All that you need to know

The Canadian dollar’s strength makes marketing by catalog to Canadians a prime expansion opportunity for U.S. catalogers these days. For many, it’s a logical way to grow, provided the prospecting universe is sufficient for the offer. Mailing and distributing merchandise into Canada has become almost seamless thanks to services such as the one offered by Canada Post Borderfree. Here’s what you can expect, and how you can get started test marketing and building a Canadian housefile as part of your overall circulation strategy.

Sizing Up the Market

There are approximately 33 million people and 12.5 million consumer households in Canada. Similar to the United States in many ways, Canada has an affluent, high-tech and urban society. Almost 20 percent of the total Canadian population resides in the province of Quebec, where French and English speaking people are split about 70-to-30. There are three groups in Quebec: French unilingual, English unilingual and bilingual. Language laws are a touchy issue. Therefore, when mailing to Quebec, select only English-speaking addresses. Avoid sending an English-language catalog to a non-identified English speaker. Although this reduces the size of the potential universe, it’s the safe thing to do.

What to Expect

Based on the fact that the Canadian population is about one-tenth that of the U.S. population, a U.S. catalog company should be able to generate 10 percent of its annual sales in Canada. Naturally, it’ll take several years to generate this amount of revenue. But it’s a good goal.

The chart “Canadian vs. U.S. Prospect List Results” (click thumbnail below to enlarge) is a comparison of typical results, e.g., response rate and average order size, for Canadian vs. U.S. response rates from prospect lists in Canada, which often are 25 percent to 40 percent higher. Response rates tend to be higher for several reasons: Canadians haven’t yet been inundated with catalogs; there aren’t as many catalogs to choose from; and there’s a favorable currency exchange rate right now. If you have a good merchandise offering, response should be strong.

A Checklist

Determining the market size and universe is the No. 1 priority. Once this is done, the other points can follow.

Determine the market size. Make certain there’s a large enough universe of prospect names to support your offer.

Mail the same catalog you mail in the United States. There’s no need to produce a separate version.

U.S. prices are OK. While it’s always best to show prices in Canadian dollars, it’s fine to print U.S. prices when the exchange rate is favorable, i.e., within 10 percent of the U.S. dollar.

Avoid late or last-minute mailings. It takes time to move goods from one country to another. Avoid mailing after Nov. 15.

Don’t limit prospecting to the same lists you’re using in the United States. Most likely, you’ll find lists that work in Canada would never work for your offer in the United States.

Prospecting in Canada

Direct response catalog lists. Indicative of the limited universe counts, most Canadian catalog lists are quite small. But these files are growing as more U.S. catalogers expand into Canada.

(For U.S. catalog companies that market in Canada and have their Canadian buyer files available for rental, see the link below for a list of some datacards we pulled together with the help of Tony Gilroy from Direct Media Canada.)

That said, although there are plenty of U.S. catalogers in Canada such as L.L. Bean, many don’t make their lists available. Due to the limited universe of buyers and the cost to acquire those buyers, many mailers won’t rent out their customer names.

Based on list-rental prices and postage, it’s more expensive to prospect to Canada. A higher response rate offsets higher costs.

Cooperative database lists. The Abacus Canada Alliance offers an advantage to U.S. catalogers wanting to develop and grow this market. Abacus Canada now has more than 8 million households in its database and more than 175 Alliance members. There are more than 20 million transactions a year, $800 million-plus spent and an average of three-plus transactions per household.

Abacus Canada could be an excellent source of prospect names. Members must contribute their Canadian customer transaction information to the Alliance as a condition of participation. You must have housefile names to contribute in order to select names from the database. Unlike its catalog-only database in the United States, the Abacus Canada co-op is open to all consumer direct mailers, including catalogers, publishers, continuity mailers, retailers, etc. Prospect names selected from Abacus Canada rent for $95/M (compared with $70/M for names from its U.S. database).

Doing business in Canada can be expensive. Canada Post Borderfree can facilitate Canadian orders for U.S. catalogers by managing customs and duty issues as well as handling delivery and returns of packages. Postage and list costs are higher in Canada. For example, a catalog that costs 24 cents to mail in the United States (after postal discounts) will cost about 55 cents to mail in Canada. Canada Post, the privately held, government-sanctioned Canadian postal system, does offer some volume discounts for mailing into Canada, albeit mostly for direct mail pieces. List costs run about 20 percent to 50 percent higher in Canada as well. Much of the additional costs can be offset by higher response rates.

Getting Started

Tips to get started in Canada:

• Contact a list broker and determine the market size for your particular merchandise offer. There are universe limitations in Canada.

• Contact Canada Post to determine your mailing and catalog distribution costs.

• Review your plans with your printer.

Stephen R. Lett is president of catalog consulting firm Lett Direct Inc. Reach him at (302) 537-0375 or via his Web site: www.lettdirect.com.