Selling automotive aftermarket products to Canadians is a lot like selling automotive aftermarket products to Americans, but recognizing the differences can lead to success or failure in the Canadian marketplace.
This article will highlight a number of statistical automotive aftermarket differences between Canada and the United States. Whether you already have a Canadian subsidiary, a Canadian sales agent, or whether you are thinking of doing business in Canada for the first time, recognizing these statistical differences should assist you in preparing your business or marketing plans.
It all starts, of course, with the consumer. Canadians consume three times as many doughnuts per capita as Americans. The most successful doughnut franchise in Canada, Tim Hortons, has 2000 stores; Krispy Kreme in the U.S. has approximately 210. There is a doughnut shop in Canada for every 9,700 people. Indeed, Canadians consume more doughnuts per capita than any other country in the world. This point illustrates that despite the huge number of similarities between the two cultures, Canadians and Americans do have some subtle cultural differences.
Canadians and Americans are friends and allies, cousins who share a piece of land. We have a great deal in common, but to understand the Canadian mind-set and demographics one need only trace the origins of the two countries. The American dream began with a revolution, Canada evolved as an independent nation, slowly and cautiously.
These cultural differences are reflected not only in doughnut consumption, but more importantly in terms of the aftermarket in vehicle buying behavior. Many of these differences mean that aftermarket inventories should be tailored to meet Canadian needs. For example, Americans love their sport utility vehicles (41.4 percent of light truck market share compared to 27.7 percent in Canada), but Canadians love their mini-vans (39.5 percent of light truck market share versus 21.9 percent in the U.S.).
Canadian vehicles are also slightly younger than U.S. vehicles (an average of 8.5 years old in Canada versus 8.8 years old in the United States). Some explanations for this may be the more severe winters in Canada. Salt, for example, on winter roads plays a significant role in parts usage such as shocks, front end and brakes. Again, this highlights the needs for inventories specific to the Canadian marketplace.
Canadians buy more compact cars (43.7 percent of market share versus 25.6 percent in the U.S.) and more foreign built cars (23.4 percent of market share versus 19.8 percent in the U.S.). The love of compact vehicles may be partly explained by differences in new vehicle affordability. It takes the average Canadian 29 weeks of after-tax income to purchase a new vehicle, while the typical American consumer only needs 23 weeks to purchase a new vehicle.
Perhaps the most astonishing difference between Canadian and American consumer habits is the dramatic difference in do-it-yourself versus mechanic installed work. In 2000, the DIY market in the U.S. was between 20 to 25 percent of market share, while in Canada the DIY market was only 14 percent. This one difference in consumer behavior explains a significant difference in distribution patterns between the U.S. and Canada.
In Canada, one industry player, Canadian Tire Corporation, dominates. Car dealers also play a much greater role in vehicle repair and parts distribution in Canada than their American counterparts. The new car dealer in Canada holds much of the market share held by the retailers in the U.S.
Some of the differences in mechanic installed versus DIY work may be explained by the fact that the installer industry in Canada is government regulated. Since only government-certified technicians can work on vehicles, Canadians may feel more confident that automotive service technicians will do the work properly.
While each of the 10 provinces and three territories has its own legislation, for the most part in Canada, you must have formal training to become an automotive service technician. This may also explain the low rate of participation in the Automotive Service Excellence program in Canada.
Also, anecdotal evidence suggests that Americans are "in love" with their vehicles, while Canadians see their vehicles as tools or appliances to take them from place A to place B.
Canada's size, (it is the second largest country in the world behind Russia) combined with its relatively low population base, has also led to differences in parts distribution via the traditional three-step aftermarket distribution. On a percentage basis, Canada has more wholesalers than the U.S. to service this geographic coverage. But it has also led to significant differences in warehouse distribution. In Canada, there are only five or six major distribution players. This consolidation in the distribution playing field has resulted in intense market share battles. As a result, new players trying to sell in Canada may find entry very difficult.
On the supplier side, a large majority of Canadian suppliers are subsidiaries of U.S. multinationals. There are also a healthy number of European subsidiaries and a small number of Canadian-owned medium and small automotive parts suppliers.
Of course, Canada is renowned for its high number of social policies. In addition to the differences in the health care system and employment insurance, Canada also has more stringent environmental and worker health legislation, which impacts the automotive aftermarket industry. For example, installers in British Columbia are currently faced with strict worker regulations regarding repairs on brakes that may contain asbestos. Several provinces have introduced waste management guidelines with regard to used oil and used oil filters, used tires, used batteries and vehicle emissions. All of these factors can impact business operations in Canada.
Of course while statistically different than the U.S., Canada also possesses a number of regional statistical differences within its borders. English Canada versus French Canada (mainly Quebec) may be the most well known, but there are also a number of differences between central Canada and the Canadian prairies, and the east and west coasts. Many of these differences would be similar to those experienced within the U.S.
As stated at the beginning of this article, there are more similarities than differences between Canada and the United States, and statistics don't tell the whole story. However, recognizing the subtle Canadian differences may have a positive impact on your bottom line.
Don't forget to bring the doughnuts to your next meeting in Canada; it could be the start of a successful working relationship.
This article was prepared by the Automotive Industries Association of Canada. For more information on the Canadian automotive aftermarket industry, to purchase AIA statistical publications, or to exhibit at the biennial AIA trade show May 3-5, 2002, in Toronto, please contact AIA at [email protected] or 613-728-5821.
The statistics in this article were prepared for AIA by DesRosiers Automotive Consultants. For more information, please contact [email protected] or 905-881-0400.
Reprinted with kind permission by the Automotive Aftermarket Industry Association.