Picture this. You have a thriving eCommerce business in the US. You are selling products that are fulfilled by Amazon, raking it in every week. But over time, you have noticed that your numbers have started to taper off. You have considered going global, but it is too complicated. The reality is that the solution maybe a few hundred miles away, in Canada.
Expanding north of the border can be a sure shot to improve your market share and expand your brand’s reach to a new, hyper-growth market in Canada.
Today, we are going to talk about why you should consider a physical expansion to the Canadian market, and give you an idea of how to expand to Amazon Canada in this short, informative article.
Opportunities available in Canada
You may be thinking, why Canada? Take a moment to consider the potential upside in a northern expansion.
In 2021, Canadian retail e-commerce sales of physical goods amounted to almost 29.9 billion U.S. dollars and are projected to increase to 40.3 billion U.S. dollars in 2025. This equates to a growth rate of about 6.5% per year, which is explosive considering the global environment today.
30,000 Canada-based third-party sellers from all 13 provinces and territories – many of which are small and medium-sized businesses – grossed more than $1 billion on Amazon.ca in 2019, growing 40% year-over-year, and more than $2 billion on Amazon stores around the world.
Canadian eCommerce is experiencing rapid growth, with far less competition compared with its US neighbor. The size of the market is smaller, as Canada has 2 million prime subscribers compared to the US’ 87 million, but the opportunity for growth is enormous.
You may be thinking, why Canada? There are a few key reasons why you would want to consider expanding to Amazon Canada instead of another major market.
Lower Risk: Compared to a move to the EU, Canada represents a much lower risk move into a familiar market.
Improves Brand Valuation: Having a global brand can boost your sales back home. Word of mouth, social networking, and success in Canada translate to a more valuable brand.
Reduced Competition: Whether we are comparing the total number of sellers or CPC, the market in Canada is significantly less competitive compared to its US counterpart.
The similarity of Markets: Canada and the US are culturally, socially, politically, and in some ways, behaviourally similar. The learning curve is minor, and you can start selling quickly if you expand north.
Geographic Proximity: The US and Canada share the longest, most open border in the world, and promote free movement of goods and services between the two countries. Expanding to Canada keeps fulfillment costs low and improves the return on your investment.
The limitations of NARF
NARF stands for North American Remote Fulfillment. It’s a program that allows sellers to display their Amazon.com inventory to Amazon Canada and Amazon Mexico. Buyers in their respective regions will be able to see the inventory but will have to pay a slight premium to cover the import duties.
Sounds great, right? There is a catch. NARF is notorious for wasting ad spend, as it results in a lower listing conversion. Operating a unified account will effectively guarantee a significant jump in your ACoS and a major drop in your RoAS, hurting your bank account and your eCommerce business.
Consider these three variables that may have a negative impact on your business:
- Your product will have a prime badge displayed, but it will not give a fast shipping guarantee, which can confuse your customer
- Most products sold through this program have a delivery time between 7 and 10 business days, which breaks from Amazon’s typical delivery expectations
- Your customers are also required to pay an extra fee for shipping and import fees, which will often result in a lower listing conversion rate
As enticing as it may seem, NARF is not the best way to start selling on Amazon Canada. If you want to optimize your Amazon PPC management and effectively do business in Canada, there are more effective ways, like partnering with a 3PL.
Expands your inventory limits
If you are already using NARF, choosing to move to a physical expansion will give you access to a whole new market to sell to. This will have the effect of improving your inventory limits, as Amazon.com and Amazon.ca have independent inventory limits. If your products are fulfilled by Amazon,
If you want to start selling on Amazon Canada, it may be wise to look for a partner who can offer you a complete suite of Amazon-specific services that will minimize your involvement. A great partner will be able to help with receiving, labeling, and booking your Amazon shipments.
Look for an end-to-end solution that keeps your hands off the day-to-day responsibilities of doing business in Canada. Don’t try to set up your own warehouse north of the border, instead, find strategic partners who can manage your FBA & FBM for you.
Do you find yourself in cut-throat competition with other players selling in your market? That may not be the case if you expand to Amazon Canada.
In many cases, US-based sellers have yet to take the step of selling in Canada. If expanding into Canada isn’t on your radar, you should put it there.
Choosing to expand north will allow you to improve your market share and your brand image. Becoming an “international seller” is in itself, quite prestigious.
Optimizes your advertising
Imagine what you could do with less competition in your market and a strong PPC strategy. Ad placements are the same on Amazon.com and Amazon.ca, simplifying the process of Amazon advertising.
CPC is much lower in Canada compared to the US, as search results aren’t as densely populated with products thanks to fewer sellers on the marketplace. To quantify this a bit, most sellers typically see a decrease of about 25% to 32% in their CPC. You’ll notice that your RoAS is much higher thanks to the reduced competition, which is great news for your bank account.
Thanks to these similarities, keyword research, and Amazon PPC management are simplified. You typically don’t have to dramatically change your strategies when selling on Amazon Canada if you are a US-based Amazon seller.
Expanding into Canada can be a worthwhile move for your eCommerce business. Doing it right can be complex, especially if you have no experience with the Canadian market. How do you get products into the country? Where are you going to store your products? How are you going to prep and ship your products to Amazon Fulfillment Centers?. There are many considerations to make. Our team has compiled our knowledge into a comprehensive guide to help sellers understand Canadian fulfillment if you would like to learn more.
Advertising your products is essential to ensuring your products get the visibility they need. While there are many similarities, Canadian consumers are fundamentally different from American consumers. It is important to tap into local insights to ensure your Canadian product launch efforts are well informed.
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