What Is a SKU Number? (Including 12 Ecommerce Examples)
What’s a SKU number and why do retailers need it?
Cross border shipping, specifically importing from the US to Canada, is tricky. Compounded with the range of SKUs and vendor partners that a marketplace retailer has, and dropshipping US-based products in their assortment poses an almost-insurmountable obstacle.
Companies looking to ship across the border should ask two questions:
In this article we’ll cover the process and documentation required to import products from Canada and the US. We’ve included links to all the relevant documents in the Canadian Border Services Agency’s (CBSA) website, along with two CBSA programs that cater specifically to Canadian retailers. Finally, we put forward two expert recommendations that allow a retailer to ship across the border without compromising on the customer experience.
The first step in ensuring a smooth dropship experience across the border is for the retailer's US-based vendor to know exactly what they're doing.
CBSA has a checklist that retailers can use to ensure they comply. They also provide a tool that retailers can use to estimate the duties & taxes they will need to pay.
Once the retailer sends their purchase order to the US-based vendor, the vendor prepares the following documents and sends them to the retailer’s broker:
The broker prepares a B3 customs entry form. They must send this to the border between 4-24 hours prior to the shipment arriving at the border. This is so that CBSA can make a decision ahead of time on whether to release or inspect the shipment.
Once the goods are released, the courier delivers the shipment to the destination.
The process is simple on paper. However there are several nuances to cross border shipping that can compound with the SKUs of a marketplace operation. We recommend retailers looking to import from the US, particularly with a dropship order fulfillment strategy to work with a CBSA-licensed customs broker. We also recommend working with a third party logistics (3PL) company like Think Logistics.
A customs broker or consultant will help the retailer classify their goods under the correct harmonized system (HS) code. HS codes dictate what duties, taxes, and tariffs needs to be paid on a product and is an entire field of study in and of itself. In fact, the CBSA releases a 1,500+ page document each year just to list the classifications. A customs broker can help a retailer classify their products and determine the best way to maximize margins at the border.
A customs broker can also help retailers understand and take advantage of special programs, like the NAFTA or Courier Low Value Shipment (CLVS) program. Retailers can apply for CLVS, for example. This program expedites border clearance for commercial shipments that total $3,300 or less with authorized couriers such as FedEx or UPS. Goods that are worth $20 CAD or less may also be duty or tax free.
But the process gets trickier as volume and scale increase. For example, CBSA requires retailers to declare and pay duties on their cost price. However, a shipment under a retailer’s dropship program bypasses the retailer and sends the shipment directly to the customer. How does a retailer pay duties on the cost price, but reflect the retail price on the invoice the customer receives?
Robert Hashimoto, president of 3PL firm Think Logistics and an advisor to luxury retailer The September, restates the question. “Asking, ‘How do I import or dropship products from the US to Canada?’ is the wrong question to ask. Instead, retailers should think about how to preserve a world-class customer experience throughout the order fulfillment process.”
One of the worst fulfillment experiences is for a customer to get a call from FedEx or UPS telling them that they have to pay $87 in taxes and duties before the delivery can be released. The solution to this is for retailers to be very clear at checkout with regards to:
Sportswear retailer Champion, for example, ships directly to Canada. They have a single site whose content changes to reflect the visitor's native currency. Their checkout is integrated with Borderfree which bakes shipping fees, duties, and taxes into the retail price.
Another option Robert suggests is to have two separate sites for American and Canadian customers. Having localised sites removes the variable of cross border shipping altogether.
Global apparel brand, SuperDry, for example considers its main site superdry.com as its flagship store. They solved the cross border problem, however, by having separate websites for US and Canada, and explicitly including duties on Canadian orders.
A retailer needs to balance a differentiated merchandising strategy with a stellar customer experience. The point of a dropship program is to automate as much of the supply chain as possible so that retailers can focus on doing what they do best -- merchandising and curation.
A differentiated assortment is strategically important to the success of a B2C retail marketplace. Importing from across the border gives retailers in Canada an opportunity to achieve this and to be first to market with merchandise that no other retailer has.
Finally, having a smooth cross border order fulfillment process is its own competitive advantage because it is so hard to do well. Having seamlessly integrated, accurate, and clear delivery costs upon checkout builds trust with the customer and encourages them to shop with the retailer, regardless of locale.
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What’s a SKU number and why do retailers need it?