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Ellen Roseman: Lowering those Canada-U.S. price gaps

Money Talks is a collection of daily columns from The Business Network, which airs weekday mornings on CBC Radio One at 5:45 a.m. ET (6:15 a.m. ET in N.L.).

By Ellen Roseman, personal finance columnist, Toronto Star
(Listen to the original audio)

Douglas Porter, a Bank of Montreal economist, made waves last month by criticizing the high price of Canadian consumer products compared to identical products sold in the United States. He found a 24 per cent price gap on a basket of assorted goods.

In his report, The Price is Wrong, he said retail prices in Canada have responded to the loonie’s moonshot “with all the speed of a three-toed sloth on a hot summer’s day.” As a result, inflation is higher than it should be and interest rates could be even lower.

So, what can consumers do? How can we persuade companies to adjust more quickly to exchange-rate changes? Here’s my advice.

Check out the U.S.-Canadian price gap on products, such as books and greeting cards, where it’s clearly visible. Then, buy from companies that have lowered prices to reflect the soaring Canadian dollar. If you see a big gap, ask the manufacturer why it’s still there and when it’s coming down.

One of my readers wrote to Carlton Cards about what he thought was a hefty surcharge. The company replied that higher operating costs in Canada – and not the exchange rate – were behind the higher prices. That reader now makes his own cards using his computer. It’s only a folded piece of paper, he told me.

What about cross-border shopping? There’s been an increase in personal limits to $400 for 48 hours, up from $200 before. But you have to tell the truth about what you bought. Getting caught smuggling in U.S. merchandise above your limit can cost you plenty.

Don’t forget the long waits at border crossings and the higher gas prices. And since the last wave of cross-border shopping in the early 1990s, many big U.S. retailers have planted roots in Canada. Passports are now mandatory for airplane trips across borders and soon will be for road trips, as well.

Speaking of road trips, should you buy a U.S.-made car? I’m not sure it’s worthwhile.
Cross-border shopping for vehicles is not simple. You may have to get the car modified, inspected and certified to meet our safety standards – and pay Canadian sales taxes on top of the U.S. taxes paid. Don’t underestimate the paperwork needed to do it properly.

- Ellen Roseman

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John

Toronto

The savvy consumer is already voting with their wallet. Over the last couple of years I have bought several big-ticket items across the border. I gave the opportunity to Canadian retailers first but they couln't get within a reasonable amount of the total cost of purchasing in the USA. Often it's not the retailer, but the Canadian marketing branch company or distributor that establish the Canadian selling price.

Posted October 4, 2007 01:35 PM

Randy Sandhu

Vancouver

The price gap is ridiculous. My parents are currently looking into buying the Lexus RX400h, a luxury Hybrid that uses as much gas as a civic. It costs $62,000 in Canada, but only $42,000 in the US. Even after duty and taxes, its 17,000 cheaper in the states. How can anyone justify this price gap. Canada's higher labor costs and extra shipping costs cannot count for this discrepancy. Does it really cost and extra $10,000 to ship this vehicle from Seattle to Vancouver? This is completely ridiculous and my parents have chosen to hold of purchasing a new vehicle and so will I.

Posted October 4, 2007 04:05 PM

Ray

I have already spoken with my wallet as well. Normally we purchase gifts for relatives in the United States and ship them via Canada Post to them to arrive in time for Christmas, birthdays, etc. But after checking out pries of goods, especially books here in Canada and receiving negative, almost insulting comments from store clerks, I have decided to purchase a US funds money order and mail this to the US instead of supporting local retailers. The loosers here are several. The canadian retailer looses the sales tht we would have given, but they either don't care or just don't realize the extent of what is going to happen this Christmas shopping period. canada Post is loosing as well. it will cost us less than a dollar to mail this money order. Thirdly, my Grand children are loosers as well as they will notget to open a gift bought in Canada, but rather, a gift bought in their own country. So sad, eh!

Posted October 4, 2007 04:33 PM

Art

Our government is a main “culprit”. They benefit from higher prices, when they collecting sales taxes.
Also everyone who involve in one-day cross border shopping is a “criminal”. Because, let’s face it – nobody tell the truth about items they bought in US to Canadian custom officer. And if you don’t know – you can’t bring anything from US on one day trip unless you paying stupid GST + PST (on top of NY sales taxes).

Posted October 4, 2007 04:34 PM

Darby C.

We are in the market for a new car, and will look at a Subaru, as none of the other manufacturers we are considering - Honda, Toyota, Mazda - have taken a reasonable stance on cross-border purchasing.

