E-Commerce Success in Canada Depends on Power of Two

Customer demands for more rapid and cost effective e-commerce delivery seem to be increasing on a daily basis. In fact not a week goes by now without my speaking with retailers and etailers that since the dawn of e-commerce have successfully serviced Canada from one fulfillment operation for the country and are currently rethinking this model.

In most cases their national fulfillment operations are either positioned in Toronto or Montreal, as well as some in Vancouver, which up until now have been totally acceptable solutions. However, it definitely appears the days are numbered for a single e-commerce fulfillment operation being a viable customer delivery experience solution for all of Canada.

Depending if your customer delivery service level goals are next day metro markets or same day will determine the appropriate the number of e-commerce fulfillment operations you will need coast to coast in Canada. For many what I’m calling the ‘Power of Two’ will be the most logical next step with the addition of a second e-commerce fulfillment operation in either Eastern Canada or Western Canada depending on location of your current national site.

Implementing a ‘Power of Two’ solution will allow retailers and etailers to reach all major urban markets for next day delivery. Based on a number of recent analyses for clients, it clearly indicates that a Greater Calgary Area and Greater Toronto Area model will provide the optimal service, coverage and cost.

Not only does the ‘Power of Two’ allow you to improve service delivery levels, it also mitigates the risk of having a shutdown, strike or other facility outage which could be fatal in current single site e-commerce fulfillment solutions. By implementing a ‘Power of Two’ solution your Canadian fulfillment operations will have redundancy built in to ensure you remain in business should a disaster or other disruption strike one of your operations.

Those US retailers and etailers still servicing Canada from their US facilities are also in a great position to benefit by tapping into the ‘Power of Two.’ Not only do you pick up the improved service levels either East or West depending on where you induct into Canada, you also mitigate the risk of being out of business in Canada should any untoward events or labor issues impact border crossings. It’s also important to note that any retailer or etailer with more than 60,000 e-commerce deliveries a year in Canada still servicing from a US fulfillment center are paying both a cost and service penalty for doing so.

Many retailers and etailers are also currently supporting their e-commerce fulfillment needs with an in house operation. This is of course perfectly acceptable, but the question becomes do you create another in-house operation East or West or look to outsource a second e-commerce site in the East or West as needed? Again I would assert the ‘Power of Two’ is again at work as by having one in-house site and one outsourced is an effective way to benchmark your business, challenging both your own operations folks and the 3PL to perform at peak levels.

Over the long term, the outsourcing of one of your fulfillment operations may also directly demonstrate the actual benefit potential of using a third party for e-commerce fulfillment. These benefits accrue in both labour and space flexibility which are very difficult to replicate and achieve with dedicated in-house e-commerce operations especially with the dramatic peaks in e-commerce demands. As well, advanced lean third party operators are incentivized to reduce operating costs with in-house operators often protecting current budgets in case of future needs.

In summary the ‘Power of Two’ is real with rapid results available now to retailers and etailers in customer delivery service, risk mitigation, flexibility and cost benchmarking. If you’re still shipping e-commerce for Canada out of one location in Canada or the United States you’re missing out on service and redundancy benefits. Finally, when the day comes, and be sure it will, that your CEO challenges you to improve on your e-commerce customer experience know that there is an easy answer and that is for you to tap into the ‘Power of Two.’

Jeff Ashcroft

A long time specialist in retail logistics and e-commerce fulfillment, Jeff works with SCI Group in Toronto which provides national retail & e-commerce logistics support for over 7,000 retail outlets/stores across Canada as well as e-commerce fulfillment operations for Walmart.ca, ToysRUs.ca, Rogers Wireless, Tim Hortons and DeSerres. He can be reached at Jeff Ashcroft jeff.ashcroft@scigroup.com @JeffAshcroft or feel free to call him at 416.401-3011 x 3033 and further discuss the ‘Power of Two.’