making it easier and easier to ship packages all over the world. So you have these international retailers that are trying to reduce that friction in the shopping experience and give the Canadian shopper a DDP experience, which is, duties delivered paid. And that basically means you pay it all up front, and that way your doorman's never gonna give you any trouble.
Matthew Steinbrecher:They just drop off the package, and you get it in however many days it takes to get to you.
Leo Tucker:No surprise charges or delays.
Matthew Steinbrecher:Yeah. Yeah. And and the the really interesting thing about the Canadian shopper experience and expectation is that a lot of people like to roll the dice.
Leo Tucker:Oh, yeah. What's tell tell me a story.
Matthew Steinbrecher:I mean, there's there's products that you need, and there's products that you want. And if it's a product that you need, you're gonna get it there on time and pay for it and know that you're gonna have to eat the the customs fees and tax fees. Like, you're just gonna pay it. If you're shopping online, you want it, and it needs to be there by Tuesday, and it's Wednesday the day the week before, you're just gonna pay it. You don't want any delays at customs or anything like that.
Matthew Steinbrecher:If you don't have that option, though, as a Canadian and you need it in a certain amount of time, you're gonna find a different retailer. You're gonna churn from that website. You're not gonna convert. So you wanna make sure that you have that flexibility where if you need this product in a particular amount of time that you can pay for your duties and taxes upfront. But there are also flip side of that where if you want this product, you don't really need it or any particular time constraint of needing it.
Matthew Steinbrecher:You don't wanna pay those duties and taxes upfront, and you would rather roll the dice and see if your delivery guy comes and slaps a, you know, little post it on your door that says you owe x amount of money. And I think that's the the key difference is that we're always in in the online retail space, especially, we're always focused on how do we make the shopping experience smoother for the customer. And in Canada, ship at DDP, but not all Canadians are gonna want to ship at DDP. They may not want to pay the duties and taxes or they may think that the fees you're charging to ship at DDP and the duties and taxes are inflated. They would rather just roll the dice and ship at duties unpaid, in some instances.
Matthew Steinbrecher:And so I think Canada is one of the rare experiences around the world or rare countries around the world with consumer experience is making sure that they always have that option to ship it delivered, with duties paid or duties unpaid. And that gives them the flexibility of whether or not they wanna pay it up front or roll the dice.
Leo Tucker:I know I've seen on various checkouts the message that there may be additional duties and taxes upon delivery, and I feel like I've seen the option too to pick one where it was included and one where it was not.
Matthew Steinbrecher:You know, if you're not shipping duties paid into Canada, probably, like, 50% of your customers are being impacted by their doorman. I say doorman, but, like, your delivery guy. Right? FedEx, UPS
Leo Tucker:Your door person.
Matthew Steinbrecher:Canada Post. Yeah. The person that's coming to your door and actually dropping that package at your apartment complex, your front door, whatever. You know? And and it costs them time and money, all these carriers that are are dropping this product at your door, that that delivery person has a salary.
Matthew Steinbrecher:There's a cost of them getting into a truck or hopping off whatever and and dropping off these products on your on your doorstep for your convenience. There's a cost for them to come and deliver a slip to you and then go back, wait until you pay it. They get a notification, and then they can deliver it on their next route a few days later or a day later or whatever it might be. Like, that's added cost. It's added time and money for the delivery people.
Matthew Steinbrecher:So they ultimately are charging you a markup. So where we see is if you aren't offering DDP into Canada and you're just forcing them to pay it, probably 50% of your packages are getting stopped on average. It does depend on what you're selling and and how expensive it is and and a few other factors. But on average, probably, like, 50% of your packages are getting stopped. And the experience for the shopper is terrible if they didn't intentionally choose that shipping method.
Matthew Steinbrecher:Yeah. But giving them the option to pay up front, again, that's kinda why I always consider it is, like, do you need this product on time, or do you just want this product to come here smooth? And it it really does make a difference in terms of, you know, what it is and who it's going to and the types of demographics. But, yeah, that's something really important to know that Canadians in particular, they want it they want optionality. Ality.
Matthew Steinbrecher:They want to know if they can ship a DDP, if they can ship a DDU. And I think that that's always the best way to maximize conversion rate there.
Leo Tucker:So Canada and the US both follow fairly similar holiday schedules, so I imagine the the hot spikes of purchasing times throughout the year probably coincide pretty pretty closely. Are there are there any peaks that merchants selling into Canada should know about?
Matthew Steinbrecher:Yeah. Boxing Day. I would say, in general, it's it's, it's very cyclically similar to the US. I don't feel that there's a ton of additional holidays that Canada has that I mean, there are a lot of additional holidays and different holidays, but there's none that I think are driven as much around buying behaviors. Perhaps celebrating different things, but not as as heavily influenced, I think, as some of the made up, like, US holidays.
Matthew Steinbrecher:I'd be curious to hear your thoughts given you've lived in both countries.
Leo Tucker:Yeah. Yeah. Boxing Day is the only one that comes to mind as as being something different. I remember growing up in the States and looking at the calendar and seeing Boxing Day, and I I just had the wildest imagination on what possibly could happen on Boxing Day. Is everybody fighting each other?
Leo Tucker:I was like, no. Canadians are pretty nice. That's probably not it. And we all you know, getting in boxes and wandering around town, I didn't know. Then I got here, and turns out that's when all the sales happened.
Leo Tucker:So that's really the big thing I noticed.
Matthew Steinbrecher:Yeah. And I feel like there's still, you know, Boxing Day sales in the US too. They just don't call it that.
Leo Tucker:Yeah.
Matthew Steinbrecher:I I think it's interesting that, you know, the the consumer behavior is really different of how people purchase online and what they expect. It's so similar in in different ways to to the US where, you know, all the the trends and the patterns and how people buy are are pretty dang similar, but then you actually have these weird nuances like shipping DDP and DDU where that doesn't exist in the US for the most part. And so, yeah, you kinda have these regulatory hurdles that consumers have to navigate through and that ultimately drives, like, their purchasing decisions and what they expect to see on your website. So although they follow similar trends, it is a very slippery slope for US merchants to just assume that they can sell to Canadians, DDU, and then US dollars, and they're gonna do well there. It's just never gonna happen.
Matthew Steinbrecher:You're not gonna be able to properly capture those customers and and retain them for the long term.
Leo Tucker:Yeah. Absolutely. So just, wanna give us a quick summary of what merchants can do to succeed selling to Canadian customers?
Matthew Steinbrecher:Yeah. When you're selling into Canada, particularly from the US, you always wanna make sure you're offering Canadian dollars first and foremost and doing it at a very competitive exchange rate because they are absolutely aware of if you are marking it up, they will not want to pay that exchange rate price, and they will find your product somewhere else. The second thing and probably the most important thing is making sure that you have DDU, delivered duties unpaid, and DDP, delivered duty paid options at the time of checkout. And that's because a lot of Canadian shoppers will still prefer to roll the dice sometimes to buy something and not pay the duties and taxes on it and, you know, maybe see if they get charged by their carrier when it comes to delivery day, versus having to pay it up front. And sometimes they'll wanna pay it up front so that way there is no risk of any delays or stopping at customs, anything like that.
Matthew Steinbrecher:So that's kind of the the two main things I would say overall in terms of what to know when selling into Canada and how to really maximize the shopping experience.
Leo Tucker:Great. That's awesome information. Matt, thanks for joining us again, and, hope to see you next time when we talk about the rest of the world. Alright, everybody. Thanks for joining us again on, consumer behavior miniseries here on Business over borders.
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Matthew Steinbrecher:Brought to you by the reach network. Visit withreach.com/network for more.