When U.S. small business owners consider exporting to new markets, Canada is probably one of the first places that comes to mind due to proximity, culture, and language. And the experts we've talked to say it should be.
Currently the world's 11th largest economy, Canada is the largest trading partner of the United States. Every day, $1.6 billion of trade crosses the U.S.-Canada border. Canada has a top-class infrastructure, a strong consumer base, a highly educated workforce and a strong banking system. Plus, because it's literally right next door, Canada is an ideal market for businesses that are brand new to exporting.
At UPS, we see the same amazing possibilities for companies in Canada today as we did when we first started doing business there in 1975. That's why we recently invested $100 million to build a new air hub in Calgary and more than double our package processing capabilities in Toronto. The future looks bright; we see a strong and resilient Canadian economy, with continued growth opportunities.
We hope that this guide will encourage you to explore Canada's potential for your business, too.
Dan Brutto President, UPS International
Population: 33,487,208 (July 2009 est.)
Life Expectancy at Birth:
Population Growth Rate: 0.817 percent (2009 est.)
Literacy: (Age 15 and over are able to read and write)
Area: 9,984,670 sq. km
Currency: Canadian Dollar
GDP (purchasing power parity): $1.287 trillion (2009 est.)
GDP (official exchange rate): $1.319 trillion (2009 est.)
GDP (real growth rate): -2.4 percent (2009 est.)
GDP (per capita): $38,400 (2009 est.)
GDP (composition by sector):
Labor Force: 18.4 million (2009 est.)
Unemployment Rate: 8.4 percent (Jan. 2010 est.)
• CIA World Factbook
• U.S. Department of State
Diana Broesler, senior vice president of commerce
What? Named one of the fastest-growing small businesses in the U.S. by Inc. magazine, Smartphone Experts, an online retailer, sells mobile phone accessories such as chargers, headsets and screen protectors to consumers and companies around the world.
Where? Based in Florida, Smartphone Experts imports products from China, fulfills orders in the United States and ships them to customers in Canada and around the world.
Who? Diana Broesler, senior vice president of commerce, was the company's first employee.
For more information: Visit smartphoneexperts.com
Please give us an overview of your company's business in Canada. Are you shipping directly to customers or
Smartphone Experts sells mobile phone accessories to customers across Canada through a range of online retail stores and communities. We ship orders from our U.S. headquarters directly to Canada, which is becoming an important growth market for us. In the last few years, we have increased our shipments to Canada ten-fold, from 25 orders a week when we first started shipping there in 2004, to about 250 orders a week today. When a new mobile phone is released, these numbers can spike much higher.
How did you go about starting up in Canada?
Our business in Canada grew organically because of our online presence. We have online communities, which provide objective reviews and discussion forums about smart phones, including the Treo™, iPhone and BlackBerry®. Our BlackBerry community, called CrackBerry.com, actually started in Canada. On these community sites, there are ads that direct consumers to our online stores, where they can buy accessories for these phones. These ads attract customers all around the world – especially when a new phone is released in a market.
What do you consider to be the biggest benefit of doing business in Canada?
Canada is a huge opportunity market. While today, it represents only about 5 percent to 8 percent of our business, we're only just beginning to scratch the surface. As the mobile phone market overall continues to grow, we know there's substantial opportunity ahead in Canada. Doing business internationally opens up new product lines and helps manage risk by diversifying our customer base, since we're not dependent on the U.S. market.
What are some of the obstacles you have faced in Canada?
The biggest issue is the misperception that shipping to Canada is the same as shipping within the United States. People want instant gratification – if they order today, they want it tomorrow. But this costs a lot more when you're shipping across borders. And although the U.S. and Canada are part of a free-trade zone, there still are certain customs and tariffs to pay that are hard to explain to consumers. To help manage these costs, we considered opening a warehouse in Canada to serve our Canadian customers. But ultimately, we weren't ready for that. So, we worked with our shipping partner UPS to design a supply chain between the U.S. and Canada that met our needs and the needs of our customers.
What advice would you offer other businesses to help them stay ahead of their shipping costs?
Quite simply, know your costs in advance, and be able to explain them to your customers. To do this, choose a logistics partner that handles a lot of shipments from the U.S. to Canada. It's imperative to have a reliable carrier that understands the customs process and can help minimize costly errors.
We worked with one company for a while, but we stopped because we couldn't track our packages door-to-door – so, if an order went missing, we had no idea what happened. Today with UPS, we have total visibility into all of our orders, all the time.
Based on your experience, what general advice would you offer companies that are thinking about doing business in Canada?
Know the market, and know your consumer. Make sure you have a product that will work for Canadians. People sometimes think Canada is the same place as the U.S. It's not.
Companies that sell their products online need to be prepared for organic international growth. Being online gives you a world community. If you have something people want, they can find you. So doing business as a retailer today is totally different—you have to be ready to handle international customers.
While you always take a chance when you start to do business in a new market, if you do your homework, the payoff can be well worth it.
