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One of the items on the table in the new NAFTA negotiations is the de minimis threshold for online purchases.  The de minimis is the value at which purchases are considered too small to bother with taxing.  Currently in Canada this is set at $20.   The US would like to increase it to $800.  In Mexico the current threshold is $50 and again, the US would like to increase it to $800 USD.

No matter where you sit on the issue, you do not want to get caught flat footed as this is going to be a significant change.  Whether the US gets their full $800 threshold or ultimately settle on something lower, the writing is on the wall and I have no doubt that it is going to go up.  The current $20 limit in Canada is laughable and whether it is increased to $100, $200, or $800 the impact is going to be significant.

Canadian merchants see this as a threat and are working hard to prevent the change.  In the meantime, they need to get ready for whatever change is coming.

  1. Automate as much as possible:  If you are still managing inventory, pricing, and order entry manually you are wasting valuable time and money.  Your back office and e-commerce platforms need to talk to each other and be able to handle your unique business rules.  
  2. Reduce shipping costs:  When I spoke at Growing Global in 2016, I compared shipping costs in Canada and the US and costs in Canada were about 250% higher.  We have a big country that is mostly empty.  It is expensive to ship and always will be but talk to your shipping partners and negotiate better rates.  If they help you lower rates, you can increase your volume and everyone wins. 
  3. Reduce fulfillment time:  One of the only aspects of shipping time you can control is how quickly you get the order out the door.  The quicker you get an order out the door, the quicker your customer gets the excitement and satisfaction of owning your products.  This efficiency also helps you reduce your shipping costs.
  4. Leverage our Geography:  Shoppers make decisions based on many different and shifting criteria, one of which is how long they have to wait to use the product.  If  you have a retail footprint use it for pick up in store.  Yes this can be complex for you as a retailer, but it is popular so just make it happen.  If you have the infrastructure, you can also consider shipping from the closest store to further reduce cost and time of shipping.
  5. Grow your local market, in the USA:  If you are in Vancouver, there are more American's within a days drive than there are Canadians and since Canada's population is strung out along our southern border this is likely true for most places in Canada.  Sell in US dollars, and partner with your shipper or a freight forwarder to scale your business to your closest customers no matter where they are.

If you are based in the United States, don't expect that any change in the de minimis will mean an automatic boost to your sales in Canada and Mexico.  Sophisticated companies from Zappos to Target have tried and failed in Canada because they were not prepared.

  1. Use our money: Canada has our own currency and we are proud of its rainbow colours and weird plastic.  Price and complete transactions in Canadian dollars.  I don't know if $199 USD is a better deal than $249 CAD today or not.  If I think it is close, I am likely going to choose the Canadian price.   I also don't want to buy at $249 CAD and discover I was actually charged a USD price and had my credit card convert it into some random amount.  
  2. Act local:  Provinces not states, postal codes not zip codes, and yes we have our own holidays and national symbols.  Cultural sensitivity will reduce friction and increase your conversion rates.
  3. Speak our Language: You can build customer loyalty by having a multi-lingual site.  To expand into Mexico, you will need to use Spanish, and Canada has a significant francophone population in Quebec.   Adding languages is not 100% necessary but if you want to approach the same sort of conversion rates you have in your home market, you will benefit from having multiple languages.

No matter where you operate in North America, the negotiations are going to affect your e-commerce business.  Will you be ready? 

 

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