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Border retailers advised to import inventory.

Despite strong urging from Ontario's border communities, the province has so far provided little assistance in the escalating battle against cross-border shopping.

However, in communities such as Fort Frances, Thunder Bay and Sault Ste. Marie a handful of retailers are taking matters into their own hands and are fighting back with aggressive marketing and pricing.

For several of these companies, the answer to the problem of crossborder shopping has been to import inventory direct from U.S. manufacturers and wholesalers.

Ming Auto Beauty Centre of Thunder Bay is one of these companies.

"When we first began importing accessories, we were looking for quality that could withstand Thunder Bay winters, a fair price and good warranties," recalls Ming owner Brian Siciliano. "Today, the way we import our products is crucial to our survival and competitiveness with out-shopping."

Siciliano says he has been able to cut his retail prices by as much as 25 per cent by changing to U.S. suppliers.

He reports that it previously took two to three weeks for an order of chrome accessories to arrive from a warehouse in southern Ontario even though the parts were manufactured in Minneapolis, five hours south of Thunder Bay.

"That distribution system represents a lot of time and a lot of money, which gets reflected in a higher retail price," he says.

Siciliano now takes shipments of inventory from U.S. suppliers directly through International Falls.

"The American suppliers sometimes don't know where Thunder Bay is. They just take the order and automatically ship to Toronto," he says. "But you can take control of the situation by becoming aware yourself of how shipments are getting here and what costs are involved."

"It (direct importing) takes a lot of leg work, but it is definitely worth it," he says.

Siciliano says he finds most of his American suppliers through trade shows, trade magazines and networking.

"I find trade shows very beneficial because you are meeting the manufacturers and you can often work out direct importing arrangements that are more difficult over the phone," he reports.

However, Siciliano warns that the distribution system for Canadian and American manufacturers is often too difficult to track.

"The product can be sold from a manufacturer to a warehouse to a distributor and to a sales rep before it reaches the retailer," he says. "Searching out the most direct access to a product is not always easy considering some manufacturers are committed to distributors covering certain territories, but the effort usually pays off."

Siciliano reports that he has increased the volume of his orders by distributing the products to a network of northwestern Ontario businesses.


Siciliano's conclusions are supported by a 600-page report released last month by the National Task Force on Cross-Border Shopping.

The $400,000 report penned by Ernst & Young Management Consultants concluded that Canada's inefficient distribution system is one of the primary reasons behind the record number of shoppers heading south of the border.

It recommended that Canadian retailers re-evaluate their supply systems and band together in buying groups to increase their clout with manufacturers.

The report concentrated on products that are most often purchased across the border. These include clothing, appliances, bedding and linen, electronics, hardware, footwear, groceries, lumber and building products, sporting goods and toys.

Of these products, 82 per cent were more expensive in Canada by an average of 23 per cent.

Such items as gasoline, cigarettes and alcohol were not studied because the task force knew that taxes were to blame for the higher prices.

The report blamed manufacturers and middlemen for the price gap. It noted that U.S.-made products often pass through an additional level of distribution in Canada, adding to the price.

In addition, Canadian wholesalers are considerably smaller than their U.S. counterparts, which reduces their bargaining power with manufacturers.


Fort Frances economic development co-ordinator Frank Myers reports that businesses in his area are taking a serious look at direct importing, with some encouraging results.

"Our prices are coming down now because businesses here are really becoming aggressive with their suppliers and making the necessary changes to survive," he says.

Last year retail consultant John Winter of John Winter and Associates Ltd. developed a cross-border shopping strategy for Fort Frances which recommended that retailers in that community examine their supply systems.

In response, Myers says the local businesses have challenged their traditional suppliers to come up with better prices, changed their distribution patterns or found new American suppliers with better prices.

"A lot of our small businesses are even finding markets in the United States because they are now more competitive," he adds.

Myers says Canada's distribution system really hurts retailers' ability to compete, particularly because the country has only two major distribution centres (Toronto and Vancouver).
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Copyright 1992, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Title Annotation:Import Export Report; Canadian retailers
Publication:Northern Ontario Business
Date:Jun 1, 1992
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