We are also writing to these manufacturers, telling them what we are doing and why.

Posted October 4, 2007 04:42 PM

Joe

London

It is important to remember that Douglas Porter's study used an 89cent USD for the dollar not the current par. He found an average of 24% higher prices and way more on some goods. There is absolutely No justification for this difference. I shop via the internet and will hold off any major item purchase until the price adjusts. If no change I will shop in the US and pay all the taxes-still a better buy.

Posted October 4, 2007 04:50 PM

Lee

Regina

Please do not alway blame the retailer they are usually at the mercy of the wholesaler. The perfect example are books, as a former bookseller, I never had the option of buy the books at either Canadian or US wholesale price, I could only buy it at the Canadian wholesale price.

Many products are brought into North America by distributors that have exclusive North American rights. In many cases these disbributors are US based and instead of distributing directly to retailers in Canada, they contract a Canadian company to do the distributing. Now the orginal distributor still wants to sell the product at their wholesale price, which means the Canadian subdistributor only way to make some profit on the item is to mark up the price.

Posted October 4, 2007 05:05 PM

Nathan

Calgary

Buying a car in the U.S. is worth it if it's done right. I just brought back a 2008 Toyota Highlander from the U.S. The whole process took a month and a half from start to finish. The key is to find a dealer that is willing to take a risk. Also, try to find a dealer in a state where there is no sales tax. I haven't finished calculating how much I've saved, but I guess that I saved about $6000 maybe more (after duty, and the costs associated in getting it). I only need to change out the daytime running lights (approx. $250 CDN) and Toyota Canada will honor my U.S. the warranty. If Toyota Canada, had lowered their prices, I would have been happy to spend that large sum in Canada, instead of helping to bolster the U.S. economy. The difference in just sticker price between the two countries? $10,000 bucks!! The U.S. border guard that I talked to said that he sees approx. 200 U.S. vehicles being imported into Canada every day.

Posted October 4, 2007 05:32 PM

Ted

Calgary

I have let my wallet do the talking. I have just bought a home theatre system on eBay. I paid 50% of what it would cost to purchase it at BestBuy. I have to pay for shipping and the GST but that is marginal. I will have saved over about 40% when it is all said a done. For an item that is made in Japan.

Do you think the retailers can profit from reacting slowly to the changes in the dollar's value?

No way. They have to move current inventory before they drop the prices, and are losing savy customers while their current products are still on their racks.

The fact is they have already spent their dollars when the dollar was low and now have the high cost products in their inventory and savy customers buying elsewhere destroying their marketplace.

They really need to be able to bite the bullet, clear out the high cost inventory and get the newest, low cost goods on their shelves as fast as posible. But I am not helping them one bit by going elsewhere to get the cheap stuff right now.

Can you say Globalization?

Posted October 4, 2007 05:37 PM

Andrew

Edmonton

I've just stopped buying most things. I had planned on buying about $1200 in hobby supplies and books over the next few months, but with a 40-60% price differential between Canadian and US prices, shipped from the same warehouses, I've decided that I can find other things to do in the meantime. I don't blame the retailers for trying to sell things at the prices listed on the back, but good feelings don't pay the bills.

Posted October 4, 2007 05:50 PM

caroline

toronto

I am also voting with my feet: if the price differential of a book is greater than $1.50, I walk away, resolving to borrow it at the library.

Posted October 4, 2007 06:08 PM

Maureen

Edmonton

I stopped buying books 3 years ago because of the price difference and chose to use the local library or second hand book stores instead.

As far as I am concerned there never was a valid reason for the excessive price difference other than the manufacturer pre-printing the prices on the back of the books.

I encourage everyone to vote with their feet on this one and stop being held to ransom by the greed and laziness of manufacturers and retailers who refuse to change.

Posted October 4, 2007 06:24 PM

Tom Kane

Toronto

One answer is to reduce the amount of "stuff" we buy. I really do not need to replace my quite serviceable little pickup truck, for example, even though I was (was!) interested in a Mazda CX-7. It turns out that the US MSRP is about $25000 while the Cdn MSRP is about $32000.

Books? Use libraries.
And, do you and I really need that new electronic device or new-fashion shirt or top?

Tom Kane

Posted October 4, 2007 06:30 PM

Bob

Vancouver

It's a little known fact that you can bring as many groceries as you like as often as you like across the border duty and tax free.

There are certain exceptions, for exapmple: turkeys over 20kg have a special duty attached to them.

