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Benefits of Global Competition

Call it patriotism or convenience but Canadians prefer to buy Canadian. Many of us buy our shampoo at Shoppers Drug Mart, shop for groceries at Loblaws, and fly Air Canada. And our morning commutes often include a stop at a Second Cup.

According to a survey conducted by Rakuten (a cash-back shopping site), 92% of Canadians have reported buying local brands and products, of which the top five commodities are food (87%), beer (46%), clothing (45%), furniture (38%) and wine (34%). Whether one attributes these statistics to patriotism or convenience, the underlying factor is that most Canadians prefer to buy Canadian, although this may not hold for all.

Further research suggests that Canadian consumers sometimes abandon their homegrown business heroes to patronize foreign-owned competition for various reasons, including greater product variety, better quality and pricing, and a superior shopping experience. The most recent example cites a combination of all of the above factors resulted in the downfall of Canadian clothing retailers Jacob, Laura and Smart Set in the wake of foreign fast-fashion brands like Zara and H&M expanding in Canada.

What can Canadian businesses do to compete, survive and even prosper in their respective markets against local-global competitors?

Challenging a foreign competitor is not easy, considering that with their growth and expansion into Canada comes an established brand, financial resources, marketing assets, superior technologies and well-established production efficiencies. However, there is no guaranteed success. The most famous examples include Krispy Kreme’s initial 2005 bankruptcy after a strong launch in 2001, Target Canada’s spectacular failure in 2015, and Forever 21’s decision in 2019 to shut down their Canadian operations.

Canadians have an added advantage in a stable economy: relatively high salaries and a fraction of retailers’ competition in the United States. Ultimately, what holds us back—both at home and abroad—may not be demographic hurdles as much as a state of mind, according to a 2017 Financial Post article, “How Canadian retailers can give U.S. competitors a run for their money.”

Here are some tips to consider when taking on global mega corporations in the local Canadian market.

Know Your Market

Do ample research into the local market. While larger global competitors may have the resources to do in-depth brand studies and market analyses, they don’t have the boots-on-the-ground perspective of a smaller firm with the added advantage of experiencing the local market every day. Capitalize on knowing your neighbours’ consumer habits and social circles by creating products and providing services that match local conditions.

Always Innovate

Starbucks’ entry into the Canadian market in the 1990s (it soft launched in Vancouver in 1987) was a big challenge to the Toronto founded national brand, Second Cup. The Seattle-based company had a more vertically integrated management strategy, modern branding, market saturation, an expansive food menu, and more coffee options. Second Cup was later struggling for a market share in the 2000s. Their 2018 rebrand was only semi-successful in restoring coffee lovers’ good graces. The consensus was that Second Cup’s decision to “keep on keeping on” in the wake of Starbucks’ play for its customers left it behind in terms of public perception and, hence, profits.

That ongoing pressure to innovate and create better products or offer better services as a response to global competitors may create a certain existential unease among Canadian businesses. But as Shopify CEO Tobias Lütke told Report on Business regarding the importance of competition: “[I]t’s … harder to build a company with a lack of competition than when one has significant competition. Wanting to relentlessly create a better product every day is much easier when you are under threat by some competitor.”

Act Local but Think Global

Always think globally in terms of delivering the best product or service, even if you have just expanded to one other store because of the foreign competition (most likely from the U.S.). Even if the impact of foreign competition is not inevitable, use it as a motivational hedge against complacency, as stated before.

Create a Better Customer Experience

Take advantage of the current situation. In the wake of COVID-19 and the closure of international borders, political leaders have urged Canadians to support local. It is now up to you to take the reins and offer your customer a high-caliber shopping experience, which will result in better online reviews. According to “The eMarketer Ecommerce Insights Report,” conducted in February 2018 by Bizrate Insights, 93% of customers read online reviews before buying a product or using a service. Connect with your customers, improve your brand image and encourage positive buying recommendations.

Shopping local has never been so important. Canadian companies that provide unique goods and services that are moderately priced or offer a bespoke experience have a significant advantage over foreign competitors.

Respond to The Local Market

Another added advantage that local companies and smaller businesses have over their global competitors is the minimal red tape and the ability to perform fast decision-making, aiding in a quicker reaction to trends, opportunities, and threats. Large foreign firms are accountable to boards of directors who can threaten to pull up stakes if profits don’t match up to forecasts.

Their size also means that pivoting to accommodate local markets—let alone individual customers—isn’t easy. By definition, small Canadian businesses have the agility and ability to respond to market changes and their customers’ needs.

The prospect of competing with global companies can be a scary one for Canadian businesses. But there are benefits—if you’re willing to face up to the challenges. Taking advantage of your local knowledge, being innovative and providing customers with a better experience can lead to a leaner, more profitable business.

Sean Plummer | Contributing Writer

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