Breaking the Border:

International Opportunities for Growing Canadian Retailers

Exploring strategic outsourcing of omnichannel, fulfillment, and customer service capabilities

A 2017 eTail Canada Benchmark Report

Breaking the Border: International Opportunities for Growing Canadian Retailers
New Paths to International Retail

In the near future, 60% more Canadian retailers will outsource

B-to-C fulfillment than are outsourcing now.

Canadian retailers face unique barriers when looking In this report, you will discover:
to engage customers abroad, most notably in the
United States. Even with expanding capabilities,
obstacles associated with fulfillment, customer care,
and omnichannel make international growth a complex • Why outsourcing may soon become more common
challenge that many retailers have chosen not to among small Canadian retailers
prioritize. But even as smaller Canadian retailers manage
customer service and fulfillment in house, they are looking • What methods Canadian retailers will adopt to
toward cost-effective solutions and partnerships that broaden customer service capabilities
will enable them to build out omnichannel, service, and
fulfillment capabilities in both Canada and the U.S. • How these retailers are responding to growing
demand for customer service to drive revenue

Traditionally, these retailers have found little need to • Which omnichannel capabilities retailers will
outsource their capabilities. But our data shows that
expand to meet evolving customer demands
while less than one-quarter of Canadian retailers are
outsourcing B-to-C fulfillment, that statistic will more
than double as these retailers carry out their plans in the
years to come. And while nearly all Canadian retailers in
this study perform customer service in house, they are
growing service capabilities beyond traditional channels
like email and phone into social media and chat with
potential to engage with new markets in the U.S.

eTail Canada and Radial conducted a survey of 92

attendees and members of the 2017 eTail Canada
conference community to discover their biggest
fulfillment, service, and omnichannel challenges, especially
in terms of engaging customers across borders. This
analysis looks into their challenges to profitability as far as
these capabilities are concerned.

Breaking the Border: International Opportunities for Growing Canadian Retailers

About the Research
Most Canadian retailers in the study are small retailers of apparel, accessories, and consumer goods, with less than $10
million in annual eCommerce revenue and predominantly in-house customer service practices.

What type of retailer are you?

34% 17% 12% Over half of respondents represent retailers of either

apparel and accessories (34%) or consumer goods
Apparel & Consumer Home
Accessories Goods Improvement (17%), the two largest groups of retailers in the study.
Home improvement retailers (12%) make up the third-
largest group.
8% 7% 6%
Consumer Business Luxury Among the smaller groups of retailers are consumer
Electronics Supplies Goods
electronics (8%), business supplies (7%), and luxury
goods (6%). And in each case, less than 5% of
4%
Grocery
3% 3% respondents represent retailers of groceries (4%),
Beauty Other beauty (3%), sporting goods (2%), footwear (2%), and
automotive (2%). Three percent of retailers are of
2% 2% 2% some other type.
Sporting Footwear Automotive
Goods

In the study, 53% of Canadian retailers are small,

with less than $10 million in annual revenue.

What is your annual eCommerce revenue?

53% Our study drew an overwhelming response from smaller

retailers versus other sizes when considering all ranges
of annual revenue measured. Most respondents (53%)
represent retailers with less than $10 million in annual
eCommerce revenue. The remaining 47% of retailers
are nearly evenly divided between $10 million to $100
12% 11% 14%
10% million or more in annual eCommerce revenue, where
14% of respondents represent retailers earning $100
million or more in eCommerce revenue annually.
Less than $10M to $25M to $50M to $100M +
$10M $25M $50M $100M

What we will find is that the results of this study are both highly characteristic of smaller Canadian retailers, but implicit
about what their goals and aspirations are for their future. These retailers will continue to retain some degree of
independence even as they look further into cost-effective options to improve and broaden omnichannel, service, and
fulfillment capabilities.

Breaking the Border: International Opportunities for Growing Canadian Retailers

Canadian retailers will look toward alternate methods of
fulfillment as they consider cross-border operations.
As they continue to cater to local markets, Canadian retailers of all sizes—especially smaller retailers—predominantly
use in-house fulfillment models, and either single node distribution centers (DC) or a combination of store and DC
fulfillment. But our findings indicate retailers are transitioning more toward outsourcing fulfillment capabilities as they
consider opportunities to break into new international markets, most notably in the U.S.
14% of respondents were enterprise companies, while 33% were in the mid-size range. we can say “especially smaller retailers” without excluding these larger companies.

