Updated: July 13, 2021
Good news: the importance of e-commerce in the Canadian marketplace continues to grow, and if you’re thinking about expanding into the United States, now is a great time to do so.
In this article, we’ll provide you with some insights and practical information to help support your business’ existing export strategy in a post-pandemic world, or even set up a path to begin selling in the U.S. for the first time.
Before we dive into discussing critical elements of an effective export strategy, let’s take a closer look at the benefits of expanding into the U.S. market.
The pandemic has intensely transformed global e-commerce trends, and as a result, online shopping has become increasingly common. With over $350 billion USD exported from Canada to the U.S. in 2019, Canada is the second-largest goods trading partner to the U.S. And while 2020 was a challenging year for brick-and-mortar businesses, in the retail industry, e-commerce grew by 20.7 per cent. However, only 23 per cent of Canadian small businesses are selling online, and the percentage of those selling into the U.S. is even smaller. The opportunity for small businesses is enormous.
The U.S. market is 10 times the size of Canada’s. That represents a lot of potential customers. It also offers a much larger pool of data that companies can use to deliver better products and services. Exporters to the U.S. can tap into macro-level trends, enabling them to more efficiently understand customer preferences, leading to higher sales.
Now, let’s review the seven tips for developing an effective U.S. export strategy.
1. Prevent risk by taking appropriate steps
Opening a U.S. sales channel may present some risks. Knowing them from the get-go will help you craft a strong export strategy and help you avoid costly missteps, such as:
Understand the complexities of duty and tariff systems. Taking the time to understand these systems will save you time and money in the long run. By complying with the duty and tariffs, you’ll avoid penalties and any resulting delays.
Securing the right U.S. fulfilment partners. When trusting elements of your brand integrity and customer experience to a third party, risks can be high. Be sure you’re offering a seamless delivery with the right partner to maintain your brand’s integrity and enhance your brand loyalty.
Create a process for customers who don’t pay. Ensure you have a plan in place for customers or distributors who are late on payments. Attempting to recoup those losses through the U.S. legal system can be time-consuming and financially draining, so put measures in place to ensure payments are received within an appropriate timeframe.
Developing a solid strategy before entering the U.S. market is critical. The more questions you can address now, the more confident and better prepared you’ll be for exporting success.
2. Make sure you’re ready to export
Wanting to sell in the U.S. can be great for business expansion and your bottom line. You’ll know when you’re ready when there is:
Sufficient interest at the corporate level inside your organization. Growth may happen thanks to the efforts of the staff members, but it starts with a commitment from the executive team. If your entire executive team isn’t on board with expanding into the U.S., you may not get the result you’re expecting. The various moving pieces involved in the expansion mean that everyone has to be on the same page.
Readiness to invest in making a U.S. expansion work. Most investment will be in connection with the right people, from recruitment to training for regular travel to and from the U.S. Significant investment will also be required for fulfilment, including more boxes and bags, higher last-mile fees and longer hauls. If all goes according to plan, you’ll pay it off in no time. But you have to be ready to spend.
A commitment to sustainable growth. It costs a lot to break into the U.S. You must consider what a prosperous move south will mean, how you’ll manage to sustain and expand it and how you’ll get buy-in from your employees. If you aren’t committed to sustainable growth inside your company as you sell to the U.S., you may need to reconsider your approach.
3. Select the right market for your business
You’ve done your due diligence, and you’re ready to spend, grow and reap. Begin by narrowing your focus by choosing a specific area or industry in the U.S., or ideally a combination of both. Think of the country as a series of regions. Discover which region makes the most sense for your company to enter first, based on your industry and target market.
But before you commit, you must do a market attractiveness test and a competitive analysis.
A market attractiveness test evaluates a market’s potential. Ask questions that are relevant to your industry and target market:
- Is there enough potential for growth in your industry?
- Are people willing to spend on this product at this time?
- Are there any underserved markets that I should focus on first?
