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Growing pains are a mixed blessing for one of the largest e-tailers

Newegg is one of the top shopping destinations for computer enthusiasts. In October of 2008, they launched a major expansion into Canada. However, the high cost of shipping and some lag in updating prices and new products has been of concern to customers.

DailyTech did a little research and asked a few questions through C2E Consulting, Newegg's Canadian public relations agency. The following is what Newegg was willing to disclose:

Are all products shipping from the Edison, New Jersey warehouse?
If not, what percentage?

Canadian orders are being fulfilled from all Newegg order processing centers. Where an item gets shipped from depends on availability and proximity. In general Edison takes care of most of Eastern Canada, while we have found our California centers to be most efficient in servicing the West side of the country.

Is Newegg going to start using Canada Post and/or Purolator instead of UPS?

We are currently going through the processes of evaluating and adding additional shipping options for our Canadian customers and certainly Canada Post and Purolator are among those we are considering. We have heard our customers' feedback and fully understand that in order to be competitive in retaining and winning new customers, we need to offer choices when it comes to carrier but also inexpedited and lower cost shipping.

Is the plan to expand the Canadian product line to match the U.S. product line? Is there a commitment to have new products available as quickly as the U.S. site?

Newegg prides itself on our ability to leverage partnerships with top manufacturers to offer our customers an outstanding and diverse product selection. As it stands, our Canadian customers today have access to almost our complete IT offering. Our computer and gaming categories established and built our business in the U.S. and in this sense we believe we have put our best foot forward by focusing on these products during our launch.

We are absolutely committed to expanding our offerings further and bringing our consumer electronics product lines to the Canadian market as well and are working hard on fostering and establishing the partnerships that will enable us to do so in a timely manner.

It is our goal to provide our Canadian customers an identical line-up to the U.S. with the added advantage of some specific Canadian only SKUs.

What is Newegg doing to lower prices in order to match what is available locally?

Our product management team ensures our prices are competitive to the local market especially when it comes to products and categories key to our Canadian customers. We monitor our Canadian pricing model very carefully to stay true to our commitment to value: offering quality product at great prices.

Any word on a local warehouse in Canada?

Our current order processing centers in New Jersey and California have been doing an outstanding job at shipping product to our Canadian customers getting 99% of approved orders out the door in one business day. Our robust shipping partnerships have also allowed us to come through with timely delivery to both urban and more remote areas of Canada. That being said, we cannot deny the fact that adding a local warehouse would make it easier to expand product offerings and expedite product delivery.  We are seriously evaluating our options in terms of opening a local facility. It is a natural next step for our Canadian business.

Can you discuss any further expansion plans?

Our expansion into Canada has been a great experience for Newegg and we believe we can help transform the Canadian online market for IT and consumer electronics products. We were met with much enthusiasm and feel we have been successful in providing a much needed alternative value model to the existing technology e-commerce market in Canada. The outstanding performance of our Canadian expansion has confirmed that our business model of exceptional product selection at great prices, combined with stellar customer service and fast shipping is a formula for success that transcends cultural and geographic lines. Right now, we are heavily focused on our Canada, U.S. and China businesses but certainly are reviewing our opportunities for expanding internationally.

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By VaultDweller on 4/8/2009 11:49:04 AM , Rating: 2
The cost of shipping across the border comes down to two things:

1) HST or GST is charged on sales at customs for sale items entering Canada. If your family is getting COD bills for this, it's because the "Gift" checkbox wasn't checked off when it was shipping.

2) Brokerage fees, which apply for shipping in either direction across the border and will be payable by the receiver. UPS has exorbitant brokerage fees for their standard, consumer level services. USPS/CanadaPost have almost no brokerage fees. High volume shippers like NewEgg don't have the same gouging fees through UPS that us little people do, and NewEgg obviously has some arrangement with UPS so that there are no COD charges for brokerage.

By Motoman on 4/8/2009 12:00:30 PM , Rating: 3
Negative on #1. I can categorically tell you that we specified those shipments to family members as gifts, and they still have to pay an import duty. This I guarantee.

On #2, I have tried shopping around to different carriers. As you note, I am sure that us little guys don't get the same breaks as Newegg, and I have found that typically the best rate is USPS (which I reckon then hands over to CanadaPost). Still, I see not the slightest reason why the cost for me to ship an item to, say, Thunder Bay (about 6 hours straight north of me) would be 2-3 times the cost for me to ship it to, say, Los Angeles (about, I don't know, let's say 30 hours away from me).