Currently, 59% of Canadian retailers do not ship to the United States,

and 61% of retailers do not outsource any aspects of their businesses.

Although the majority of Canadian retailers do not What aspects of your business do you outsource?
outsource any aspects of their business, B-to-C
fulfillment and B-to-B fulfillment are the most popular
We do not outsource any
outsourced capabilities, with B-to-C fulfillment at 23% aspects of our business. 61%
and B-to-B fulfillment at 10%. Less than 10% B-­to-­C fulfillment 23%
of Canadian retailers outsource other aspects of B-­to-­B fulfillment 10%
their business.
Other 8%
Fewer retailers outsource their contact center (7%), Contact center 7%
overflow or peak capacity needs (6%), value-add Overflow/peak capacity
6%
needs
services (3%), and returns (3%). Eight percent of
Value-add services 3%
retailers claim they outsource some other aspects of
Returns
their business. 3%

But while 66% of Canadian retailers do not plan to

outsource any or more aspects of their business,
it is implied that 14% plan to outsource B-to-C Do you have plans to outsource any of the
fulfillment for the first time. That is, in addition to the following aspects of your business?
23% of Canadian retailers who already outsource We do not plan to
B-to-C fulfillment, another 14% plan to do so in the outsource any/more 66%
aspects of our business.
future, meaning 37% of Canadian retailers will have
B-­to-­C fulfillment 14%
outsourced B-to-C fulfillment.
Value-add services 9%
More Canadian retailers plan to outsource other 6%
Returns
aspects of their business. Nine percent more plan to
Overflow/peak capacity 6%
outsource value-add services, for example—three needs
times the number of Canadian retailers already doing 6%
Contact center
so. Fewer retailers plan to outsource returns (6%), 5%
B-­to-­B fulfillment
overflow or peak capacity needs (6%), contact center 6%
(6%), B-to-B fulfillment (5%), or other aspects of Other

their business (6%).

Still, many Canadians highlight a number of barriers to cross-border shipping, while many more say shipping to the
U.S. is not a priority at all. But if we look at these companies holistically, we will find more indications of desire for
international growth, most notably in customer service models.

Breaking the Border: International Opportunities for Growing Canadian Retailers

Canadian retailers will look toward alternate methods of
fulfillment as they consider cross-border operations.
Among Canadian retailers, customer service is increasingly called upon to become a profit center, not only remedying
customer complaints but upselling and cross-selling as well. These retailers are looking into new digital options for
servicing customers and providing opportunities for growth, potentially to international audiences.

Is your customer service in-­house or As with most other aspects of their businesses, a
great majority of retailers (85%) perform customer
outsourced?
services in house, and 11% of retailers use both
in-house customer service and outsource customer
service to partners. Only 4% of retailers exclusively use
outsourced partners for customer service.
In-­house 85%
Outsourced
with a
partner(s)
4% Email, phone, social media,
and chat features are
perhaps the most prominent
Both in-­house channels for providing
and outsourced
with a partner(s)
11% customer care in retail.
Canadian retailers providing
in-house services favor all
four of them considerably—
Through which of the following channels
and few others.
do you provide customer care?

98% 93%
82% When asked to select as many channels as applies,
retailers claim to use several different channels for
customer care, and many retailers use more than
48% one. For example, almost all retailers use either email
(98%) or phone (93%) for customer care. Interestingly,
another majority (82%) uses social media for customer
6% care; and almost half of retailers (48%) claim to use
chat functionality for customer care.
Email Phone Social Media Chat Other

Very few of these retailers use any other channel for customer care, indicating these four are by all indication the most
popular customer care methods among Canadian retailers. But even as most retailers favor email and phone channels
to provide customer care, they will encounter barriers to these channels when servicing customer internationally—
whether by restrictive email regulations or long-distance phone expenses. Adopting a foundation for international
service may be a partial cause for many smaller Canadian retailers to incorporate newer technologies and channels into
their customer service mix.

