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| Selling South |
November 10, 2005 |
By Paul Lima
HOW CANADIANS ARE MAKING A MINT BY MARKETING TO AMERICANS.
Katrina Herndorf feels like she is waiting for the proverbial slow boat from China, although in her case it’s actually a large boat from India. The boat is carrying her inventory of designer dog crates to New York City.
Once the cargo is unloaded, Herrndorf’s crates will be shipped by rail to Northland Fulfillment, a third-party logistics warehouse in Toronto. As Herrndorf receives orders, she electronically uploads shipping instructions to Northland’s back-office distribution system. Dog crates will be picked, packed and sent by truck to a UPS office in Buffalo. From there, they will be delivered to Herrndorf’s clients across America.
Herrndorf is president of Bowhaus Inc., and, while without the Web her business would still exist, it would be a different - and less lucrative - endeavour. She’d have far fewer American clients, for example, unless she spent more time in the U.S. working trade shows or engaged in expensive direct-mail promotions. Using the Web, Herrndorf sells more than 90 per cent of her inventory to American customers, but spends almost all her time in Toronto. She runs a few ads in magazines for dog owners and pet supply retailers, but those primarily drive traffic to her Web site.
Exports account for roughly a third of Canada’s $1.023-trillion gross domestic product, and the United States accounts for more than 85 per cent of our exports. Tapping into that massive cross-border revenue stream used to be nearly impossible for small Canadian companies that lacked offices south of the border. But that has changed. The North American Free Trade Agreement opened the borders to the duty-free export of products manufactured in Canada and, for small businesses, the Internet bridged the marketing and ordering gap.
However, free trade does not mean goods move freely between Canada and the U.S., especially if paperwork for customs is not in order or the U.S. increases its terror alert. Since 9/11, greater scrutiny of goods heading south has led to increased delays, but that has not kept Herrndorf and countless other Canadian entrepreneurs from taking a bite out of the world’s largest economy.
Open to the U.S.
When Herrndorf launched her business in 2001, she expected to sell to Canadian retailers and consumers. She sourced a local manufacturer, sent out brochures, took orders and shipped her designer dog crates, the haus in Bowhaus. Almost as an afterthought, she had a Web site built.
Funny thing about the Web - people from all over the world find you online. Soon she was receiving inquiries from American pet store retailers and dog owners. “The thought of exporting to the U.S. scared the bejesus out of me,” Herrndorf said. She ordered information on exporting from the government so she could learn how to do it right and then ran several ads in American pet magazines, all pointing to her Web site. Web site traffic and dog crate sales increased dramatically.
“Americans are much more willing to buy online than Canadians,” said Herrndorf, who had to find a new manufacturer to handle the increased sales volume, a warehouse to store inventory and an efficient way to ship crates to American customers. All of this might not have happened, or might have happened much more slowly, if not for the Internet.
Many small companies simply would not reach American markets without the ’net, according to Toby Barazzuol. His company, Vancouver-based Eclipse Awards International Inc., would be limited to producing personalized recognition awards for clients in British Columbia, instead of conducting business across Canada and in the U.S., U.K. and Mexico. American corporate clients, associations and non-profit organizations account for 80 per cent of the company’s sales, and Eclipse has even sold recognition awards to NASA.
Founded in 1998, Eclipse Awards set up an online catalogue in 1999. Within six months, the company was shipping most of its products south of the border. “Pre-Internet, the U.S. was a small part of our business plan. Once we saw the potential of the Internet, it changed the course of our business,” Barazzuol said. Instead of spending far more money on less effective means of marketing, such as direct mail, Eclipse lands almost all of its new customers through Google searches and Google ads.
Border cross-ups
Eclipse had used a variety of couriers to ship its products but consolidated shipping with UPS a year ago. This move streamlined shipping, but it doesn’t guarantee easy border crossings. “The thing to remember is that every outbound shipment is at the mercy of U.S. Customs, and if they decide to act in any way, there’s not a lot you can do,” Barazzuol said. To prevent delays, he researched tariff classifications and spoke extensively with U.S. and Canadian customs offices to determine the proper tariff codes so Eclipse could fill out paperwork correctly. Barazzuol fills out paperwork by hand and the company rarely has problems shipping across the border.