By Motoman on 4/8/2009 12:48:43 PM , Rating: 2
...I don't know what it was, but it has happened multiple times (although sometimes a package goes through with no additional fees, for no apparent reason we can discren). And it sure was't $5. It's been anywhere from $50 to $100. And it flat-out sucks.

By Ratinator on 4/8/2009 1:17:59 PM , Rating: 1
That sounds a lot like the UPS brokerage fees. I have received several items from the US and will never get something shipped via UPS again because of this reason. When receiving parcels from the US there is $5 fee + GST which is 5% of the value of the item.

By Motoman on 4/8/2009 1:30:42 PM , Rating: 2
...this happens on shipments sent by USPS. I believe it is probably the fee that omnicronx is talking about below.

By Ratinator on 4/8/2009 2:37:05 PM , Rating: 1
Funny because I had a video card valued around $150 USD sent to me from the states where the sender had marked gift on it. Canada Customs opened it and saw there was a receipt inside. I still paid the $5 + GST on it. Maybe Canada Customs thought the value of it was correct....

By oldscotch on 4/8/2009 3:32:34 PM , Rating: 2
Never ship across the border with UPS. Ever.

USPS is usually fine for speed (<1 week), I've had the best experience with FedEx and Purolator if it needs to be here in a hurry.

A lot of electronics now can be shipped without any duty fees, most of the time I get away without having to cover taxes either. "Brokerage fees" are sometimes misinterperted as duty fees, that's not accurate though, those are fees that the courier applies on their own. UPS is horrible for brokerage fees and the times I have used them, they've been inexcusably slow. Some things I've received two weeks late.

By monomer on 4/8/2009 5:13:06 PM , Rating: 1
I got hit for a large brokerage fee from UPS last year, so I phoned them up to find out what it was for.

What UPS does is that if Canada Customs says they have to charge GST for a product entering Canada, they will pay Customs, then charge you on delivery. They also charge you a fee to do the paperwork for paying the GST. In my case, the order was around $100, so the GST was $5. They then charged me $45 on top of that for the paperwork.

They did say that you can phone them to opt out and prepare the customs paperwork yourself.

By omnicronx on 4/8/2009 1:20:05 PM , Rating: 2
Packages shipped by USPS (you are correct, these are handed over to CanadaPost for brokerage and delivery) have a flat rate fee per parcel crossing customs, I believe in the vicinity of $5, regardless of declared value.
While this maybe true, this has nothing to do with the duty fees, it does not matter whom you ship your package with, they do spot checks on random items for all carriers. Rarely have I bought an expensive electronics item from the US that was not subject to duty. The first time I got bit I bought a 150$ video card off ebay 7-8 years ago, and I was charge 60 dollars duty. This had nothing to do with the carriers, it was a fee by Canadian customs.

By Motoman on 4/8/2009 1:29:45 PM , Rating: 2
...I believe that is the fee we run into almost every time. As noted, once in a while we get a package through that doesn't get billed for - but probably 80-90% of them get hit with this fee.

By oab on 4/8/2009 1:24:36 PM , Rating: 2
Negative on #1. I can categorically tell you that we specified those shipments to family members as gifts, and they still have to pay an import duty. This I guarantee.

It is because you gave a dollar value > $20-30. Gifts less than a certain dollar are exempt from GST/PST/HST ~5-15% tax on top of indicated price.
You also need to pay customs/brokerage fees (USPS/CanadaPosts are fairly inexpensive compared to UPS, this is roughly $5 to $25 dollars depending on the shipper)

By Motoman on 4/8/2009 1:33:24 PM , Rating: 2
...we have been convinced that we need to specify a realistic value for the pacakges we send in, lest they be confiscated or something due to an attempt to circumvent the duty fees. While it is certainly quite tempting to send in a box with 5 $100 gifts in it with a stated value of $25 to avoid the duty fees, it would be infinitely preferable for your Christmas presents to actually get to the familiy members (with a fee) than for them to get confiscated at customs and never seen again.

By cingkrab on 4/8/2009 11:35:01 PM , Rating: 1
Here's the official CBSA stance on tax:

Short version: no GST/HST on goods valued at <$20, or goods <$60 marked as gift. Everything else over, yes.

Regarding brokerage fees, if your package is handled by USPS/Canada Post, it is $5. For UPS, here is the brokerage rate table:

Short version: UPS ground charges hideously expensive brokerage fees. Services such as UPS Worldwide Express/Expedited have NO brokerage fees (included in shipping charge). Therefore, if UPS is the only shipping option offered, choose Worldwide Express or Expedited. You will most likely save on brokerage fees, even though the base shipping cost is more.

FedEx I recall has lower brokerage fees than UPS, but as they have no brokerage rate table on their website, I can't be sure.

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