September 1st, 2024
Selling on Amazon.com vs. Amazon.ca: A guide for Canadian businesses
For Canadian businesses, understanding the nuances between selling on Amazon.com vs. Amazon.ca is a pivotal step in mastering cross-border e-commerce.
This guide breaks down the main differences and similarities to help you make a decision.
Read on to learn more.
Market size and potential
When considering the vast landscape of e-commerce, the choice between Amazon.ca vs. Amazon.com often boils down to market size and potential. Amazon.com offers access to a diverse and extensive American consumer base, promising higher traffic volumes but also stiffer competition. This consumer base difference becomes clear when we compare the U.S. population, with 330 million people, to Canada’s 38 million.
The increased competition inevitably leads to higher CPCs (Cost per Click), which can significantly erode your profit margins. Moreover, the marketplace offers a vast array of search avenues for products. Therefore, mastering SEO and conducting thorough keyword research are crucial for achieving success in this competitive environment.
In contrast, Amazon.ca presents a more targeted approach to Canadian customers, potentially reducing competition but also limiting market size.
Here, the CPCs are usually lower because of less competition. By using fewer keywords, brands can optimize listings more effectively for conversion. This means focusing on quality rather than stuffing them with excessive SEO.
Fee structures and pricing strategies
Navigating the complexities of Amazon FBA Canada vs. US requires a deep dive into their respective fee structures and pricing strategies. While Amazon.com might necessitate more aggressive pricing due to its competitive environment, Amazon.ca allows for more flexibility.
The cost is usually the same, with a 15% referral fee (which can vary across different product categories) and FBA fees based on the size, weight, and category of the item.
Profitability hinges largely on the sale price, which tends to be slightly higher on Amazon.ca due to reduced competition. Conversely, selling on Amazon.com often results in higher volume sales, contributing to overall profitability.
On the Canadian platform, PPC costs are substantially lower compared to the US, which allows sellers to expand their profit margins. The reduced competition also leads to fewer price wars, moreover, improving the chances for profitability.
Understanding these distinctions is crucial for optimizing profitability on either platform.
Currency
It is important to know that Amazon pays sellers in the local currency of their bank’s location.
From that point, there are two options. You can either request Amazon to transfer your USD balance to your CAD bank account or open a USD bank account with a U.S. bank or a virtual bank. Keep in mind that holding a USD account from a Canadian bank will not work. If you choose to receive payments in CAD, Amazon will convert your USD balance using its currency conversion rate before making the payment.
Making the right decision can help you avoid double currency conversion when paying suppliers or service providers in USD, optimizing your financial transactions. Additionally, considering the exchange rate fluctuations between the Canadian dollar and the US dollar is essential for accurate financial planning.
Logistical considerations
Efficient logistics are the backbone of successful cross-border e-commerce. Canadian businesses must weigh the differences in fulfillment options, including the specifics of Amazon’s FBA program in the US and Canada.
Whether it’s dealing with shipping options, storage fees, or delivery times, the choice between Amazon.ca and Amazon.com can significantly impact your operational efficiency. Moreover, shipping costs and the customer experience play a crucial role in customer satisfaction and repeat business.
The brokerage fee plays a crucial role in determining the project’s overall profitability. A brokerage fee is a charge applied by a customs broker for handling the importation of goods into a country. These fees can vary based on the complexity of your shipment and the value of your goods.
Delays in customs clearance due to inadequate handling can affect your inventory levels and sales. Proper management of brokerage services helps avoid such delays and ensures compliance with Canadian import regulations, making shipping to Canada a more cost-effective process.
Customer expectations
On Amazon.com, U.S. customers generally expect fast shipping, competitive pricing, and a vast selection of products. The emphasis on speed and convenience is a significant factor in customer satisfaction within this market.
In contrast, Canadian customers shopping on Amazon.ca may be more accustomed to slightly longer shipping times. Additionally, they often prioritize supporting local businesses, which can influence their purchasing decisions, particularly when local alternatives are available.
