Low loonie driving Americans to spend billions shopping at small Canadian e-commerce websites

It’s always been common practice for Americans to head north for bargains whenever the Canadian dollar falls meaningfully underneath the greenback. Throughout the current slump, they’re doing so from the comfort of their houses by shopping online from small-time Canadian merchants.

The Canadian dollar – the loonie – has fallen about 18 per cent against its U.S. counterpart over the past two years after flirting with parity many times within the last decade. Simultaneously, spending by U.S. shoppers using PayPal on Canadian websites jumped 20 per cent in 2015 in the year before.

“The current drop in the Canadian dollar presents an exciting export opportunity for Canadian businesses supplying 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 marketplace for commodities, Canada is turning to exports and tourism for growth. The development of online shopping allows that to occur without requiring Americans to seek out their passports.

We visit a large amount of customers purchasing from Canada due to the strong dollar — the merchandise is just cheaper

Shopify Inc., Bigcommerce Inc. and Shoptiques Inc., which provide websites and services for small and medium businesses from multiple countries to market 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 within an e-mail. Sales at Canadian Bigcommerce stores throughout the holiday shopping season rose 39 percent in the same period a year earlier, as the number of actual stores only increased 2.9 percent, he explained.

There’s a higher bar to entry for cross-border e-commerce in to the U.S., one good reason the nation has among the lowest percentages of online shoppers who buy abroad, based on eMarketer. Whenever a customer purchases an overseas product online, getting it delivered is recognized as importing and also the package is subject to examination from U.S. Customs and Border Protection.

That means that the customer may need to pay extra duties and fees with respect to the kind of item and its value. There may even be extra paperwork involved and bank processing charges.

Related

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Worth It

Despite everything, some Americans have found the lower prices worth their while. Americans spent US$3.2 billion on Canadian websites in 2015, a part of an overall total cross-border spending spree of US$27 billion that is likely to grow 10 % in 2016, according to a study from PayPal and Ipsos SA.

The top two reasons U.S. digital shoppers cited for purchasing cross-border were better prices and product availability, according to a study published in February from eMarketer. Of all the things Americans purchase from Canada, the biggest group of goods is auto parts, based on 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 via a set of vintage-style earrings she bought on Shoptiques from a Vancouver-based boutique. She then started filtering her looks for Canadian stores and she’s since found a top, a set of jeans along with a winter hat she would like to purchase from the country.

“I’m within my 20s and living in Brooklyn – life is expensive,” Papasergiou said. “Price definitely is an enormous element in my purchasing decisions.”

Papasergiou estimates she saves around 10 per cent on her behalf purchases from Canada.

Customer Service

“We have seen lots of customers purchasing from Canada because of the strong dollar — the merchandise is simply cheaper,” Olga Vidisheva, founder and CEO of Shoptiques, said within an interview.

Her clients are finding deals even when comprising extra trans-border costs. And also to make things easier still, Shoptiques provides shipping labels to its sellers which include all the information needed to get over the border.

Ottawa-based Shopify is seeing similar growth in U.S. digital shoppers looking at Canadian stores, based on Chief Operating Officer Harley Finkelstein. He declined to give any details.

Larger retailers are also feeling the advantages, while they maintain separate websites for the different countries they be employed in. The amount of U.S. consumers using Amazon.com Inc.’s Canadian website doubled to 1.3 million in December in contrast to exactly the same period a year earlier, based on 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 companies are willing to invest the required effort and time to develop a global presence and foster customer trust – cross-border trade can provide a lucrative growth avenue for 2016,” he explained.

Bloomberg News