By Steven Page
Natural health products have become increasingly popular in Canada, and as Canadians continue to purchase items that restore and maintain their health, they are teaching younger generations similar habits to preserve their quality of life. Canada is a lucrative market and represents an opportunity for U.S. brands to generate additional new revenue—likely 5 percent to 25 percent more. However, in order for brands to succeed, they should understand the marketplace and the nuances that coincide with selling natural health products in Canada.
Doing business in Canada appears to be a natural extension for those already doing business in the United States because these countries share a large border, a free trade agreement and no language barrier. Canada currently imports more than US$2 billion worth of U.S. goods and services per day. Cross-border spending will reach US$300 billion a year by 2018, and Canadians represent a high percentage of e-commerce shoppers contributing to this growth. Canadian consumers often behave like American consumers and frequently receive information through similar channels.
While many commonalities are shared, one must remember that Canada is not the United States. Take, for example, an L.A.-based company that successfully sold weight loss products online to U.S. consumers. When the same company started selling products to Canadian consumers, it quickly experienced challenges due to the company’s unfamiliarity with logistics and compliance requirements. Some of these challenges included:
• The company did not obtain a product license, so Health Canada randomly stopped shipments;
• The company did not account for cross-border shipping, and customers waited more than two to three weeks for their package to arrive, which affected customer experience and satisfaction;
• The company did not account for import duties, customs brokerage and Canada’s sales tax, so customers had to pay surprise fees upon receiving their shipment.
Asking the following questions will help businesses from experiencing similar mishaps:
• How will the product be warehoused, transported and shipped?
• How will the pricing structure change in the new market?
• Will shipping and handling fees need to be adjusted to reflect the different tax structure in Canada?
• Is there an understanding of the rules in place by Health Canada as they pertain to the natural health product?
• Does the product packaging adhere to the necessary requirements by Health Canada?
• Is there a proper e-commerce platform set up to adjust pricing and taxes specific to Canadian customers?
When considering how to manage cross-border logistics, companies should also be aware of trucking, customs clearance and duties. These components will need to be arranged before products cross the border in order to successfully deliver your products. You also need to plan for current and historical exchange rates between the Canadian dollar and the U.S. dollar to ensure your pricing structure reflects the current Canadian market. Know what the exchange rate is and review future projections in order to properly plan. In terms of sales tax, you will need to confirm that the tax structure for your product aligns with Canada and its various regions.
You will also need to understand existing Health Canada regulations to guarantee that your product formulation and packaging comply with requirements and do not raise red flags. Depending on your product, it may need to be registered with Health Canada to obtain a Natural Product Number or Cosmetic Notification before it can be legally sold. Bilingual labels, in English and French, might also be necessary if you plan to sell in Quebec or other national Canadian retailers.
As you delve into selling to Canadian consumers, remember to adjust your website so that it modifies based on the person’s IP address and shipping address. Develop a web-marketing checklist based on a thorough understanding of consumer behavior in the Canadian market. In 2013, Canadians spent $3.45 billion while shopping using their smartphone, and this number is projected to grow 142 percent by 2016, according to a study involving PayPal and Ipsos. To align with consumer trends, a manufacturer should have a mobile-responsive website. Working with a reputable web-marketing company that understands Canada’s consumer privacy laws will help your business better understand and comply with legal requirements.
Qualified vendors can guide businesses through each step—everything from reviewing product formulation so it complies with Health Canada regulations to cross-border logistics such as trucking, customs clearance and brokerage fees. There are experienced Canadian companies that specialize in cross-border logistics that provide services such as pick-up, transportation, and fulfillment so the manufacturer can focus on sales. Secure a warehouse in the United States or Canada to determine how your product will be shipped to consumers. If warehousing in Canada, be sure that the site has an official site license so that it can legally distribute the product.
Canadians represent a worthwhile endeavor for businesses looking to expand their customer base. As the youth population grows into adulthood, they will continue to embrace the benefits of natural health products that help them maintain their health. While marketplace challenges exist, using a qualified vendor can help eliminate risks, letting your business successfully secure its position in the marketplace.
Steven Page ([email protected]) is the founder and president of Stalco (Stalco.ca), a gateway to the Canadian Market providing fulfillment and Canadian importing consultation for nutraceutical and cosmecutical manufacturers.