Everything You Need to Know about Selling in Canada

E-commerce is nothing new for Canadian consumers. The internet penetration is among the highest in the world and more than half of the population has embraced online shopping. Not being an especially populous country, the market is still relatively small at just over USD 20 billion, but cross-border e-commerce dominates the industry, with eMarketer reporting that 7 out of 10 online purchases in Canada are made to international merchants.

Canada’s culture of e-commerce and cross-border shopping is firmly established, so there’s no race to catch the wave. The growth will be slow and steady – instead of the excitement of cashing in on a new trend, the market offers a solid, low-risk, long-term investment. In this article we’re going to take a look at some of the reasons why Canada is the first choice for so many merchants selling across borders, and how to decide if it is the right market for you.

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In the “Everything You Need to Know” series, we take a look at a specific e-commerce market to help you decide whether you should expand online sales across borders. As a provider of comprehensive payment processing services, we at DalPay specialise in cross-border commerce and have first-hand experience facilitating business in over one hundred markets worldwide.

Unless otherwise noted, figures in this article are sourced from:

When deciding whether to expand your business across borders, you need to consider which countries you are targeting and what each one can uniquely offer you. If you’re selling a niche product or service and your target audience is very specific, you need to identify which markets have a demand for what you provide. But in terms of sheer growth, Canada is an obvious first choice for international expansion.

Canada is in fact the single most popular market for cross-border merchants around the world by a significant margin. According to Multichannel Merchant’s MCM Outlook 2014, 84% of international merchants said they sell into Canada, well above the runner-up, Australia, at 54%. This fact is a double-edged sword, since it both represents the reality that Canada is a very attractive market for cross-border e-commerce and suggests that the market may be flooded and highly competitive.

Quick Figures

  • Total population: 35.1 million
  • Internet penetration: 87% (29.8 million)
  • Mobile penetration: 78.9%
  • Online shoppers: 18.5 million
  • E-commerce sales: USD 20.6 billion
  • M-commerce sales: USD 1.3 billion
  • E-commerce annual growth rate: 15.5%

The widespread popularity of cross-border commerce in Canada can be traced back to the country’s geography. Canada was not settled in the same way as the US – it never had a frontier. Instead, Canada was settled primarily by boat, through the St. Lawrence Seaway and the Great Lakes, which is where the border between Canada and the US was drawn, the world’s longest continuous border between two countries.

As a result, the vast majority of the country’s population lives within a short drive of the American border, and throughout the 20th century cross-border shopping was a very popular weekend activity among Canadians of all demographics. By the time e-commerce came along in the 21st century, most Canadians were already highly accustomed to buying from international merchants, and once that was no longer limited to the US, they embraced it even further.

What You Need to Know

Industry Trends

Media products – books, music, film and TV – dominate the Canadian online retail market, accounting for a value 21.4 billion USD, nearly triple the next most popular category, apparel and footware. One third of total e-commerce spending goes to American merchants, with Amazon.com being the most popular.

There are three main drivers for cross-border purchases among Canadian consumers. 41% cite lower prices as their primary reason for buying from international merchants and 23% cite better selection. Free or discounted shipping is also a key motivator, with merchants offering free shipping seeing a 69% increase in their conversion rates.

Preferred Payment Methods

As with most of the world’s e-commerce markets, credit cards are the most popular method of online payment, with MasterCard being the most popular scheme in Canada. E-wallets account for nearly one-fifth of online transactions and prepaid cards for 11% of the total.

Canada also has one of the most mature national debit card networks in the world, the Interac network. Debit cards have contributed significantly to decreasing the country’s dependence on credit cards at the point-of-sale, and the more recent development of Interac Online has received widespread adoption in the e-commerce sphere, representing 9.1% of the market after only its first two years. The increased security and lack of debt concerns associated with debit and prepaid cards has encouraged the growth of Canadian e-commerce.

M-Commerce

Similarly, Canadian consumers have been more ready to embrace new m-commerce technologies than Americans and Europeans. More than a third of the populations uses mobile banking and over 5 million Canadians shop online using their smartphones.

The eagerness for emerging technologies among Canadians is clear: the average Canadian spends nearly twice as much time on the internet as the worldwide average (23 hours per month); almost half have said they are ready to embrace m-commerce on wearable devices; and 47% have said they want retailers to provide more secure mobile payment options. All this has contributed to Canada scoring #2 on the Mobile Payments Readiness Index (MPRI).

Fraud Report

Partly because debit card use in Canada is among the world’s highest, payment card fraud in Canada is relatively high. When the major credit card schemes began migrating to EMV chip and PIN systems, Interac was slow to catch on since debit cards were always perceived to be more secure. However, fraudsters caught on to this and began targeting debit cards.

After the rollout of EMV, online fraud grew from 31% of the total in 2008 to over 64% today. In Canada, 3D Secure is mandated to counteract online payment card fraud, but international merchants in particular need to be careful when accepting payments from Canadian-issued cards since they are one of the most commonly targeted by fraudsters.