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With the highest per capita immigration rate in the world, Canada is an ethnically diverse country. The country is home to approximately 34 distinct ethnic groups, each with a population in Canada of about 100,000 people. So it’s no surprise that Canada has embraced multiculturalism, a fundamental belief that all citizens are equal. Multiculturalism ensures all citizens can keep their identities, take pride in their ancestry, and have a sense of belonging.
In 1971, Canada became the first country in the world to declare multiculturalism to be an official state policy. Under the Multiculturalism Policy of Canada, the country affirmed the value and dignity of all Canadian citizens regardless of their racial or ethnic origins, language or religious affiliation. The policy also confirmed the right of the Aboriginal peoples and the status of Canada’s two official languages – French and English. Canada’s laws and policies recognize its diversity, and all Canadians are guaranteed equality before the law and equality of opportunity.
This bold step provided a cultural basis for security and mutual respect for Canadians of all backgrounds and ancestry. With no pressure to assimilate and give up their culture, immigrants freely choose to naturalize more often because they want to be Canadians. Almost 20 percent of Canadian citizens were born outside the country.
Canada considers its diversity a national asset. Canadians who speak many languages and understand many cultures make it easier for Canada to participate globally in areas of education, trade and diplomacy.
Multiculturalism is also a point of pride for Canadians. Canadian culture is full of celebrations of multiculturalism like Canadian Multiculturalism Day (June 27) and Toronto’s Caribana festival, the largest Caribbean festival outside of the Caribbean, held every summer. Toronto, Canada’s largest city, also is considered to be one of the most multicultural cities in the world, and is full of neighborhoods that reflect its different cultures.
Stephan Wasylko is the former senior commercial officer at the U.S. Embassy in Ottawa and was responsible for directing and managing the U.S. Department of Commerce’s trade development programs and business facilitation services throughout Canada.
Why should U.S. companies consider doing business in Canada?
When it comes to exporting, U.S. businesses should “think Canada first.” Canada offers many opportunities for growth. First of all, it is the United States’ largest and most important export market, with $600 billion in two-way trade in 2008 – that’s an average of $1.6 billion every day. Second, Canada is the most receptive and easiest market to access from the U.S. While emerging markets get a lot of attention, they can be very complicated places to do business – especially if you’re new to exporting. In contrast, Canada has common business practices, a common language and a great infrastructure for doing business. There’s a mature market for U.S. products. And the risk is low; the playing field is level. Plus with NAFTA, you can export many goods that originate in the U.S. without duties or tariffs.
In challenging economic times, did the U.S. Commercial Service in Canada see fewer requests from U.S. businesses seeking to trade?
Interest in exporting to Canada and demand for our services was actually growing. When the U.S. economy is humming, it’s hard to get people to look beyond our borders. But when we go into a recession, companies’ interest in exporting piques, and they look to other markets to hedge their income flows.
Businesses were interested in Canada during this downturn in particular, as Canada was slower going into the recession. Also, it didn’t have the same banking and sub-prime issues as the U.S., as Canada’s financial institutions are far more conservative and very heavily regulated. As a result, Canada seemed to be coming out of the recession at a quicker pace than the U.S.
What is the biggest mistake you see U.S. businesses make when they go to Canada?
Oftentimes, U.S. companies look at Canada as simply an extension of the U.S. market. That’s a big mistake. Canada has its own rules, regulations, standards and tax system. Consumer demand and preferences are somewhat different. And, like the U.S., it has regional differences – so it’s not just interstate commerce by any means.
What are some of the shipping and logistics challenges small businesses encounter when they move products between the U.S. and Canada?
First, the U.S.-Canada border procedures have changed as a result of security procedures implemented after 9/11. In the past, travelers and goods crossed the border with much less scrutiny and control than is required today. We now have new requirements and tighter controls in place to ensure our borders remain secure and open to legitimate travel and trade. Companies shipping to Canada and the United States have to be familiar with these new requirements and take them into account when they prepare their documentation and plan their shipping and travel timelines.
Second, transborder infrastructure over the years hasn’t kept up with demand. Trade between the U.S. and Canada has increased 143 percent since NAFTA, yet border crossing capacity hasn’t changed. As a result, backlogs occur, which wastes time and money. The U.S. and Canadian governments are working on the best approaches to balance our security concerns with our shared interest in keeping trade and travel flowing smoothly. While much progress has been made in this regard, the need to further facilitate our cross border trade remains a high priority for both countries.
What is critical for U.S. companies to know before they go?
Market research is critical. Canada is a diverse market. British Columbia, for example, has more in common with the West coast of the United States than Ontario. There’s a different lifestyle and demand for different products. Then, there’s the French-speaking province of Quebec, which is very different again. Sometimes U.S. companies make the mistake of looking at Canada as one homogenous market. It’s not.
Do you have any success stories about U.S. businesses going to Canada that you can share?
The U.S. Commercial Service helped 1,000 U.S. small businesses generate more than $30 million in new sales – collectively – by exporting to Canada. This was new money they never would have realized if they didn’t give exporting a try.
