Canadian retailers close to the U.S. border should brace themselves for even bigger challenges ahead, according to a new report from the Bank of Montreal.
The bank says Canadians are spending more in the U.S. than government figures indicate, and the new higher limits on duty free items will make things worse.
There’s still a big gap between Canadian and U.S. prices, and until that changes bargain-hunters will continue to run for the border.
In a hockey-crazy city on the west coast of a hockey-obsessed country, you would think Canada would be a hotbed of rock bottom prices on hockey gear.
But shoppers at the Sports Exchange in Vancouver are always flagbbergasted to find out the buck doesn’t stop here.
“A lot of them don’t understand, certainly don’t know the economics behind it, why a company in the U.S. would be able to buy or sell for a lot less than we would,” said Andrew Robinson of the Sports Exchange.
As a result, every day a steady stream of those consumers make the trek over the border to stock up on bargains.
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The savings are not as good as last year, according to a survey by BMO; the price gap is now an average of 14 per cent, down six per cent from last year.
But it all adds up.
Losing precious consumer dollars to the U.S. is a huge concern for retailers, but so far Ottawa hasn’t done much to level the playing field.
Many imported goods are slapped with 15 to 20 per cent duty, while the U.S. government does not have a similar tax.
“We have marketing boards, poultry, cheese and dairy; these market control systems don’t exist in the States, and retailers can offer products at significantly lower prices,” said Mark Startup, president and CEO of Shelfspace.
It is estimated up to 10 per cent of retail spending is going south, and with increased duty free limits starting June 1, there are fears it will get worse.
Though some critics blame retailers for not lowering the prices, many local businesses insist they are already running on thin margins.
Add up 18 per cent duty on hockey gear, higher prices from the distributors, and steeper corporate taxes.
But with the end of hockey season comes baseball, where ironically, the buck does stop here.
“Baseball gear sells to the U.S., and it’s their national sport, so sometimes it works both ways,” said Robinson.
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