Forms filled out incorrectly can cause major delays at the border because “U.S. Customs is very particular about its paperwork,” said Northland Fulfillment co-owner Doug Nicol. While large enterprises have departments devoted to moving product smoothly across the border, small companies tend to complete their own paperwork by hand and cart goods to the post office or a courier company. However, there comes a point in the evolution of a company when the proprietor does not have time to fuss with paper or ship products, Nicol said. That’s when they turn to a third-party logistics fulfillment company, one that can provide customs brokerage, warehousing, distribution and shipping.
Herrndorf initially filled out customs forms by hand, but as both sales and her product line grew, she streamlined operations. Herrndorf now ships Studio Haus for dogs up to 20 pounds, Loft Haus for dogs up to 50 pounds and Spot, a metallic silver wall hook that holds keys, leashes, collars, bags and other dog-walking essentials. Instead of filling out forms by hand she sends product information and customs codes to Northland electronically. The information is entered automatically into Trade Direct, a UPS shipping application that prints customs forms, shipping labels and other documentation. The automated process saves Herrndorf hours of tedious work.
Some Canadian enterprises try to streamline the customs process by shipping products in bulk to U.S. distributors, who then fulfill orders. For instance, Catherine Woodliffe bulk ships her products to two U.S. distributors who fulfill American orders so she does not have to fill out individual forms. In 1995, Woodliffe founded Essex Cottage Farms Ltd., an organic dog food business located in Roslin, Ont. Annual revenue has doubled almost every year and is expected to hit $500,000 this year. More than 80 per cent of her sales are generated online from veterinarians and consumers.
E-commerce and e-trade sites
Business Development Bank of Canada http://www.bdc.ca
Canada Business http://canadabusiness.gc.ca
SourceCAN https://www.sourcecan.com/E
The Canadian e-Business Initiative http://www.cebi.ca
The Step-by-Step Guide to Exporting http://www.exportsource.ca/stepbystep
Export Your Services http://www.exportsource.ca/worldview
Team Canada http://exportsource.ca
Although Woodliffe has streamlined her shipping process, she still experiences the occasional border-crossing snafu, including “the seemingly arbitrary handling of the need for permits,” she said. For eight years, Woodliffe did not need a U.S. Food and Drug Administration (FDA) permit for one of the ingredients she uses. Recently, the FDA delayed a shipment at the border because she did not have a permit for the ingredient. Many phone calls later, she was told the rule had been on the books for years but was not enforced. “It seems that any time there’s a rumble from our diplomats about softwood lumber or some other problem, we get hammered with another permit.”
However, Woodliffe has nothing but praise for her American customers. “In the U.S., clients jump online and try a new product,” she said. “When Americans find something good, they sing it from the rafters. And then Canadians hear about it,” she said. Her latest product, Urban Wolf, was an “instant hit” in the U.S. Canadian dog owners did not warm up to it until word of mouth “boomeranged” north across the border, she said.
Woodliffe targeted Americans with a mere three print ads to supplement her Web site and permission-based e-mail campaign, and launched Urban Wolf for less than $10,000 in marketing costs.
“It was fast and direct and Americans bought it.”
For Herrndorf, Barazzuol and Woodliffe, selling to Americans has meant learning how to deal with cross-border paperwork, customs and customs brokers, couriers and currency exchange rate fluctuations. It also has required the investment of thousands of dollars in Web sites and e-commerce systems. However, they all agree it has cost far less to reach American markets using the Internet than it would using more traditional forms of sales and marketing.
If not for the Internet and American sales, Essex Cottage Farms would be little more than a cottage industry, Woodliffe said. Eclipse Awards would sell most of its product in and around Vancouver. Herrndorf would have to spend a great deal of time and money traipsing to and from American trade shows to sell her Bowhaus crates. And that would mean she’d have far less time to walk her dog, Chester, which she does religiously each morning before returning home, turning on her computer and processing orders.
Web selling
Bowhaus http://www.bowhaus.ca
Northland http://www.northlandfulfillment.com
Urban Wolf http://www.urbanwolf.ca
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