- How does the supply chain in that region work – who does final-mile delivery and where are the distribution centres?
If you’ve answered these questions with confidence and you’re ready to move forward, continue by doing a competitive analysis. Discover the companies that you would be competing with directly, and ask yourself a few key questions to help determine your market viability:
- Is your selection superior?
- Can you offer something they don’t?
- Do you excel in customer service or delivery time?
Following this, we recommend you conduct two more analyses:
A VRIO (Value, Rareness, Imitability and Organization) analysis to make sure you can truly own your segment in the market; and,
A CAGE (Cultural, Administrative, Geographic and Economic) Distance Framework to help you identify the differences (and similarities) between your home market and the foreign market — especially things you can use to gain competitive advantages, such as product labelling regulations, tax breaks or separate regulatory standards for international firms.
4. Mobilize your domestic network
You’ve selected your market, and you know your product will add value to it. Now it’s time to find the right support network to put your plan in motion.
Give some thought to your domestic network of advisers, customers, suppliers, trade associations and government partners with inroads into the market you want to enter. The most cost-effective way to set yourself up is a few phone calls combined with a solid pitch. People want to help you if they can, and if your pitch is good enough, they will.
As part of that exercise, we encourage you to consult the Canadian Trade Commissioner Service, as it’s their job to plug you into helpful resources like shipping partners. For example, if you’re already working with Purolator for domestic shipping, they can work with you and Purolator to set up a U.S. shipping solution. Together, you can devise packaging requirements for your products; technology solutions for packing, tracking and delivering; border management; key shipping lanes and transit times; an affordable returns strategy; and overall readiness to deliver on your promises.
5. Attend conferences for your target market
One of the easiest ways to test a foreign market is to attend conferences. They can provide excellent opportunities to expand your network, maximize sales and promote your brand in front of your target audience. There are plenty to choose from in the U.S. every year, but it’s critical to select the right one.
Trade shows and exhibitions require a significant investment of time and money, so think strategically before deciding. This means gaining an understanding of the market you’re trying to break into, setting clear sales goals, reviewing the competition and obtaining an updated list of past events.
The good news is that online conferences are an ongoing and cost-effective means to meet industry professionals and stay current on industry trends.
Consider which events your potential partners or competitors are going to attend. Ask whether there will be agents and distributors you could partner with at any particular conference because you may find B2B partners, rather than consumers, at these conferences. And if possible, avoid conferences where you’ll have a lot of competition, and instead, focus on conferences where you can bring value by providing a unique solution to the attendees.
6. Understand the difference between an agent and a distributor
The roles of an agent and a distributor are often confused. An agent opens doors and connects you directly to buyers but doesn’t actually sell anything. On the flip side, a distributor buys products from you and resells them. You can make more money with an agent, but it’s much more work, as you’d be selling to hundreds or thousands of customers rather than a single distributor.
In addition, the legal and operational responsibilities of agents and distributors are very different, and you must understand these differences before entering into an agreement with either of them in a foreign market.
You could also consider a licensing agreement with a U.S. manufacturer, in which case you’d have to have processes in place to handle IP protection, royalties and how you pay them.
7. Work with your shipping partner
Ultimately, a quality U.S. export strategy won’t be worth the paper it’s written on if you can’t affordably get your products down there. This is why working proactively with your shipping partner is vital.
Among other things, your trusted shipper can help you perform a review of your products, control packaging to optimize transit, reduce damage and lower costs, offer logistical solutions and add value to your export strategy.
As we said at the start, this is the perfect time to become an exporter. The opportunities are there, and so are the resources — the tools and expert teams — to help you develop a successful plan to take your products south and your revenues north.
Use Purolator in your export strategy
These seven steps to developing an effective export strategy will take some time to understand and execute. The benefits will likely outweigh the effort, given the large market and opportunities in the U.S. There are many resources available to help you develop an effective export strategy. Purolator offers a variety of delivery services within Canada, the U.S. and internationally to accommodate all of your shipping requirements.