Canadian E-Commerce in Brief

Pros:

  • The most popular e-commerce market for international merchants
  • Canadians, on average, spend the most time on the internet
  • More than two-thirds of online purchases are cross-border
  • High mobile penetration and m-commerce acceptance

Cons:

  • Relatively low growth rate
  • Highly competitive market for international merchants
  • High payment card fraud rates

The interesting thing about Canadian consumers is how readily they will purchase from an international merchant. Lower prices and better selection will always trump most Canadians’ desire to purchase from a domestic retailer. Canadian consumers even buy from Amazon.com 2.5 times more often than they do from Amazon.ca, the company’s Canadian arm.

One of the world’s largest countries with a highly mature online retail sector, Canada is a seller’s market wherever you may be located. Though it is competitive, it’s relatively easy to begin selling into the country and, with its strong economy and steady e-commerce growth, Canada could serve as a low-risk, long-term investment with a steady return to help you fund future international expansions.

Expanding into a new international market is a risky venture but a very rewarding one if done right. For the latest information about how you can build and maintain a strong e-commerce enterprise and keep it compatible with legislation and buying habits at home and abroad, subscribe to the DalPay Blog and follow us on Facebook, Twitter and LinkedIn for the latest industry news.

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A/B Testing Your Webstore: Getting Started with the Basics

AB Testing

If there was one thing you could change about your webstore, what would it be? For some people, it might be conversion rates (converting website visitors to paying customers). For others, it might be an optimised general user experience (which could, in turn, increase conversion rates). Whatever the changes you want to make, the best way to test their effectiveness is through A/B Testing.

What is A/B Testing?

Also known as “multivariate testing”, A/B Testing allows you to experiment with two variants, or elements, on your landing page, shopping cart page or payment process to see which version gets the visitor to do what you want them do. There is no limit as to how many variants you can test, but for the sake of A/B Testing, you are only testing for two. Version A is your control; this means that the original element stays the same as it always has. Version B is your treatment, which is the modification whose effectiveness will be compared to the original.

Let’s say you want to test for increased conversion rates. Your landing page might contain a Call-To-Action (CTA), like a Buy Now button, on the lower right side of the page, which has garnered a 9% conversion rate. This version of the page is your Version A control. Another version, the Version B treatment, might feature the same CTA, but positioned in the middle of the screen rather than off to the right. Half of your site’s visitors will experience Version A, while the other half will experience Version B. Once a specified number of visitors has seen one or the other page (it could be 1000 visitors for each version, for example), you can compare which site was the most effective at increasing your conversion rate. If Version B generated a 16% conversion rate, then it is obvious which version of the page you should go with to convert your website’s visitors into paying customers.

Why A/B Testing is Important for Your Business

If you are not achieving the results you’ve been hoping for with your online business, A/B Testing is a great strategy you can use to exponentially boost your conversion rates, and hence, your profits. It can also enhance the user experience for your potential customers which improves your credibility, dependability and customer retention rates. Furthermore, it can help combat the pesky problem of shopping cart abandonment if your payment process is not on point.

How to Start A/B Testing for Your Website

You can start the process of A/B Testing by taking the following points into consideration:

  • Small changes can make a big impact. Simply modifying the look and location of a CTA (like a payment button) can be effective. Moving a CTA from the right to the center, or vice versa, can mean a world of difference in the number of visitors you can turn into customers.
  • Pay attention to merchandising. How you group the articles for sale in your web store could make a difference in profits. If you sell clothing and accessories, try one version in which shoes and sandals are categorized together, and another version in which they are categorized differently. See which one leads to the highest number of completed transactions. It is also good practice to make all essential information about your products and services eye-level. Make it as easy as possible for your customers to locate the goods.
  • Shopping cart and checkout button placement is crucial. You want the site visitor to spend money. The best way to make that happen is to craft a seamless user experience. One way to ensure this is to make the “Add to Cart” icon and “Checkout” buttons obvious. You want the customer to easily fill their cart, and have the option of checking out at any point while shopping. You can place these buttons in the conventional upper right-hand corner, and then create another version in which the buttons are in a different location. Test both locations and see which works out best. You might be pleasantly surprised at the results.
  • A little publicity can go a long way. If your company has been featured in the news, in a magazine (online or print), or on a TV show, refer to this in your content. If you have not yet done this, you now have a variant that you can control for: Version A without the reference to the publicity, and Version B with the reference. Test it, and see which version does best.
  • Make use of the available tools. Google Analytics is a practical and invaluable tool for the casual user who wants to collect and analyze data regarding their website’s user experience. Within Google Analytics, Google Analytics Content Experiments can be used specifically for the purposes of A/B Testing.

Now that you have the basics of A/B Testing, go out and start testing! The sooner you start, the sooner you can roll out your optimised website, page element or checkout process, and begin reaping the benefits of providing your visitors with the right tools to convert them into customers. For more tips on starting and running your online business, subscribe to the DalPay Blog and follow us on Facebook and Twitter.

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