Issue #239 Hewers of Wood and Drawers of Water | Canada, Parts, Canadian, Order, Customers

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Issue #239 Hewers of Wood and Drawers of Water

Written by Robert Smith
Tuesday, 04 March 2008
In a previous lifetime, I worked in the Canadian sales office of a US-based construction equipment manufacturer. Our products, those cornflower-blue man-lifts you see on construction sites and movie sets, were built in Washington State, and we imported them, sold them, serviced them and provided overnight parts delivery across Canada from our North Vancouver warehouse. Our equipment and parts prices were higher in Canada than in the US, reflecting the costs of running the office and providing that all-important parts service from our inventory. But time is money, and if a customer’s machine went down, it was critical to get the necessary parts to them as fast as possible. So, if our equipment and parts were cheaper in the US, why didn’t our Canadian customers shop there? This was in the time before GST. Imported equipment was subject to a 12 per cent Federal Sales Tax. But as a distributor, we were exempt the FST, so we had a head start. When GST came in, FST went out, and our 12 per cent advantage evaporated. Also, NAFTA meant the end of “non-tariff trade barriers,” meaning we couldn’t dictate to our customers where they bought their equipment. Our customers went south to shop for the big items—even though they had the hassle of dealing with the border—but they still wanted us to keep an inventory of parts in Canada. Without the equipment sales, that made no economic sense: the Canadian office closed, and I was out of a job. Our customers got the lower prices they wanted, but at a cost: service.We had been, to use the current expression, “disintermediated.” PATTERNS OF RETAIL PURCHASING ARE SHIFTING ALL THE TIME, OF COURSE. ONLINE PURCHASING, FLUCTUATIONS in exchange rates, cross-border shopping, tax structure and so on. So what’s a Canadian motorcycle dealer to do? One of the biggest frustrations I hear from other motorcyclists isn’t so much the price of parts in Canada, but simply being able to buy what they need when they need it. Carrying inventory has a price, of course: the cost of the money tied up. But so does not being able to provide what customers need. It seems anything more complicated than an oil filter has to be ordered from a US warehouse. Why should I wait a week for my Canadian dealer to order up a part out of the States when I can mail order the same part from a US dealer and have it arrive in the same time … for less money? A couple of weeks back, I went shopping online for some Touratech bar risers. Touratech is based in Germany, but has distributors in Calgary and Seattle. Of course, I checked the Canadian website first, only to find that all they had done was upload Touratech’s European sales material—complete with prices in Euros! To order from Touratech Canada, I would have to go to the German website, open an account, note the items I wanted, email my list to Touratech Canada, who would then email me the price in Canadian dollars. Then I could pay for my parts, and TC would order them from Germany for me. You can imagine how long this whole process might take. So I tried the US website. I could order direct with my credit card and the items would ship same day. I want you to guess where I placed my order. The bar risers arrived two days later. I’ve no idea whether I paid more or not. Buying from Touratech Canada was just too hard. This may not be a typical case, but it is a real example of what it’s like to shop in Canada from a customer perspective. And, the recent run up in the Canadian dollar has simply made it cheaper to shop in the States. SALES OF MOTORCYCLE PARTS AND ACCESSORIES THROUGH OUR Canadian dealers represents close to 20 per cent of total sales value, according to the Motorcycle and Moped Industry Council. As we know, Canada is not a huge market, especially compared with the US; and it’s our proximity to that vast supply, and the relative ease of cross-border shopping, that helps drive customers south. The inevitable end danger is that Canadian motorcycle dealers will be, like I was, “disintermediated.” The answer, I believe, is supply and service. There’s a very real cost to cross-border shopping, in terms of the time and hassle factor. My Touratech bar risers were delivered to my Point Roberts, Washington mailbox, so I had to take an hour out of my day to go get them. That has a cost. But it wasn’t price that drove me south—it was the huge amount of work I would have to do to order the parts in Canada. That can’t be right, can it? Making it easy to buy is the key; and that means keeping parts inventories in Canada. It’s tempting for overseas motorcycle manufacturers to regard Canada as part of the US market, but the rules really are different; and many parts sold in Canada have had two sets of duty and taxes added, first when they were imported into the US and again when they came into Canada. Unless manufacturers, distributors and dealers recognize that they have to inventory parts in Canada to support their Canadian customers, more retail money will go south; and more dealerships—like Toronto’s McBride and Cycle World—may well go under. Comments (0) Subscribe to this comment's feed Write comment You must be logged in to a comment. Please register if you do not have an account yet.