There’s no denying it: we Canadians love a good deal. Now that the loonie is nearly at par with the U.S. dollar, we might naturally expect local retail prices equivalent to those in the U.S. After all, the goods are virtually the same, and local retailers are buying them with a stronger dollar, and therefore enjoying wider margins, right?
THE RIGHT PRICE?
Derek Nighbor, senior vice president of the
Retail Council of Canada, says a variety of factors influence retail prices in Canada, some of which retailers are able to control, and others that involve more complex issues that retailers are working to resolve.
“Retailers need to be as efficient as possible and keep costs down, whether it’s energy, labour or other business costs. They need to work with their suppliers to get the best prices for products and flow those prices through to consumers.”
He says doing so is in any retailer’s best interests. “Canadians work hard for their money and they demand value. These days, retailers are dealing with shoppers without borders. It means our retailers need to work extra hard and provide even better service to keep shoppers at home.”
Nighbor says retailers are more challenged, however, by external factors such as wholesale prices set by multinationals, and import taxes and duties added to them.
“Multinational brands fix costs according to the market. It’s called ‘country pricing,’” says Nighbor, who explains that since the U.S. economy started to slow, many multinationals have been turning to economies in France, Germany and Canada to help make up lost revenues.
“We retailers need to keep negotiating with vendors to help keep prices down,” he says. “That’s a fight in the backroom that Canadians don’t see, but which retailers are taking very seriously.”
While retailers argue for lower prices, their bargaining stick is only so big. “Canada’s market is 1/10th the U.S. With a population of 33 million compared to 330 million, we’re just not buying in the same volumes,” says Nighbor. “Plus, the cost structures are different between the U.S. and Canada; there are larger distances between major markets. The cost of doing business in Canada comes at a premium.”
Part of that premium is added at the border. “Canadians face significantly higher import costs compared to the U.S. For example, Canadians pay 18 per cent tax or duty on a pair of running shoes from Asia; a U.S. store pays zero. With iPods and MP3 players – it’s five per cent for Canadians, zero for U.S. retailers.”
Is there any hope that Canadians may eventually see retail price parity with the U.S? “Canada has an outdated import and duty structure that hasn’t been reviewed for a long time. But we are working with Minister Jim Flaherty and Finance Canada, and hope they will try to resolve this.”
In the meantime, before Canadians rush stateside to shop, they might consider the hidden costs – the hits to the local economy and tax base that supports public benefits. Plus, there is the value of supporting local employment, and the ease of exchanging or servicing defective goods bought close to home, says Nighbor. “For their parts, local retailers can keep working to bring prices down, and provide customer service that will keep shoppers coming back for more.”
---
TO SEE THIS SPECIAL INFORMATION SUPPLEMENT AS IT APPEARED IN REPORT ON BUSINESS MAGAZINE, PLEASE CLICK THE ATTACHED PDF ABOVE FOR THE FULL REPORT>
| Attachment | Size |
|---|---|
| retailROB.pdf | 151.88 KB |