The following is a guest post by AMZ Prep.
Why Sell on Amazon Canada
Picture this. You started your Amazon.com business two years ago. You experienced explosive growth at first, but eventually, your sales started to plateau. You have been laser-focused on your supply chain, and you have been working in your business, not on your business.
Now might be one of the best times ever to start selling on Amazon.ca. But why would you want to do that? Isn’t Canada a smaller market than the US?
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.
The Canadian market is experiencing rapid growth, with far less competition compared with its US neighbor. The size of the market is smaller, but the opportunity for growth is enormous.
What is NARF?
NARF stands for North American Remote Fulfillment. It's a program that allows sellers to display their Amazon.com inventory across both Amazon.ca and Amazon.mx. 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.
NARF makes it easy to gauge your product’s demand in their respective domain. You will have access to a consolidated UI that gives you a clear understanding of how your product performs in each market, allowing you to make decisions that will help improve your sales accordingly.
Besides having access to key metrics, pivoting to selling on Amazon.ca and Amazon.mx can afford you a relatively cost-effective international expansion. Through NARF, you can use domestic inventory for international expansion, which allows you to simplify your supply chain. Instead of dealing with a third party in Canada, you can control your supply chain from the US.
What are NARF’s Limitations?
Despite all of its benefits, there are some significant limitations that NARF presents that you will want to consider.
The first is that it can result in wasted ad spending. In many cases, your listing conversions will decrease, and many sellers find that advertising performance also decreases. The results of this are that your ACOS and ROAS will decline, meaning that the money that you are investing into advertising will not be nearly as effective.
An unintended drawback of NARF is that the customer experience also declines, as the experience of buying from a NARF seller is not quite as refined as when purchasing from a local seller.
What are some other things that you should consider?
- Prime Confusion: Your product will have a prime badge displayed, but it will not give a fast-shipping guarantee, which can confuse your customer
- Long Shipping Time: Most products sold through this program have a delivery time between 7 and 10 business days, which breaks from Amazon’s typical delivery expectations
- Duties and Taxes: 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
- An example of what this looks like from your customer’s perspective is displayed below. If you were buying these headphones, which one would you choose?
Diversify Your Revenue Streams
NARF presents an opportunity to become multi-channel within Amazon - but it may not be the best way to do it. If you sell via NARF, your listing conversions will drop, and you will end up spending more money when it comes to advertising.
As we mentioned above, there are also several key drawbacks to selling via NARF that make your product less attractive to local consumers.
Thanks to the cultural similarities between the US and Canada, expanding onto Amazon.ca is significantly less risky than a complete international expansion. The geographic proximity of the two markets means that products can move relatively quickly and freely, and you can benefit from commonalities observed in both markets.
Instead of selling through NARF, consider having a physical presence in Canada by selling with a 3PL. You can diversify your revenue stream by expanding into the Canadian market without much additional effort on your end.
There is nothing more exciting than being able to tap into a brand new market with significantly less competition.
You will be able to measure your demand in the Canadian market and create new iterations of your products that will sell well north of the Border. Transitioning to Canadian FBA will allow you to reduce costs and increase purchases due to NARF’s limitations.
Selling on Amazon.ca can also net your business more profit, as Canadian consumers often expect to pay more for quality goods from the US.
While it may seem small, the Canadian e-commerce market is only continuing to grow by double digits per year, and by getting involved early, your business can ride the wave of growth that this relatively untapped market is experiencing.
Optimize Ad Spend
Let’s consider how a proper expansion will allow you to optimize your ad spend. If you are using NARF advertising on the .ca and .mx platforms, you will experience a lower listing conversion rate.
This results in a higher-than-normal ACOS and a lower ROAS, compared to selling exclusively on Amazon.com. Having domestic inventory will also increase your ROAS, as the inventory is eligible for faster prime shipping.
Open Inventory Limits
One of the key advantages of selling on both Amazon.ca and Amazon.com is that it grants you the ability to have more inventory on hand that is ready to sell. The US and Canada have separate, unrelated FBA inventory limits.
This will allow you to optimize your inventory allocation in each region, thereby maximizing the amount of product that you can sell to customers.
