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Online spending by U.S. consumers benefits e-retailers in Canada.
(Bloomberg)—It’s long been common practice for Americans to head north for bargains whenever the Canadian dollar falls meaningfully below the greenback. During the current slump, they’re doing so from the comfort of their homes by shopping online from small-time Canadian merchants.
The Canadian dollar—the loonie—has fallen about 18% against its U.S. counterpart over the past two years after flirting with parity several times in the last decade. At the same time, spending by U.S. shoppers using PayPal on Canadian websites jumped 20% in 2015 from the year before.
“The recent drop in the Canadian dollar presents an exciting export opportunity for Canadian businesses selling to American buyers,” Cameron Schmidt, PayPal Inc.’s Canadian general manager, said in an e-mail.
As the energy and mining industries struggle under the collapse of a decade-long bull market for commodities, Canada is turning to exports and tourism for growth. The expansion of online shopping allows that to happen without requiring Americans to dig out their passports.
Shopify Inc., Bigcommerce Inc. and Shoptiques Inc., which provide websites and services for small and medium businesses from multiple countries to sell online, all said they’ve seen an increase recently in U.S. consumers buying from Canada-based merchants.
“Across our customer base, Canadian businesses saw strong growth among U.S. shoppers in 2015,” Brent Bellm, chief executive officer of Austin, Texas-based Bigcommerce, said in an email. Sales at Canadian Bigcommerce stores during the holiday shopping season rose 39% from the same period a year earlier, while the number of actual stores only went up 2.9%, he said.
There’s a high bar to entry for cross-border e-commerce into the U.S., one reason the country has one of the lowest percentages of online shoppers who buy abroad, according to eMarketer. When a customer purchases a foreign product online, getting it delivered is considered importing and the package is subject to examination from U.S. Customs and Border Protection.
That means that the buyer might have to pay extra duties and fees depending on the kind of item and its value. There may even be extra paperwork involved and bank processing charges.
Despite all that, some Americans are finding the lower prices worth their while. Americans spent $3.2 billion on Canadian websites in 2015, part of a total cross-border spending spree of $27 billion that is expected to grow 10% in 2016, according to a study from PayPal and Ipsos SA.
The top two reasons U.S. digital shoppers cited for buying cross-border were better prices and product availability, according to a report published in February from eMarketer. Of all the things Americans buy from Canada, the biggest category of goods is auto parts, according to PayPal, followed by fashion, then web services and software.
Nicole Papasergiou, a 26-year-old from Brooklyn, is one of those shoppers. She stumbled onto Canadian deals through a pair of vintage-style earrings she bought on Shoptiques from a Vancouver-based boutique. She then started filtering her searches for Canadian stores and she’s since found a top, a pair of jeans and a winter hat she wants to buy from the country.
“I’m in my 20s and living in Brooklyn—life is expensive,’’ Papasergiou said. “Price definitely is a huge factor in my purchasing decisions.’’
Papasergiou estimates she saves around 10% on her purchases from Canada.
“We see a lot of customers buying from Canada because of the strong dollar—the product is just cheaper,” Olga Vidisheva, founder and CEO of Shoptiques, said in an interview.
Her customers are finding deals even when accounting for extra trans-border costs. And to make things even easier, Shoptiques provides shipping labels to its sellers that include all the information needed to get across the border.
Ottawa-based Shopify is seeing similar growth in U.S. digital shoppers checking out Canadian stores, according to chief operating officer Harley Finkelstein. He declined to give details.
Larger retailers are also feeling the benefits, even though they maintain separate websites for the different countries they operate in. The number of U.S. consumers using Amazon.com Inc.’s Canadian website doubled to 1.3 million in December compared with the same period a year earlier, according to data from ComScore Inc.
PayPal’s Schmidt said cross-border commerce will keep getting bigger and merchants would be wise to learn how to sell internationally.
“If businesses are willing to invest the necessary time and effort to build up an international presence and foster customer trust—cross-border trade can provide a lucrative growth avenue for 2016,” he said.