Breaking the Border: International Opportunities for Growing Canadian Retailers

As it relates to customer service, Increasing customer satisfaction (CSAT) scores
overall remains the most popular area of focus
what are your key focus areas for
for these retailers as they expand their in-house
improvement in 2017? customer services into additional channels. But
as customer service teams are increasingly called
66% upon to contribute to sales cycles, increasing upsell
and cross-sell volume have become key focus areas
55%
of improvement for another majority of retailers
in 2017—the only majority other than CSAT, over
43%
core customer service KPIs like improving first call
resolution, improving average handle time of calls, and
29% cost containment.

Almost half of retailers (43%) are focusing on

14%
10% improving first call resolution. Improving the average
handle time of customer service calls is a goal for 29%
of retailers. Only 14% of retailers are focusing on cost
containment as it relates to customer service, and 10%
Increase Increase Improve Improve Cost Other
customer upsell first call average containment of retailers claim they have other key focus areas for
satisfaction
scores
and/or resolution handle improving customer service in 2017.
overall
cross-­sell time of
volume calls

As we will find, retailers taking on these added roles will turn to specific technology and training providers to help them
accomplish these goals. While many retailers are already pivoting toward a sales-oriented role with some success, third-
party resources providing tools, analytics, and training will enable customer service associates to apply best practices
and deliver greater business value within their service experiences.

Breaking the Border: International Opportunities for Growing Canadian Retailers

Barriers to U.S. distribution drive Canadian retailers from
considering it an option as they focus instead on local markets.
Among Canadian retailers, customer service is increasingly called upon to become a profit center, not only remedying
customer complaints but upselling and cross-selling as well. These retailers are looking into new digital options for
servicing customers and providing opportunities for growth, potentially to international audiences.

What percentage of your eCommerce Among these retailers, shipping eCommerce orders
orders are shipped to the United States? to the U.S. is in limited practice. In fact, over half of
retailers surveyed (59%) do not ship eCommerce
orders to the U.S. One-quarter of Canadian retailers
59% ship from 10% or 25% of eCommerce order to the
U.S., and fewer retailers ship more than 25% of their
eCommerce orders there, citing several obstacles
or priorities keeping them from doing so. And in
considering Canadian retailers’ both fulfillment and
customer service models, it’s clear why the majority
of respondents do not ship eCommerce orders across
25%
their southern border.

9% Among those retailers not shipping to the U.S., 42%

claim it simply is not a priority; but others within this
5% 2% segment identify barriers such as shipping costs,
delivery speeds, and partner capabilities.
We do not 10% to 25% 25% to 50% 50% to 75% 75% to
ship to the 100%
U.S.

Cost, partner capabilities, and regulations are the top barriers

Canadian retailers face when shipping to the U.S.

Breaking the Border: International Opportunities for Growing Canadian Retailers

Since you do not ship to the United States, what is preventing you from doing so?

16% 21%
42% Partner
capabilities
Cross-­border
shipping costs
Not a priority

40%
9% Delivery speed to
U.S. customers Other

Other Responses:
• Complexities of FDA regulations • Group company agreement
• Our parent company is U.S.-based and takes care of • Systems upgrade
sales there • Focusing on Canadian growth first
• Sister American company services U.S. • We have a separate U.S. e­Commerce site
• U.S. orders are handled by the IKEA U.S. site • Have own U.S. subsidiary
• Territory regulation
• Company policy
• Club territory restrictions
• Exclusivity to Canada only

Forty percent of retailers claim they have other issues preventing them from shipping to the U.S., including regulatory
and territorial restrictions, exclusivity to Canada, systemic issues, and most notably, existing business units or parent
companies already established in the U.S. that manage distribution and other matters as U.S. entities.

For many Canadian retailers, prioritizing U.S. services may have been unthinkable given these barriers alone. But
despite these obstacles, retailers’ broadening of customer service methods into cost-effective but geographically
agnostic channels like social media and chat may be means for smaller retailers to begin engaging with customers
abroad more fluidly, as instant engagement via social media and online chat features becomes more approachable.
Alongside new fulfillment strategies, retailers can increase revenue if they begin shipping to the U.S. and expand
customer service capabilities to do it effectively.

Breaking the Border: International Opportunities for Growing Canadian Retailers

Canadian retailers’ fulfillment and order management
objectives indicate they will overcome obstacles to shipping
to the U.S.
Although most Canadian retailers are managing customer service, order management, and fulfillment exclusively in-
house, almost half of retailers use a combination of store and distribution center fulfillment systems, while another 38%
use at least a single node distribution center for fulfillment. Only 7% of these retailers use simply store fulfillment, and
almost one-quarter of retailers are using a hybrid fulfillment model featuring both in-store and partner resources.