Increases Brand Valuation
Think of big-name brands. Apple. Coca Cola. Tesla. What do all of these companies have in common? A global presence. Establishing, maintaining, and expanding an international presence will increase your brand’s valuation in the long term.
If you sell in other countries, you are committing to an international expansion that will give your brand exposure across North America.
While an international expansion seems complex, it doesn't have to be. If you want to take the difficulty out of your launch, consider hiring an Amazon-focused 3PL. They will allow you to expand internationally in the most risk-conscious way possible. Over time, selling internationally will help you to boost your brand’s value and increase your lifetime sales.
Selling in Canada can also grant you a competitive edge. The North American market can be remarkably similar, and there are many cases where your competition has yet to expand to Canada or are not taking full advantage of the Canadian market.
Expanding by selling on .ca can help you to improve your market share and capture a large potential share in Canada.
The Canadian market is still relatively underdeveloped compared to Amazon.com. Many of your competitors may not yet have any presence at all on the Canadian market, which would allow you to achieve one of the cardinal rules of business - be first or be better.
In this case, you have an opportunity to shine because your business can make a big splash on Amazon.ca. To maximize the possibility of your success, it is important that you have the knowledge to do so. If you don’t feel capable or are unsure of how to make your launch as seamless as possible, consider an Amazon-focused consultant.
How to Get Set Up on Amazon Canada
Establishing Your Business
Getting set up on Amazon Canada requires you to have an Amazon North American Unified Account. This will allow you to switch between .com, .ca and .mx in seller central. From there, you can list products and manage orders.
Some of the benefits of having a North American Unified Account include:
- The accounts share listing information between each other
- Quickly and easily manage inventory across all three platforms
- Track orders made on .com, .ca and .mx at the same time
- Access unique tools for all platforms
- You only have to pay a single monthly subscription
- Offers a consolidated user interface
- Accept payments in local currency
Getting set up can be difficult at times, especially if you are relatively new to Amazon. If you are thinking to yourself, “this sounds pretty complicated,” consider hiring an Amazon Canada Consultant to ensure that everything runs smoothly.
They can ensure that your transition to selling via NARF can happen perfectly with their knowledge, team and Amazon-focused resources.
One caveat of selling on Amazon in Canada is that there are a few hurdles to overcome before you can effectively sell on the platform. There are many tax and regulatory considerations that must be addressed before your launch.
One consideration is that you will be responsible to pay taxes, duties, and customs, as well as any associated clearance fees when your product crosses the border.
When importing to Canada, and then subsequently selling on Amazon.ca, you must first calculate the import fees deposit that you must collect from your customers.
There are also non-resident importer requirements for sellers who are located outside of Canada, and who import goods for sale within Canada.
To become an NRI (non-resident importer) you will have to get a business number from the Canada Revenue Agency, which is often abbreviated as the CRA. You can register for a business number by calling 1-800-959-5525, or by registering for one online.
A final consideration of selling in Canada is that you will also have to think about Federal and Provincial sales tax. A helpful table can be found below which will give you an idea of the tax implications of selling in various provinces in Canada.
In order to effectively manage your Amazon inventory across your .com, .ca, and .mx stores, you must understand the difference between Global SKUs and marketplace-specific SKUs.
Global SKU: Uses a shared inventory pool across the .com, .ca, and .mx domains. You can create one by selecting “Existing Offer” in Sell Central. When using a Global SKU, keep in mind that the number displayed is the total number of products available. If you see “50 units”, that doesn’t equate to 50 in each market, it means 50 total products. Pricing is also managed separately in each store.
Marketplace-specific SKU: Managed as a marketplace-level inventory pool. This means that you will be managing three unique pools of inventory in the .com, .ca, and .mx domains. This SKU can be created via the “Unique Offer” link in Seller Central, and in this case, pricing and inventory are both managed separately in each domain.
In general, a good rule of thumb is that if you are shipping via FBM, you should use a Global SKU, and if you are shipping FBA, it is typically better to ship via a marketplace-specific SKU.
Importing Inventory to Canada
So, you are ready to start selling in Canada, but first, you need to get product into the country. Importing inventory from the US can be costly, as you will pay customs on your imports to the US, and then again to Canadian customers.
