The Reminder is making its archives back to 2003 available on our website. Please note that, due to technical limitations, archive articles are presented without the usual formatting.
The strong economy has boosted consumer confidence and Canadians in the West havenÕt been afraid to spend some of their hard-earned money. As a result, retailers across the West are doing pretty well. But now that the loonie has hit parity and more with the U.S. dollar, retailers are starting to hear some customers muttering under their breath as they open their wallets. You can probably guess what they are complaining about. The Bank of Montreal last year released a study showing that prices here are not in line with prices in the U.S. A comparison of an assortment of identical goods found that Canadian-dollar prices are roughly 24 per cent higher. The report went on to say: ÒCanadian consumers are far from reaping the full rewards of the massive run-up in their currency in the past five years.Ó There has been much ballyhoo about substantial price discrepancies between seemingly identical vehicles. A Toronto law firm even jumped into the melee by launching a class-action suit against major auto makers and dealers, claiming they have teamed up to fix prices higher in Canada. So are we getting ripped off? In many cases, the extent of the gap seems to defy explanation. This is especially true for vehicles. High-end car manufacturer Porsche has already indicated that it will Ôlisten to the marketÕ and reduce prices on its 2008 Canadian models by 10 per cent. This is an encouraging sign that other manufacturers have room to move. There are, however, some legitimate reasons why Canadian prices are higher and why they havenÕt adjusted rapidly. Retailers order goods well in advance. This has the effect of delaying the pricing decreases, as retailers may have purchased stock when the loonie was not quite as mighty. Remember, as recently as January 2007, the dollar was trading at just below 85 cents US. Other factors include: Such expenses as wages, rent, energy and property taxes are in Canadian funds and are not immediately or directly affected by the rising dollar. Many operating costs are higher in the Canadian market. American companies are able to take advantage of economies of scale not available to Canadian firms, because the U.S. population is 10 times larger. And, because CanadaÕs population is spread out over a much larger area, transportation costs are higher here. Marketing costs are higher, because many things must be done in both official languages. The minimum wage is generally higher in Canada and employers here are facing labour shortages. As a result, Canadian retailers have larger payrolls compared to their U.S. counterparts. And last, but not least, taxes are higher in Canada. Given these structural differences between the U.S. and Canada, it is unreasonable to expect that weÕll pay the exact same price as Americans on identical goods. This wide gap in prices, however, cannot be completely explained away. In fact, economic research has been done that suggests these and other factors donÕt come close to explaining the full extent of the gap. It has been said that retailers Ôprice to the Canadian marketÕ. Consumer demand is strong, even at high prices, so retailers have no incentive to lower them. We all have the opportunity to exert some pressure on retailers. Do your homework before you hit the stores. Go online and check the U.S. dollar cost of comparable products. When you find a product that is much cheaper, tell your local retailer about it. Try haggling on larger purchases. Perhaps you can get a better price. If enough people gripe, retailers just might begin to listen. You also have the option to vote with your wallet. Online shopping is easy and convenient. Not only is there potential to save money by buying from U.S.-based online retailers, you can avoid crowds at the mall, too.
