Selecting a 3PL for Your Canadian E-Commerce Logistics NeedsLearn All About Canadian E-Commerce Logistics 3PL Selection
Driven by a need for convenience and personalization, Canadian customers have embraced online shopping but have been a bit slower to do so than American consumers. Even with the success of e-tailing, Canadian merchants have been disinclined to adapt to the wave of e-commerce shopping. By 2020, it is expected that approximately 10 percent of the annual $352 billion in retail sales will be generated from online shopping. Canadian e-commerce, not as widely used as in the United States is still a considerable force in retail and is now impacting B2B as well as B2C commerce.
Compare this to the popularity of e-commerce in the United States. According to the United States Census Bureau, approximately 10 percent of American retail sales are due to e-commerce, $137.7 billion of the total $1,344.9 billion in total retail sales.
Why the disparity between the United States and Canada when it comes to e-commerce?
- Significant challenges exist in fulfilling and distributing online orders across a country as vast in size as Canada with its existing infrastructure and population distribution
- Canadian retailers have failed to adapt sufficiently to meet the challenges of e-commerce retailing
- Nearly half of all Canadian small businesses do not have websites to conduct sales
- Canadian consumers spend a third of their total online shopping dollars south of the border
Impact of E-Commerce on Canadian Warehouse Market
Geographically, Canada is a huge country with approximately 18% of its population living in rural areas. As of 2016, nearly 82% of Canadians lived in urban areas, primarily in Ontario, Quebec, British Columbia and Alberta. About 95% of Canadians live close to the U.S. border as most of the country is very far north in regions that are less habitable and easy to navigate.
Although Canadian customers eagerly await delivery of their packages, delivery typically takes 2 to 3 days for major metropolitan areas including Toronto, Calgary and Vancouver and can take 7 to 8 days to reach their end destinations for more rural areas.
Across Canada, industrial real estate is in increased demand as the logistics industry pivots to position fulfillment centers, warehouses and distribution centers within striking distance of major population centers to reach e-commerce omnichannel delivery expectations. Vacancy rates are slim for large, big box distribution center space.
According to PwC, warehousing and fulfillment is driving the market for industrial space, largely due to increased need for last mile delivery and e-commerce facilities. This tends to be true throughout Canada. In a recent survey, consumer expectations regarding “fast shipping” had noticeably changed: whereas 53% of respondents considered 3-4 days to meet the standard in 2015, two years later only 35% found 3-4 days to be considered “fast” for that delivery standard.
Demand for industrial real estate space for warehouses and fulfillment centers in Canada is strong and limited new supply is driving up prices. Leasing of warehouse space has also shifted. Today approximately 20 percent of new leasing can be attributed to e-commerce fulfillment in Canada. E-commerce fulfillment in Canada is generating three times the demand for warehouse and distribution space as that required for the logistics to service brick and mortar retail operations.
of new leasing can be attributed to e-commerce fulfillment in Canada
Logistics service providers have found that the role of location is critical to today’s supply chains, enabling greater efficiency, agility and different service level options and expectations. Supply chain labor is also impacted by location. Industrial real estate properties are now being marketed in ways to focus more on amenities to attract the needed workforce.
A new generation of facilities is cropping up to meet the needs of e-commerce known as “Last Touch™” facilities. Especially popular in 24-hour cities that have significant high-income populations, goods are delivered directly to consumers, bypassing stores. Last Touch™ distribution centers are purpose-built to ensure the achievement of the rapid delivery standard, typically require three times the typical amount of warehouse space and are well-positioned to reach major population centers along optimal transit routes. Although they require more warehouse space, these facilities tend to have smaller footprints than traditional warehouses and are often multi-story. Advanced automation helps to reduce the size of the workforce while optimizing warehouse space and the speed of operations.
Canadian E-Commerce Logistics Lessons Learned
Whether inventory is sourced from the United States or elsewhere, moving the goods closer to the consumer as quickly as possible is crucial. As the e-commerce trend continues to boom, many companies are turning to third party logistics providers (3PLs), outsourcing the warehousing, transportation and logistics to ensure e-commerce fulfillment needs are met.
When choosing a Canadian 3PL, consider the specific capabilities of each company including the extent of their operation near the induction point at which goods will enter Canada as well as the number and location of warehouses across the country.
18 Issues to Consider When Selecting a 3PL for E-Commerce Fulfillment in Canada
Consider if the WMS the 3PL is using is a legacy system with outdated capabilities that would prohibit sharing of real time intelligence or if a leading edge WMS is being used to provide high level service for e-commerce sales.
Some innovative 3PLs now can customize solutions to meet specific business needs and requirements, especially important for e-commerce retailers. E-commerce retailers need to ship smaller packages in higher volumes, typically each with a small number of items. It also is important to note that some logistics service providers can take advantage of the CBSA Courier Low Value Shipment Program to transport goods directly into Canada with only minimal disruptions.
It is often ideal to have shipments remain under the control of a single logistics services provider once in Canada, however many logistics providers do not have this capability.
- Objective: simplify import process for low value goods
- Streamlines customs processing of shipments valued at Can$2,500 or less
- Goods are not prohibited, regulated or controlled
- Provides the courier industry with expedited release
The world today is changing. From coast to coast across Canada, consumers use search engines to research products before buying online, they write reviews and post pictures of new purchases on social media. Artificial intelligence is even used in online auctions and supply chain management. It’s a fast-paced, action-packed customer-centric world out there and it is getting faster every day.
The pace of change, the e-commerce boom and changing consumer expectations in Canada and around the world are leading more retailers to outsource warehousing and logistics operations to third party logistics providers. 3PLs lease or purchase warehouses, fulfillment centers and distribution center facilities, operate last mile delivery operations and extend the services of retailers to consumers.
In Canada, it can be especially challenging to select a 3PL to handle e-commerce logistics. Some 3PLs offer a comprehensive suite of services including maintenance of online stores, providing payment gateways, enablement of mobile commerce, web hosting and shopping carts in addition to providing warehousing, logistics, inventory management and order fulfillment services. When selecting a 3PL, make sure you consider the issues on our list. Remember that a third party logistics provider not only handles fulfillment of orders but also, and more importantly will be the face of your brand. Poor service, lack of shipment visibility, delayed deliveries-all those issues, if they occur, will reflect on your brand directly and shape the impression your customers have of you, not the 3PL. Poor customer service and bad experiences can result in lack of brand loyalty, poor public reviews on social media and a diminished reputation.
When selecting a 3PL, take your time, do your homework, talk to references and be sure. The future of your e-commerce retail business will be in their hands.
3PLs Use Technology as a Competitive Advantage
Today, third party logistics providers rely on leading edge technology not only to provide the highest level of service to their clients but also as a differentiator to compete and win new business.
- To provide maximum benefits for e-commerce omnichannel clients, 3PLs invest in tools such as cartonization and shipping management to keep shipping costs down while maximizing order fulfillment rates
- Having access to the ability to integrate with shipping carriers, material handling and other systems, shopping carts and web stores connects 3PLs and their clients to the fast-paced world of digital commerce