Posted October 4, 2007 08:22 PM

Sean Cooper

Toronto

Why don't Canadian retailers just start selling books at the US price? Many comic book stores already do it. Don't worry, they'll wait so long to adjust their prices that the Canadian dollar will drop and they won't have a reason to lower their prices. Theifs!

Posted October 4, 2007 08:29 PM

Scott

Kingston

I was looking to buy an iPod Touch. At the US Apple online store it is $399 and the Canadian one it's $449, yet our dollar is presently worth more.

I guess I'll just keep the money in the bank; or get my friend in Buffalo to grab me one and ship it to me.

Posted October 4, 2007 08:33 PM

Lawrie Lock

I was recently in the market for a bottled water electric pump. The only manufacturer was an American one (Flojet) This was for a home in Mexico.I contacted the Canadian distributor and was told the price was $169 US or in Canada $199. Same distributor both countries. I enquired why the large price difference between the two, and was told that was "what the market would bear" I purchased the pump brand new on Ebay for $107 and shipped it direct to Mexico. The same pump was available from , you guessed it same distributor in Mexico for$ 229 I guess they will bear more. Yes it was made in China.

Posted October 4, 2007 09:00 PM

Jean

Last year, when the loonie was worth US91c., I bought a Jeep Liberty CRD in Florida for US$20.000 including Florida sales tax. You could not get one in Canada for less than $31,000 plus gst and pst in BC. On the other hand, a friend of mine used to buy Silverado's with diesel engines in Montreal and resell them in Florida and in the Caribbean at a good profit but that was 4/5 years ago.

Posted October 4, 2007 10:37 PM

Frank Iker

For items such as magazines & greeting cards where the price discrepancy is clear, make the purchase with US cash. Just buy some the next time you go to the bank & use it for those purchases. If you live close to the border one usually has US cash anyway.

Posted October 5, 2007 07:24 AM

Fred

Nepean

Re "Speaking of road trips, should you buy a U.S.-made car? I’m not sure it’s worthwhile."

This is rather naive - a friend recently picked up his US purchase - he saved about $14,000.000 - yes $14K. Check it out on the web by looking at the price spread for say Subarus purchased in the US versus Canada. The paperwork etc. is minimal - and many US dealers still place a value on "service".

Posted October 5, 2007 10:57 AM

Jay

Vancouver

Dear Consumers - BUYER BEWARE. Have you really added up the costs of buying on-line from the US? Yes, an item like the new IPOD Nano might look cheaper on the US BestBuy site but have you looked into hidden shipping costs, etc? For example, I purchased an item from Ebay and had it shipped via UPS. Sure they quoted me a reasonable rate to ship to Canada but they failed to inform me there would be an automatic brokerage fee of $50 to clear customs! Folks, before you decide to open your wallets and buy from the US - do all the math and remember THERE IS A PRICE FOR CONVENIENCE.

Posted October 6, 2007 11:04 AM

Richard

Victoria

One thing I have notice in cross border shopping and shipping is always use try to have things shipped by USPS....US Postal Service, especially for smaller items. Most of the commercial shippers charge two to three times the price of postage, and then they tack on usury "brokerage" charges sometimes these fees exceeding the value of the item you bought.

Some retailers insist on using the commercial shippers is because its convenient, the orders are picked up at the end of the day, the collect charges are paid by the receiver and they get a percentage kickback on the order.

If a business won't ship by USPS don't deal with them.

Posted October 8, 2007 05:31 PM

WillyJim

Ellen is partly wrong about importing a car from the US - you do not pay taxes on a car which is to be exported...and the paperwork is not as bad as it seems. I recently imported a vehicle and the price in my driveway was about 25% below local prices.

Posted October 8, 2007 09:12 PM

Shari

Ontario

I'm a bookseller and just rec'd a case of hardcover books that I thought would finally begin to show a price difference. My shipping cost from the States was $5 a book - up from 2.50 last time. I'm told that all shipments from the States must be sent air mail now rather than the parcel post I always used. Most publishers ship free to the States so there's one cost that we have that the American book sellers don't have.

Posted October 9, 2007 08:25 AM

Ken Wilson

Ottawa

One of the most outrageous is Chapters online. When asked why the prices are as much as 40-50% higher than the US, they reply that the publisher puts on the price and they can not legally lower them. A lie, of course.

Then we have amazon.ca. When asked why a book set that is $240 on amazon.ca is $151 on amazon.com they state that they might look into it (the phone agent confided "Don't hold you breath).

Incredible arrogance...

