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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How to Prevent Online Fraud: Knowledge is Power

How to Prevent Online Fraud

Fraud is a fact of online life. Every year there’s at least one new story about a major fraud ring or security breach that could affect anybody who shops, sells or does their banking on the internet. Although online fraud rises and falls from year to year, it will never disappear. The good news is that, with the technologies and security features available today, it’s not so difficult to operate a strong, secure business.

Quick Figures

  • In Europe, payment card fraud increased in 2012 for the first time in the previous five years.
  • In the UK, Europe’s leading online shopping economy, payment card fraud rose by 3%, but remains significantly lower than 2008 rates.
  • Within the Single Euro Payments Area, 0.038% of funds transacted by credit or debit card are lost to fraud, while within the UK the rate is 0.074%, nearly double.
  • Contrary to popular assumptions regarding high-risk countries, 66% of all online scams worldwide originate in the US, and over 10% originate in the UK.
  • Every year, one out of every four small businesses fall victim to some form of cybercrime.

Since it can be intimidating for a small business owner to know how to keep themselves and their customers safe, we’re here to help. The important thing is to remain vigilant and be aware of who your customers are and what types of transactions move through your web store. On the flip side, you also don’t want to go overboard with your security features by treating every customer like a criminal and risk driving them away.

Whether you have a brick-and-mortar business with an online component or it’s entirely e-commerce-based, here are a few guidelines you can follow to keep you and your customers from becoming targets of fraud:

  • Be in the Know

When doing business online, you need to be aware of the different types of fraud beyond the usual stolen payment cards and identity theft. For example, in pay-per-click fraud schemes, your ad is hacked so that when people click on it they are redirected to a phishing site andyou still getcharged for the click. Stay informed about the latest scams and techniques used by cybercriminals so you know what to be prepared for.

  • Know Your Customers

Enacting a good Know-Your-Customer policy can save you a lot of grief later down the line. It’s not worth the risk to do business with somebody if you haven’t confirmed their identity and that they genuinely exist. Use an address verification system to make sure the customer’s physical address is valid and keep records of all contact you have with customers. For more about Knowing-Your-Customer (KYC) click here.

  • Know Your Transactions

It’s vital to a have systems in place to identify potentially fraudulent transactions. Be vigilant about monitoring the types of transactions that go through your web store so that you can identify and flag unusual transactions (very large, out of character for the customer, originating from an unusual location, etc.) and put them through an extra layer of security.

  • Know Your Credit Cards

Most credit card fraud occurs during card-not-present transactions. When accepting credit card transactions, practice due diligence such as making sure the card’s country and issuing bank match the customer’s information and use additional layers of security such as MasterCard SecureCode and Verified by Visa.

  • Know Your Shipping Methods

Secure your shipping methods with postal insurance and tracking services, and use a courier that requires the recipient’s signature upon delivery. Don’t ship orders until the customer’s identity and address have been confirmed and the payment has been received.

  • Know Your Technologies

Fraudsters can infiltrate your web store through your network if your technologies aren’t up-to-date, allowing them to steal your customer information or install malicious software. Make sure your firewalls, anti-virus and anti-malware all have the latest rules and that your browsers and programs have the latest patches installed.

In addition to these guidelines, you should also maintain a good customer service presence. Often complaints from customers can make you aware of phishing sites or glitches in your system which could indicate malware or vulnerabilities much sooner than you might otherwise discover them.

How DalPay Helps to Prevent Online Fraud

At DalPay, we’re committed to online security. DalPay merchants are provided with all the tools they need to protect themselves and their customers from stolen cards and cyber shoplifters. We practice a strict Know-Your-Customer policy and always confirm your customer’s billing address through an Address Verification System (AVS) before shipping. If you have any suspicions about a specific order, we’re happy to perform a secondary screening at your request for no additional cost.

Finally, remember that we’re here for you. If you have any questions about the security of your business or your customers, please feel free to reach out to a member of our team.

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