Customer reviews and feedback
The expansive customer base on Amazon.com allows businesses to quickly accumulate reviews, which can greatly impact sales. However, the high volume of transactions also means that negative reviews can spread rapidly, potentially harming a brand’s reputation.
On the other hand, the smaller market size on Amazon.ca results in reviews accumulating more slowly. Despite this, Canadian customers tend to value detailed and genuine feedback, making positive reviews especially powerful in building trust and credibility in this market.
Regulatory environment
The regulatory landscape presents another layer of complexity for Canadian sellers. The differences between selling on Amazon.ca and Amazon.com extend into customs duties, compliance requirements, tax obligations and commercial liability insurance.
- Customs duties and Amazon policies: Customs regulations will be first thing to review, if your intention is too import goods from abroad.
Also, leveraging Amazon’s Fulfillment by Amazon (FBA) services can ease the customs process by managing import duties and taxes for sellers, making international sales on Amazon.ca more efficient.
Amazon’s policies should be included in this initial analysis, as each industry may face unique restrictions and conditions when selling products in a new country.
- Compliance requirements: You can use your Canadian Amazon account to sell in the U.S. without registering a business or obtaining a business license in the U.S.
However, Amazon must comply with U.S. laws, such as the INFORM Act, and may require you to provide official documentation, including tax identification. Your business address, bank account, and personal identity—verified through documents like a passport or driver’s license—will also need to be confirmed. Keep in mind that while Amazon enforces certain policies, you are ultimately responsible for ensuring compliance with all legal requirements.
- Tax obligations: Canada imposes three primary types of taxes: the Goods and Services Tax (GST), the Harmonized Sales Tax (HST), and the Provincial Sales Tax (PST) on goods and services. The rate of tax you need to charge for a supply is based on the place of supply and type of product. There are some zero-rated supplies (not taxed) as well.
For example, at present, the rate for other taxable supplies depends on the province or territory. The current rates are:
Province | GST and HST | PST |
Alberta | 5% | 0% |
British Columbia | 5% | 7% |
Manitoba | 5% | 7% |
New Brunswick | 15% | N/A |
Newfoundland and Labrador | 15% | N/A |
Northwest Territories | 5% | 0% |
Nova Scotia | 15% | N/A |
Nunavut | 5% | 0% |
Ontario | 13% | N/A |
Quebec | 5% | 9.98% |
Prince Edward Island | 15% | N/A |
Saskatchewan | 5% | 6% |
Yukon | 5% | 0% |
For more information related to tax rules in Canada, you can follow this link.
By contrast, in the USA, many states have set a sales threshold of $100,000 as the trigger for economic nexus. If a seller’s sales to customers in a state surpass this threshold within a specific period (usually the current or previous calendar year), they must collect and remit sales tax in that state.Continue to read more here.
- Commercial liability insurance: Amazon requires you to obtain, maintain, and upload proof of commercial liability insurance with a minimum coverage of USD 1 million within 30 days after your gross sales exceed USD 10,000 in a single month on Amazon.com. However, it is strongly recommended to have commercial liability insurance in place even before reaching this threshold.
A thorough understanding of these aspects is essential for seamless operations and legal compliance in cross-border selling. Ensuring a smooth customer service experience is also vital, as regulatory issues can affect how Canadian consumers perceive your brand.
Conclusion
Choosing the right platform for selling – whether Amazon.ca or Amazon.com – involves a strategic analysis of the canadian market and U.S. market potential, fees, logistics, and regulations. For Canadian businesses eager to dive into cross-border e-commerce, this guide provides a starting point for navigating the complexities of both marketplaces.
Working with a specialized agency can simplify the process of reaching customers on Amazon. This can help position your business on the platform, even if you’re just starting with your Amazon seller account. The agency will have expertise in Amazon marketplace strategies. Their knowledge can benefit your business and improve your chances of success.
Ultimately, understanding the dynamics of Canadian consumers and the specifics of selling on Amazon Canada or Amazon USA can enhance your online shopping strategy, and improve your customer service and overall customer experience.