What is the most important advice you would offer U.S. companies considering doing business in Canada?
First, consider Canada because it offers huge opportunities, especially for small-to-mid-sized companies seeking to export. Second, do your homework, and don’t take the market for granted. There are a lot of services available that can help companies avoid costly mistakes. For a U.S. company looking to export, there’s no better place to start than Canada.
One of the cities with the strongest ties to the United States is Vancouver, British Columbia (B.C.). The province borders Washington State and is home to nearly 84,000 U.S. expatriates. With pristine, natural landscapes – such as beaches, mountains and greenery as far as the eye can see – it’s no wonder that so many Americans love to visit Vancouver. It’s time now for U.S. small businesses to discover why Vancouver is an attractive export market.
From a trade perspective, Port Metro Vancouver makes the city attractive for small businesses. The port trades US$75 billion in goods with more than 130 countries annually. It is the fourth largest tonnage port in North America and offers infrastructure to meet a variety of shipping needs, including 28 major marine cargo terminals and three Class 1 railroads.
Residents in Vancouver already have an affinity for U.S. goods – making them an ideal target customer base for U.S. small businesses. On “Black Friday,” the day after Thanksgiving, it’s very common for Vancouver residents to flock south-of-the-border to snag deals on U.S. merchandise; 2008 estimates from the Canada Border Services Agency showed that more than 14,000 B.C. residents traveled into the United States on Black Friday.
Business travelers to Vancouver are typically surprised by the city’s temperate climate. Even though Vancouver hosted the 2010 Winter Olympic Games, the city isn’t typically known for its cold weather. Canadian Television Network (CTV) reported that in the 70 years on record for Feb. 12 – the first day of the 2010 Games – 61 of these days have had no snow. Tourism BC has always advised travelers that a warm coat and umbrella is all you need during the winter months.
President of UPS Canada Mike Tierney shares logistics advice to help U.S. companies grow north.
Why should American companies explore exporting to Canada?
First and foremost, there is strong demand for American products in Canada. In fact, U.S. goods and services account for 60 percent of purchases in Canada. Second, Canada is the largest trading partner for the U.S., so there’s a strong, established commerce relationship, a free trade agreement and a solid transportation network in place that small businesses can capitalize on.
Now may be an especially opportune time for U.S. companies to begin exporting to Canada. The Canadian dollar is strong, and it promises to continue to stay strong against the U.S. dollar. Canada’s consumer market is quite robust, which is particularly good for an exporter or importer.
Most of all, in today’s global economy, companies that don’t expand beyond their home borders and comfort zone today will have to play catch up tomorrow. For U.S. companies, Canada is a logical first step in exporting.
What shipping information do you think American small businesses should know before they go to Canada? Are there any shipping challenges that are unique to Canada?
Companies need to understand their shipping choices so they can choose the most efficient option for them – whether it’s express or longer-term ground shipping. UPS offers an option called UPS Trade Direct®, which bundles shipments together so they can cross the border as one, cost-effective shipment before being broken down into individual orders. Ultimately, there are many choices that can fit an exporter’s need.
There is a customs challenge that is unique to Canada. When shipping a package to Canada, the importer is responsible for the clearance unless other arrangements are made. If the exporter doesn’t want Canadian customers to take this on, the U.S. exporter can register as a non-resident importer.
My advice: rather than trying to navigate these protocols themselves, small businesses should choose a shipping partner to establish the process that’s best for them.
What should U.S.-based small businesses look for in a logistics partner?
It’s imperative to work with someone who understands Canada, and the specific needs and challenges companies have when they ship north of the border. They need to be sure that their partner can deliver to every address. There are a lot of regional carriers that don’t deliver everywhere, so shipments may change hands several times. It’s also important for businesses to ask a prospective logistics partner what tools they have to help them export. For example, do they have a tool that tallies the exact door-to-door shipping costs, including customs fees and taxes, known as “landed costs?” Do they have tracking tools that enable you to keep tabs on your package at any time? Businesses want to find a partner that will take the guesswork out of shipping.
What can UPS do to help U.S.-based small businesses enter the Canadian marketplace?
UPS has more than 35 years of experience in Canada. We understand the market and have an unmatched transportation network that delivers to every address in Canada. We also offer a range of tools that help U.S. businesses export to Canada. For example, UPS TradeAbility® is a ready-made tool that calculates a shipment’s landed costs ahead of time – so there are no expensive surprises. We can further simplify the customs process with UPS Paperless® Invoice, which enables shippers to file customs documents electronically. The tool greatly decreases the number of manual errors, which reduces customs delays by up to 41 percent.
We also offer shipping software that automates much of the shipping process, and a tool called UPS Quantun View® Notify, which sends proactive shipping notifications and ensures
businesses and their customers can track their shipments online anytime.
Finally, because we’ve been in Canada for over three decades, we can connect small businesses to other resources that may help them grow.