The rapid and monumental failure of Target in Canada startled many observers, including numerous business analysts.
Within a mere 22 months, the $70-billion U.S. retail giant launched and subsequently shuttered 133 stores across the country.
This swift collapse highlighted a crucial reality: despite numerous parallels between the two nations, Canadians possess distinct characteristics that set them apart from their American counterparts, beyond just having access to healthcare.
Recent failures of Canadian expansions include Wal-Mart’s Sam’s Club, K-Mart, Radio Shack, Linens ‘N’ Things, and Sony Stores. Moreover, Best Buy, Sears Canada, and others are precariously positioned after significant cutbacks.
Disparities Between Canada and the U.S.
The disparities between Canada and the U.S. are manifold. While Canada’s population is only slightly smaller than that of California, expanding into Canada is not as straightforward as entering another U.S. state.
Unique packaging standards necessitate redesigning labels to incorporate French and comply with federal regulations, constituting an additional expense for retailers dealing with tens of thousands of stock-keeping units (SKUs).
Numerous other cost considerations, often overlooked by the majority, come into play. Minimum wages and taxes are higher north of the 49th parallel. Commercial real estate carries a steeper price tag, and importing goods across a weaker currency entails added expenses.
Despite these logistical and financial hurdles, consumers cannot be expected to comprehend or sympathize with them.
Canadians who were acquainted with Target stores in the U.S. expressed resentment that, despite near parity between the Canadian dollar and the U.S. dollar, products in sparsely stocked Canadian stores cost over 30 per cent more than their counterparts across an imaginary border.
Consequently, Target’s “Expect More” pledge appeared hollow to shoppers, except in terms of pricing. Such sentiments failed to foster a legion of early brand enthusiasts.
From the perspective of debt collection, several lesser-known yet equally significant differences can impede U.S. expansions into Canada and result in millions of dollars in unforeseen bad debt write-offs. As an agency that collects debts for U.S.-based businesses of all sizes, I have witnessed firsthand the repercussions of innocent gaps in knowledge among our southern neighbours.
When dealing with customers across multiple provinces, it is imperative to engage a reputable national collection agency. In the United States, debt collectors operate under the Fair Debt Collection Practices Act (FDCPA).
Conversely, Canada lacks a national equivalent, with debt collection regulated by individual provinces and territories, translating to 13 distinct sets of legislation. A Canadian debt collection agency must obtain licensing and bonding in each jurisdiction to collect commercial debts, with additional requirements in Quebec, where laws diverge significantly.
While this doesn’t mandate engaging 13 different collection agencies, businesses with customers spanning multiple provinces should opt for a reliable national collection agency. Some agencies claim to be national but lack the necessary coverage, making it essential to verify their physical locations.
Bilingualism and Communication Requirements
In Canada, bilingualism is enshrined in law, with English and French enjoying equal status and rights. Consequently, debt collectors must be capable of communicating in the official language chosen by the debtor.
At MetCredit, this poses no challenge, as we maintain a major office in Montreal and our agents nationwide are fluent in at least 20 languages. However, for U.S.-based businesses offering centralized customer service or relying on small regional collection agencies, this could pose a significant obstacle.
Furthermore, differences in statutes of limitations on debt collection between the U.S. and Canada present additional complexities. In the U.S., statutes of limitations for oral and written contracts range from three to 10 years, significantly longer than the two-year limits in many Canadian provinces.
Moreover, court judgments in one-third of U.S. states remain valid for 20 years, compared to 10 years in Canadian provinces, exacerbating the challenge of debt collection in Canada for businesses accustomed to lengthier collection periods and negotiation windows.
Understanding these limitations is crucial for all credit grantors and businesses operating in Canada to mitigate the risk of uncollectable debts.
Last Updated on by Nikita Pradhan