Border towns enjoy bonanza: packages, tax revenue pile up

SUMAS, Whatcom County —

The Lone Jack Saloon was once among the many taverns in a border town that catered heavily to Canadian carousing.

The stage where cancan girls used to dance is still there, adorned with a painting of a miner panning for gold. But the floor now serves as the warehouse for Ship Happens, the largest of eight parcel services that in just a few years have made this farming town of 1,468 a mecca of e-commerce.

“Amazon ships directly to us, a pallet every morning,” says O.J. Zeilstra, the manager.

The cardboard boxes that cram the place are full of stuff that customers from British Columbia buy on U.S. websites, using a Sumas delivery address to avoid lengthy waits at customs and exorbitant international shipping costs.

It’s a few minutes’ drive, or a quick cross-border walk, for the 170,000 residents of the Abbotsford, B.C., metro area. Their enthusiasm for Web shopping has made Sumas the state’s top spot for online spending per resident: In 2014 it was a whopping $3,013, seven times the figure for Seattle, according to state Department of Revenue data on sales from 20 top online retailers.

Blaine, the last U.S. stop on Interstate 5 en route to Vancouver, also saw a disproportionate amount of online shopping: $2,705 per resident.

Of course most of that e-commerce is by Canadians, not residents — but the jobs and the sales-tax receipts are local just the same.

Even those remarkable numbers sell short the real strength of Internet commerce here. They leave out purchases made at companies such as Nordstrom or Target, which have a large online operation but are primarily brick-and-mortar and therefore classified differently by regulators.

A look at U.S. Postal Service figures may help round out the data: A postal spokesman says that last year it handled nearly 400,000 parcels for Sumas, or 272 per resident. That would be 22 times the U.S. average.

The surge of cross-border online shopping is a new twist in the old saga of U.S.-Canada trade. Its intensity has meant an unexpected boost for Sumas and other U.S. towns that have long seen their fortunes sway with shifting exchange rates and procedural changes at the border.

“Over the years we’ve seen the economy of Sumas ride the roller coaster of the Canadian dollar,” says Briana Kelley, Sumas Chamber of Commerce president.

That ride was often traumatic: In the late 1990s, the town was full of shuttered gas stations, in part victims of a sharp drop in the value of Canada’s so-called loonie. The decline was further compounded by tighter border security after the World Trade Center attacks in 2001.

These days the strengthening U.S. dollar means fewer Canadians are going to big-box stores in U.S. cities like Bellingham, but the growing number of virtual shoppers has buffered the small border communities.

E-commerce “has created a new opportunity for local businesses,” Kelley says.

Appealing shopping

The Retail Council of Canada estimates that about 30 percent of Canadians’ online transactions are made abroad, mostly in the U.S.

Because of import tariffs, different pricing and high distribution costs for Canadian retailers, shopping in America can look pretty appealing. Even U.S. retailers operating in Canada suffer the effect: A tire that sells for about $320 at Amazon.ca retails for $227 on the company’s U.S. site.

And because the Canadian market is one-tenth the size, there’s much more variety available in the U.S.

“If you’re a Canadian retailer on the border, you’re caught with one hand behind your back,” says Michael LeBlanc, the retail council’s senior vice president for marketing and digital retail.

LeBlanc says Canada’s e-commerce sector is underdeveloped compared with its bigger southern neighbor. For instance, Holt Renfrew, a high-end Canadian department store, doesn’t sell products on its website. Neither did Target’s Canada website during that company’s brief foray there.

But the gap won’t last forever, LeBlanc says. More foreign retailers — from Seattle’s Nordstrom to Japan’s Muji — are opening stores north of the border, increasing the assortment of products available to Canadians.

Also, Canadian retailers have embraced U.S. retail holidays like Black Friday and Cyber Monday. A survey by consultancy RetailMeNot.ca showed that 44 percent of shoppers did less holiday shopping in the U.S. because they were able to indulge in those discount extravaganzas at home.

And Canada’s government, amid pressure from retailers, has lowered tariffs on products like hockey gear and baby clothes, making those products cheaper than before in Canada.

“The U.S. will always play a role in shopping for Canadians,” LeBlanc said. But “that’s going to get moderated over time.”

Outsized impact

The U.S. impact of Canadian online shopping can be felt along the entire border. Residents of Ontario pick up their Web purchases in cities like Buffalo and Detroit.

But it’s perhaps most felt in Washington state, where the border is sparsely populated in comparison with the highly urban part of British Columbia that sits opposite.

About 15 percent of B.C. residents, according to data from a survey by Vancouver consultancy Insights West, have some form of U.S. mailbox. That would be more people than live in Whatcom County, which borders the most populous part of the Canadian province.

“It means that there is significant impact on e-commerce,” says James McCafferty, assistant director for the Center for Economic and Business Research at Western Washington University in Bellingham.

The impact comes from people like Rhonda Nikkel, an Abbotsford, B.C., resident who says she often picks up parcels in Sumas twice a week. Generally it’s for books she buys online, but she’s moving more of her shopping to the Web.

“This past Christmas I did all online shopping,” she says. “All from Amazon, shipped to here.”

Pic-It-Up, which proudly bills itself as “100% Canadian owned and operated,” was the fourth shipping business in Sumas when it opened its doors four years ago, says owner Richard Simen-Falvy, who lives in Abbotsford. Its opening coincided with a big jump in online commerce.

“The first year was just explosive growth,” he says.

At the Pic-It-Up warehouse on Cherry Street, Sumas’ main thoroughfare, cardboard boxes from the likes of Amazon and zulily, with customers’ names scrawled in black marker, sit until their owners pay a $3 fee and pick them up.

Once a customer had a huge chandelier shipped. “It was the size of that room,” said Simen-Falvy, pointing to his shop’s ample vestibule. There have also been tires, pinball machines, even beehives. Around Christmastime, there are lines out the door.

Simen-Falvy says more than 20,000 people have registered with his service as word spread, thanks in part to his zany YouTube videos.

In these he has impersonated a cowboy holding a banana, a female cheerleader, and a suspect under police interrogation. He also explains how to use the service.

“You know your name? You have a computer? You have a Visa that isn’t racked up? Then, if you do, you’re qualified to use Pic-It-Up.”

Other shops include a 24/7 locker service that opened this year.

Even Bob Bromley, the mayor of Sumas, partakes in the bonanza: The supermarket he owns holds parcels for a few hundred customers.

The direct tax revenue brought by online sales is estimated at $37,000 by the Department of Revenue for last year, based on the big retailers it tracks. That’s not as much as the taxes collected from the gambling establishments that, according to Bromley, in the early 1990s “financed the whole Police Department.”

But it’s income this town wouldn’t otherwise have, he says. The package places also help other businesses, as visitors fill up on dairy and gas during their parcel runs.

“People come over to pick up their Amazon package and buy an ice-cream cone,” said Rod Fadden, utilities superintendent for the city.

While the cross-border parcel business may in effect bring the U.S. and Canada closer together economically, it also highlights some unchanging differences between the two, such as holidays.

Zeilstra, of Ship Happens, says many customers “think we’re closed on July 1st,” when Canada celebrates its independence. “Then on July Fourth you’re at the barbecue, and you get a call.”