Canadian Distribution Strategy for U.S. Organizations

For many American companies, Canada can be an afterthought considering its small size relative to the US. However, given its intricacies, it would be a mistake for American companies to assume that Canada is much the same as the US as the Canadian market and topography is very different from that of the United States.  The key to unlocking the best Canadian distribution strategy is to understand these differences.

Canada’s population is 11 percent of the U.S. population based on 2015 data, despite being nearly 25% larger than the contiguous lower 48 United States (38.85 MM square miles vs. 31.12 MM square miles).  The Canadian population is primarily inhabited near the continental U.S. border which is 3,987 miles long, as the population map below shows:

Map created in Tableau. Data source: http://www12.statcan.gc.ca/census-recensement/2011/dp-pd/hlt-fst/pd-pl/Table-Tableau.cfm?T=301&S=3&O=D

The distribution to Canadian customers can be complex as a result of market, distance, regulations and tax requirements.  However, many companies have evaluated their options and selected one of the following distribution strategies either shipping direct from U.S. or establishing warehousing operation(s) in Canada.  The selection of which distribution is right depends on a number of factors, such as:

  1. Sales volume

  2. Service requirements

  3. Distribution center costs

  4. Transportation costs

  5. Inventory carrying costs

  6. Type of customer

  7. Etc.

Here are some high-level benefits/disadvantages depending on the strategy: