When San Francisco-based Gap Inc. launched online sales in Canada in late August, its head of e-commerce told Business in Vancouver that many B.C. clothing retailers are approaching direct-to-consumer sales all wrong.
That’s because they have complicated return policies, charge extra shipping fees and leave the customer to deal with any unexpected customs duty costs that arise.
But B.C. retailers point out that the Gap’s strategy of not shipping internationally likely frustrated shoppers abroad.
About 7.8% of the Gap’s US$14.2 billion in sales in the year that ended January 30 came from e-commerce sales to Americans – a sizable sales channel that has been built during the past 10 years.
“We wanted to do [international e-commerce] right,” said Toby Lenk, who is president of Gap Inc. Direct.
“Some U.S. companies choose to ship from the U.S. over the border into Canada. We have historically shied away from that. It really was in consultation with the Canadian consumer who said it’s really a painful experience to have a lot of extra charges – shipping, handling and duty.”
Costs would rise further if the customer wanted to return an item, said Lenk, who has overseen e-commerce strategies since 1997, when he founded eToys.
The Gap charges various amounts for shipping, although it’s free for Gap credit card holders. It’s also free for the first two months of the service in Canada for all orders valued at more than $50.
Determining the appropriate fee for mailing clothing around the world is one of the bigger challenges of operating a successful e-commerce business.
Lululemon Athletica Inc. (TSX:LLL; Nasdaq:LULU), Mountain Equipment Co-op (MEC) and Lija all charge for international shipments, although Lululemon provides free shipping to the U.S.
Refusing to mail clothes internationally, as Gap did until last month, was never an option for these companies.
Lija owner Linda Hipp said she gets frustrated when she’s on a website and tries to buy product only to find out at the checkout that the company doesn’t ship to Canada.
“We think the positives outweigh the negatives of allowing international customers to be able to buy online,” she said.
Hipp’s e-commerce sales are a mere 1% of her company’s more than $7 million in annual revenue, even though the checkout page on Lija’s e-commerce site has a drop-down menu that shows products are shipped to such far-flung places as India, Germany and Portugal.
She plans to hire someone to increase e-commerce sales by managing Lija’s website and conducting social media for the company.
Lululemon is similarly adding staff to its 20-person e-commerce team because the company’s experiment with online sales has been such a success.
Lululemon annoyed some bloggers when its announcement that it would launch an e-commerce site April 1, 2009, turned out to be an April Fool’s Day joke.
The site eventually launched two weeks later.
Corporate filings show that Lululemon generated about 6.6% of its $138.3 million in sales in the quarter ended May 2 from a combination of e-commerce and phone sales.
Shipping from Lululemon is free within Canada and the U.S.; it charges a $30 fee for all international shipments.
The company plans to consolidate its warehouse operations for e-commerce out of its 102,000-square-foot warehouse in Burnaby.
The move would expand the facility to 110,000 square feet, said Deanne Schweitzer, the company’s vice-president of e-commerce and global strategy. She said the consolidation should eliminate the current situation where there’s no inventory for some sizes on the U.S. site, but a surplus in Canada.
MEC got into the e-commerce business long before Lululemon – in 2001 – largely because it had an established mail-order business.
George Weetman, MEC’s web marketing manager, said the company’s virtual store generated 8% of MEC’s $262.1 million in 2009 sales.
He believes e-commerce serves a dual purpose. It gives MEC members more opportunities to buy products and allows them to research those products before going to a MEC store.
MEC’s e-commerce sales grew 25% between 2008 and 2009. That, Weetman said, is much faster than sales growth at any of MEC’s 13 streetfront locations.
He added that free shipping within Canada for orders over $75 help fuel that growth.
Unlike the Gap and Lululemon, MEC is not planning to expand international sales.
The Gap’s Canadian e-commerce launch coincided with the chain leasing a 200,000-square-foot warehouse in a Toronto suburb. It’s leasing another warehouse in the U.K. and launched e-commerce sales there at the same time it initiated Canadian sales.
In July, the Gap launched e-commerce sales in 53 other countries although in each of those countries it will have no warehouse.
Instead, it’s contracting third parties to facilitate product delivery and stickhandle customs regulations.
Customers in each of the 53 countries will see Gap product prices in their local currency when they shop online. However, foreign Gap customers might see unexpected duty charges.
“It’s not nearly the great customer experience [in those 53 countries] that we have for our Canadian customers,” Lenk said.
“We knew the way we want to do Canada is to do it first class and give the Canadian customer the same great experience we have in the U.S.”