Are you doing your own fulfillment, or do The majority of retailers in the study (68%) indicate that
you have a fulfillment partner? they do their own fulfillment exclusively. Twenty-four
percent of retailers—the next largest group—do their
own fulfillment, but use a fulfillment partner or partners
68% We do our own fulfillment
exclusively. as well. Only 8% of retailers use a fulfillment partner or
24% We do our own fulfillment, partners exclusively.
but we also use a fulfillment
partner(s).
8% We use a fulfillment
partner(s) exclusively.

Although the vast majority of

Canadian retailers run their
fulfillment operations in house, the
vast majority of Canadian retailers
What is your current fulfillment model? use some form of distribution
center fulfillment model.
41% Combination Store and DC
Fulfillment
38% Single Node DC
7% Two Node model
In terms of fulfillment models, nearly half of retailers
7% Store Fulfillment
(41%) use a combination of store and DC fulfillment. A
7% Other
group of retailers similar in size (38%) uses only single
node DC as their fulfillment model. Far fewer retailers
use a two node model (7%), store fulfillment (7%), or
some other fulfillment model (7%).

In line with these retailers’ clear tendency toward in-

What type of order management do you house capabilities, 75% of retailers use in-house OMS,
currently use? while 25% use outsourced OMS.

75% In-­h ouse OMS
25% Outsourced OMS
Even alongside in-house order management, greater
fulfillment capabilities could allow for more cost-
effective solutions for shipping across the border. As
retailers increase their fulfillment capabilities, their
customer service capabilities must scale alongside
their expanded audience, especially as fulfillment
opportunities open up in the U.S.

Breaking the Border: International Opportunities for Growing Canadian Retailers

How would you describe your goals in terms of fulfillment by the end of 2017?

Aside from those retailers who are not prioritizing

Improve fulfillment 70%
efficiency / cost shipping to the U.S., cost is the greatest barrier to
cross-border shipping, as previously mentioned. But
Improve returns
45% the vast majority of Canadian retailers (70%) identifies
handling
improving fulfillment efficiency and cost as a goal
Improve delivery speed
for their fulfillment operations by the end of 2017,
to Canadian customers 36% indicating their priorities are in line with overcoming
only
cross-border obstacles. Almost half of retailers (45%)
Add customized would like to improve their handling of returns.
/ personalization 32%
services from DC

Improve delivery
speed to both U.S. and 29%
Canadian customers

Improve delivery speed

to U.S. customers only 3%

Other 6%

In sum, 32% of Canadian retailers want to improve delivery speed to the

U.S. Seventy percent of Canadian retailers want to improve fulfillment
efficiency and cost, two barriers to successful international fulfillment.

Over one-quarter of Canadian retailers also identify
improving delivery speed to both U.S. and Canadian
customers as a fulfillment goal by the end of 2017.
One retailer from the study reiterated this desire for
international fulfillment, claiming their goal is to “find
partners to facilitate fulfillment beyond North America,
create an improved efficiency model for U.S. fulfillment,
and reduce the costs of Canadian fulfillment.”
In each case, about one-third of retailers have goals to
improve delivery speed to Canadian customers only;
add customized and personalized services from DC; and
improve delivery speed to both U.S. and
Canadian customers.
Only 3% of retailers are targeting only the U.S. in terms
of their fulfillment goals by the end of 2017. Six percent
of retailers claim they have other goals, including finding
partners to facilitate beyond North America, and creating
an improved efficiency model for both U.S. and Canadian
fulfillment.
Although Canadians experience a great number of
barriers to sales growth across the border, they are
identifying opportunities to reach that goal in the form of
cost reduction, greater speed and efficiency, and forming
partnerships with third parties poised to facilitate those
changes for the long-term.

Breaking the Border: International Opportunities for Growing Canadian Retailers

Canadian retailers will expand omnichannel offerings,
indicating a greater need for order-management and
fulfillment capabilities.
Canadian retailers offer a strong mix of omnichannel capabilities among the options available. And as our findings
show omnichannel adoption will continue to grow, these retailers’ order-management capabilities will grow with them
—whether by expanding upon in-house resources, growing outsourced capabilities, or both.

