The run-up to Christmas is a crucial time for retailers at the best of times, but this year will determine the fate of many more small Canadian businesses than usual.
And with so many Canadians avoiding in-person shopping altogether, and some retailers only offering online shopping, the only way for many to achieve their goals is to ship their products to customers.
On the rise, e-commerce has exploded since the onset of COVID-19. According to Google, overall online sales in Canada increased 200% in March of this year from 2019, and increased three times the normal average throughout 2020.
In contrast, bigger competitors like Walmart and Amazon already have major advantages, including large marketing budgets and well-established e-commerce operations.
In addition, they also get lower rates from Canada Post due to their higher shipping volumes.
“It’s literally cheaper to ship from Vancouver to New York than it is to ship (from Surrey) to Burnaby,” says Shahraz Kassam, who runs Shamin Diamonds and BeaDazzle Beads & Beading Outlet, both in Surrey, on the subway. from Vancouver. . Burnaby is less than 12 miles away.
“How can we compete? It is difficult to do business online. “
Shipping has become a problem this year for Canadian retailers like Kassam due to COVID-19, which has forced many people to rush to start or rely on online stores to keep their businesses afloat.
According to the research company, 61 percent of Canadians plan to shop more online during the rest of the year. One-third of consumers who normally shop in-store during Black Friday events in November do not plan to do so this year, preferring to shop online.
“The little ones are going to have problems because there is a lot of clinginess with the big online retailers,” says David Soberman, Canadian national president of strategic marketing at the Rotman School of Business at the University of Toronto. “There are changes going on, but maybe more slowly than we would like. “
The pandemic has been mixed for Kassam, who also sits on the Government of British Columbia’s small business roundtable. Shipping costs don’t usually affect its primary jewelry business – customers typically buy premium products, which are then shipped through courier companies such as FedEx.
But costs are a major factor in its secondary pearl business, which has taken off in the wake of the pandemic. Online pearl sales were only around $ 2,000 in 2019, but this year they have already exceeded $ 100,000. As with baking and other home-focused hobbies, the popularity of dazzling clothes has exploded as people spend more time indoors, Kassam says.
Pearls are not a high margin product, which means Canada Post’s fees make it a difficult business to succeed, he says. A small 0.22 kilogram package costs $ 11.19 to ship from Vancouver to Kelowna, about 400 kilometers away. The same package costs $ 8.92 to send to New York State.
In comparison, shipping a package of a similar size across the United States can cost as little as $ 5 (US) via the United States Postal Service.
The fees in Canada add about 18 percent to the cost of Kassam. It is obligated to offer free shipping, which it does for purchases over $ 75 (Cnd.), Because Amazon has created that expectation among consumers.
“It’s a huge amount of money out of my pocket on the pearls, because it’s not like we’re doing a lot of it,” he says.
The Canadian Federation of Independent Business, which has more than 110,000 members, is urging the federal government to force the postal service to give small retailers a break in light of the advantages of the big players.
Canada Post has a national duty to help Canadian businesses because it is a crown corporation, according to CFIB President and CEO Dan Kelly.
“There’s no question that the playing field is truly second to none when it comes to what small businesses can get,” he says. “At least with Canada Post, they should be able to benefit from the same rates as Amazon.”
Canada Post spokesperson Jon Hamilton was unable to comment on specific cases of shipping prices, but said the charges were better than other shipping service providers in Canada , including FedEx and UPS.
He also said independent retailers can get discounts through Canada Post’s Solutions for Small Business program, although it’s not clear if those savings can match the volume discounts enjoyed by bigger players.
Outside of costs, Canada Post is warning consumers of expected delays this holiday season. With shipping volumes exploding this year, the Postal Service expects an unprecedented number of packages to pass through its system over the next two months.
“We urge you to break away from tradition and shop early this holiday season to avoid disappointment,” says Customer Service and Marketing Manager Rod Hart in a video on the Canada Post website. “Otherwise, the traditional late increase in vacation packages on top of expected demand could overwhelm our ability to process and deliver and cause delays.”
The Retail Council of Canada says Canadian retailers large and small also face another problem in light of the widespread shift to online shopping – that of high credit card fees.
Credit card providers, including Visa and MasterCard, charge retailers in Canada and the United States significantly higher fees for accepting transactions online than in Europe, where these fees are regulated.
Fees vary depending on the type of card the consumer uses and the volume of business the retailer does, but typically ranges from 1.4% to 2.24% per online transaction, depending on the card processing provider. e-commerce credit. MerchantAccounts.ca. In Europe, online credit card fees are capped at 1.5%.
Spokespersons for Visa and Mastercard did not specifically respond to questions about e-commerce fees in Canada.
Visa Canada says it has lowered its average transaction fees – which include those charged in stores as well as e-commerce – to 1.4%, the lowest they have been in 15 years. Mastercard Canada says retailers reap a number of benefits from paying fees, including guaranteed payments on higher sales volume, fraud protection and the security of not handling cash.
The Retail Council, which is pushing the federal government to pass regulations similar to those found in Europe, says these fees are a bigger problem for all Canadian retailers than shipping costs.
“It’s offensive for our retailers to see how much more they have to pay to accept these transactions,” said President and CEO Diane Brisebois. “A cap is probably the only way to solve this problem. “