INTERNATIONAL: Canada resurges

New potential as economy improves

As the markets in Japan, Eastern Europe, and South America contract due to unstable currencies and recession, the time may be right for U.S. mailers to look closer to home – to Canada – for international marketing opportunities.

Granted, Canada hasn’t been kind to direct mailers over the past few years. The Canadian dollar, which as recently as 1991 was trading at U.S.$0.89, fell to U.S.$0.63 in ’98, slashing Canadians’ buying power. Add to this the limitations of a smaller market (approximately one-tenth the size of the U.S.) and far fewer postal volume discounts than offered by the U.S. Postal Service, and the challenges appear daunting.

But these challenges have also produced a near-absence of competition. “There aren’t many indigenous catalog marketers in Canada,” says Tony Gilroy, general manager of Toronto-based list firm Direct Media Canada. “It’s a U.S.-dominated market, but many of the big U.S. mailers have cut back on their marketing activity, waiting for the currency exchange to improve. So there are entire merchandise categories that are wide open. There is no dominant toy book. There aren’t many hardware books.”

Now may be the best time to take advantage of this wide-open field, given that Canada’s economy is rebounding. According to statistics compiled by the Canadian finance ministry, the country’s economy grew 3.6% in 1999, and the nation enjoyed its second consecutive federal budget surplus. What’s more, last year’s unemployment rate of 7.5% was Canada’s lowest in nine years. And while economists don’t envision the exchange rate reaching the levels of the early 1990s, the Canadian dollar is trading at roughly U.S.$0.68 – 8% higher than in August 1998.

Not the 51st state

But gaining a foothold in Canada requires more than simply mailing Canadians a copy of your U.S. catalog. “Canada is not the 51st state,” says Graham Love, general manager of Day-Timers of Canada, a cataloger of time-management products. “Canadians must know a company has a presence in Canada. We went as far as creating a Canadian operation. If a U.S.-based catalog chooses not to establish a Canadian base, I’d suggest partnering with a Canadian company to handle distribution and returns.”

Like Philadelphia-based Day-Timers, Foster & Gallagher (F&G) set up front-end and fulfillment operations in Canada. “Having a Canadian presence is important,” says Dale Fujimoto, senior vice president of horticulture for Peoria, IL-based F&G. “When Canadians call to order, they talk to other Canadians who know what their needs are.”

The $480 million F&G also creates separate catalogs for Canadians. Not only would it be unacceptable to offer plants ill suited to Canada’s cooler climate, says Fujimoto, but care must be taken to use the metric system and Canadian spellings and phrases.

Parlez-vous franiais?

Mailers targeting Quebec, which includes the country’s second-largest city, Montreal, must also be aware that the province’s official language is French. “There are about 6 million people in Quebec, and I’d say 20% speak only French,” Gilroy says. “Another 60% are bilingual.” Rental lists indicate whether audiences prefer to be contacted in English or French.

Although the province’s language laws require native mailers to use French, Gilroy says U.S. mailers haven’t been required to do so. But Day-Timers’ Love disagrees. “We’ve had to get legal rulings to mail English-only catalogs into Quebec,” he says. “Basically, we have to be able to show that the individuals who receive English-language catalogs prefer to be contacted in English.”

Love says that U.S. catalogers often ignore the French-speaking market altogether when mailing to Canada, and this creates an even better opportunity for mailers willing to address these consumers. “Canadians get up to two-thirds less direct mail than their U.S. cousins, so they tend to respond better to the offers they get. In Quebec, they get even less direct mail, and we’ve found they are even more responsive,” Love says.

Ultimately, Gilroy contends, “if you’ve got a really great offer with few competitors, you will succeed in Canada, no doubt about it. But if you just test 50,000 U.S. books and expect results, you’ll fail. And if you try to compete with an established, dominant player, you’ll probably fail because the market won’t support the number of competitors that the U.S. will. But there are relatively few categories like that. For the most part, an opportunity exists for nearly every U.S. cataloger to enter the market and flourish.”

Because there are far fewer catalogers in Canada, there are also far fewer catalog lists for rent. “Canadian mailers depend more heavily on compiled survey files and magazine files, because there just aren’t enough transactional files on the market,” says Tony Gilroy, general manager of list firm Direct Media Canada.

But Graham Love, general manager of time-management products cataloger Day-Timers of Canada, says his company has been able to find enough transactional lists to meet its prospecting needs. Nonetheless, he admits that “the list industry simply isn’t as developed as in the U.S. There aren’t as many names available to direct marketers.”

One compensation for the lack of names might be an ad mail program that Canada Post, the Canadian postal service, offers in conjunction with Columbus, OH-based service provider CompuServe. According to Love, “It covers 12 million addresses in Canada, overlaid with geodemographic data and broken into clusters with age, income, household, profession, education level, and interests.”

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