What role does omnichannel play in your

strategy? Do you currently…?
33% 33% The most popular categories, drop ship and ship-
29% from store, are utilized by 33% of Canadian retailers
respectively. Twenty-nine percent offer pickup
in-store, and 17% offer ship-to store. And these
17% omnichannel capabilities are isolated, where only
1% of Canadian retailers represent any other
omnichannel capability.
1%

Drop Ship Ship-­from Offer pickup Offer ship-­to Other

store in-­store store

Omnichannel capabilities are in wide use by Canadian retailers, and

those numbers will grow in the near future—for ‘pickup in-store’ and
‘ship-to store’ especially.

Which of the following omnichannel strat- Canadian retailers have great plans for implementing
egies do you plan to implement in the omnichannel strategies in the near future. While
37% of Canadian retailers still do not plan to
near future? implement any of these capabilities in the near
future, the numbers for those that do plan to use
40% 34% 37% these capabilities show an increase in a willingness to
31% 29% adopt new omnichannel technologies.

In each case, roughly one-third of retailers plan

to implement at least one of the omnichannel
mentioned. And although 37% of retailers have no
Pickup Ship-­to Ship-from Drop Ship We do not plan plans to implement any of the options available in
in-­store store store to implement the future, the remaining 63% are wholly invested in
any of these in these strategies.
the near future.

Canadian retailers can continue utilizing their in-house capabilities in an agile way to meet the needs of existing
customers—utilizing in-store fulfillment, and drop ship, for example. As they grow their omnichannel capabilities,
outsourcing models may become increasingly effective to meet the evolving demands of those existing and
new audiences.

Breaking the Border: International Opportunities for Growing Canadian Retailers

Key Takeaways
Retailers that do not consider
cross-border shipping a priority
may be closing off emerging
opportunities to do so.
Whether because of their companies’
size limitations or because of regulations,
cost, or shipping times, retailers that are
not prioritizing cross-border shipping are
nonetheless missing out on opportunities to
tap into new and lucrative markets. Where
16% of Canadian retailers also cite limited
partnership capabilities as an issue, upgrading
fulfillment and omnichannel capabilities
through outsourcing may be an accessible step
to overcoming those barriers.
Broadening customer service
channels is the best means
for Canadian retailers to reach
international audiences.
Unlike email, and despite international
limitations associated with in-house phone
services, social media and chat capabilities
provide customers with instant access to
service representatives, no matter those
customers’ locations. Facilitating those
engagements allows those companies to cost-
effectively reach international audiences as
they choose to expand.
Breaking the Border: International Opportunities for Growing Canadian Retailers
Canadian retailers must to
some degree transition toward
outsourcing fulfillment models
to break into U.S. markets.
Increasingly, Canadian retailers will begin
outsourcing B-to-C and B-to-B fulfillment as
part of clear ambitions to expand into new
markets, whether they are local to Canada or
abroad. Transitioning to outsourced fulfillment
models aligned with cross-border shipping,
alongside greater omnichannel capabilities
and geographically agnostic customer service
channels, will support efforts to break into these
new markets.
Canadian retailers need
to prioritize omnichannel
capabilities to meet evolving
customer demands.
With limited physical presence in the U.S.,
Canadian retailers must fully invest in
omnichannel capabilities so that customers
in new markets can engage with their brands
successfully. Advanced omnichannel capabilities
may also help streamline the shipping process,
in addition to retail brands becoming a greater
presence in foreign customers’ lives, regardless
of geography.
Radial is the leader in omnichannel commerce technology and operations, enabling brands and retailers to
profitably exceed retail customer expectations. Radial’s technical, powerful omnichannel solutions connect
supply and demand through efficient fulfillment and transportation options, intelligent fraud, payments, and
tax systems and personalized customer care services.

Hundreds of retailers and brands confidently partner with Radial to simplify their post-click commerce
and improve their customer experiences. Radial brings flexibility and scalability to their supply chains and
optimizes how, when and where orders go from desire to delivery.

Learn how we work with you at www.radial.com

Or contact us:
sales@radial.com
1-877-255-2857

Breaking the Border: International Opportunities for Growing Canadian Retailers