A way around this is to ship directly to Amazon FBA Fulfillment Centers from your own warehouse in the US or China. Assuming your manufacturer can meet all FBA labeling compliances, then this is a possibility. While this may seem great, one key obstacle is the possibility of a rejected shipment. Without a Canadian return address, you can run into issues if the shipment is rejected at the FBA center, resulting in significant shipping costs or the outright loss of your product.
Shipping directly to an Amazon-focused 3PL is a great way to overcome many of these obstacles and give you peace of mind for your .ca business.
As we mentioned above, there are also non-resident importer requirements for sellers who are located outside of Canada, and who import goods for sale within Canada.
Fulfillment & Returns in Canada
Now that you know a bit about the tax implications of moving products into Canada, let's talk a bit about getting those goods to customers. To get your products to market, you can ship directly to an Amazon FBA Fulfillment Center within Canada.
Using a Canadian 3PL is a great way to receive your inventory in Canada. From there, you can forward it to Amazon FCs like AMZ Prep, which is the premier Amazon-focused 3PL in Canada.
People who are using NARF to start shipping in Canada often have small inventory limits, which can be completely negated by shipping directly to an Amazon-focused 3PL. A 3PL will give you the ability to do FBM within Canada and give you full control over your goods.
Returns in Canada must be routed to a Canadian address. A Canadian Amazon-focused 3PL will be able to receive and process the goods quickly and effectively. If you choose to sell your goods without a 3PL, you will need a Canadian address to receive and process returns, which can be a costly endeavor for a smaller shipper.
If you still have questions about fulfillment within Canada, check out this free comprehensive guide on Amazon.ca FBM.
Advertising in Canada
What about advertising? There is some good news here. On Amazon.ca, there is significantly less competition when compared to the American market.
All ad placements are the same, but just on Amazon.ca, so there is virtually no learning curve when it comes to advertising on Amazon.ca. ROAS is generally higher compared to the US market, but it also isn’t as competitive as a .com-focused seller is used to. For instance, on Amazon.com, the phrase “baby-sling” will get around 11,000 hits per week, whereas in Canada that number would be closer to 1,900.
Another cost consideration is in your CPC, which is lower in Canada than it is in the US. While this is by no means a perfect example, the phrase “egg cooker” on Amazon.com will cost roughly $1.33 per click, whereas in Canada, it will only cost $1.02.
Canadian Advertising Considerations
While there are quite a few similarities between the US and Canada, consider that Canadians are fundamentally a different type of consumer compared to the average American consumer.
Below are just a few of the differences that you may come across when you start to sell in Canada:
- Cultural: Canada is a diverse country, and immigrants make up about one-sixth of its total population. Canadian consumers are known to be accepting, tolerant, and willing to try new goods and services.
- Taste: Compared to their US counterparts, Canadian consumers tend to have a more risk-averse approach to purchasing. They want to see comfortable and homely indications from listings. When it comes to literal food goods, sweet and salty is a national favorite for Canadians.
- Value: Historically, Canadian consumers have had less disposable income compared to their US counterparts. They want to feel like they are getting good value from their purchases. They tend to be value shoppers, looking for the lowest price or best deal, instead of being attached to a particular brand.
- Spelling: There are some minor spelling differences to be conscious of. Color vs. colour and grey vs. gray are two common examples. It is important to vet your spelling through a Canadian spell-check system, as grammatical mistakes can lower the credibility of your listing.
- Weather: Compared to US consumers, Canadians live in a much wider variety of weather, meaning that you may have to change product marketing based on your customer’s location. For example, Toronto, Ontario has a warm summer climate with no dry season whereas Vancouver, British Columbia has a Mediterranean warm climate with a major dry season.
In order to seamlessly launch into the Canadian market, consider employing an Amazon Advertising Agency based in Canada. They will understand these differences and help you make the necessary changes in advertising and branding that will allow you to dominate the Canadian market.
About the author: AMZ Prep is centered around one mission: guaranteeing your Amazon success by making sure you’re prepared to sell and deliver to all your eager customers worldwide. By leveraging a consultative and holistic approach towards eCommerce supply chain management we excel in weaving every business owner’s unique vision into a tailored solution.