Posted October 10, 2007 02:39 PM

Darnell

Winnipeg

I am a Nike shoe collector and if you compare the prices in the USA and Canada it's just crazy. A pair of Jordan shoes for $260 in Canada will retail $175 in the USA. I stopped purchasing in Canada the last few years and now make all my shoe purchases online or I go to Minnesota.

Posted October 15, 2007 05:03 PM

Dan

Halifax

I am amused by the missed marketing opportunity here.

What do you think they would do if every consumer in Canada had 10 to 20 percent more cash in their pockets as a result of lower priced goods?

I am thinking most of them would spend it to buy more goods!!! I am not an economist but I think that may be a good thing for the manufacturers and service providers.

I guess coorporate greed is no different than an individual consumers greed.

Posted October 16, 2007 10:57 AM

Jim Aukko

Montreal

I was shopping for a motorcycle a Harley Davidson 1200N in Canada, a used 2004 model sells for about $10,500 (USED!!!!) in the USA the 2008 Manufacturer suggested selling price is $9,870.USD, Even Cam AM I've read it prohibiting their US distributor from selling to Canadians, WE should not buy from them, until they lower their prices, Can Am which was Bombardier, I just cant understand their logic.

Posted October 19, 2007 01:24 PM

Ray White

Shopping for an HDTV the competetve price differences available in the US is incredible compared to Canada. Looking at sites like Nextag, and Amazon you can get a good brand name (Panasonic, Samsumg...) 50" Plasma down there for around 1400, here on sale they are 2100 plus. There the difference in price for the same HDTV can be up to 800.00, here the prices are about the same,and alot more expensive. Check out sears.com and sears.ca, the same product is a few hundred cheaper there than here, from what appears to me to be the same store. If the Canadian Governemnt relaxed the duties on personal goods, we'd see the retailers react in a hurry to lower their prices, and battle their suppliers.

Posted October 20, 2007 04:21 PM

Mike

We were in the Market for a New Jeep. I myself did ALL the homework for price comparison and everything else for US versus Canadian purchasing. In the End the US Dealer won out since I saved $9700. So I calculated the time and Savings..... I GOT Paid $485/hr. for 20 hours of my time and effort. Not bad for a Blue Collar Worker!!!

Posted October 21, 2007 05:30 AM

Pat

Vancouver

It's not all bad out there. Best Buy have lowered some of their prices and the cost of a 37 inch Sharp LCD TV is about the same in Canada as it is in the US. Dell.ca even sells some of their notebooks for less then what you pay when buying from Dell.com in the US.

Posted October 24, 2007 01:31 PM

Iris

Edmonton

I am a HUGE fan of reading and love getting new books, but I am also voting with my feet. I get so frustrated when I walk by bookstores and see people purchasing, I want to scream "What are you doing?". Until people are willing to hold off purchasing and take a stand I cannot see the prices changing at all. I for one am doing my part. I will not buy a book until prices go down, as the library is so convenient.... And as for the new Mazda I have been researching and want to purchase, that is on hold as well. I can make the old car last a few more months.

Posted October 24, 2007 03:03 PM

Pierre

Ottawa

I haven't bought clothes in Canada for the past three years. I live in Ottawa, and I often go to Syracuse, Massena or Watertown NY. Even with higher exchange rates, the deals were good, so imagine now at 1.04$... and the border taxes are not hefty, contrary to popular belief. I now have a CIBC US dollar credit card, a US dollar bank account. I buy a lot of stuff on Ebay. My current lease expires next year. I am looking for a luxury car. If the situation has not changed, I will for sure buy in the USA. Don't really care if the warranty is not valid... Some price differences are just outrageous. The worst is probably Nissan. By browsing their US and canadian sites, you see sometimes 80% difference (i.e. the Nissan Armada is 63,298 CAN and sells for 35,330 US). Nissan Canada executives should be walking around with brown paper bags over their heads.

Posted October 27, 2007 09:04 AM

halina

Ottawa

The top of the line 2008 Hyundai Veracuz Limited in the US has an MSRP of US$35,750, including all taxes except state sales tax.

The same model in Canada has an MSRP of Cdn$49,907, including the GST (but no provincial sales tax).

If you convert the Canadian to the US price at the current exchange rate, the total price difference amounts to over $16,000.

These are prices taken from the US and Canadian websites of Hyundai. The differential is vulgar and offensive. It cannot be explained by the Canadian distributor having bought the merchandise when the Cdn$ was low.

I had planned to purchase this car here in Ottawa, but I just changed my mind.

I wish the media would give this offensive price gauging a lot more exposure!

Cheers, Halina

Posted October 28, 2007 03:28 PM

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