Ellen Roseman: Lowering those Canada-U.S. price gaps
- October 3, 2007 4:11 PM |
- By Ellen Roseman
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
(Click on the comment link below to share your view)
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Comments (52)
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.
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.
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!
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).
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.
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.
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.
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.
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?
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.
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.
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.
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
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.
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!
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.
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.
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.
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.
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".
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.
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.
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.
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.
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...
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.
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.
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.
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.
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 $485/hr. for 20 hours of my time and effort. Not bad for a Blue Collar Worker!!!
It's not all bad out there. Best Buy have lowered some of their prices and the cost of a 37 inch Sharp LCD TV is about the same in Canada as it is in the US. Dell.ca even sells some of their notebooks for less then what you pay when buying from Dell.com in the US.
I am a HUGE fan of reading and love getting new books, but I am also voting with my feet. I get so frustrated when I walk by bookstores and see people purchasing, I want to scream "What are you doing?". Until people are willing to hold off purchasing and take a stand I cannot see the prices changing at all. I for one am doing my part. I will not buy a book until prices go down, as the library is so convenient.... And as for the new Mazda I have been researching and want to purchase, that is on hold as well. I can make the old car last a few more months.
I haven't bought clothes in Canada for the past three years. I live in Ottawa, and I often go to Syracuse, Massena or Watertown NY. Even with higher exchange rates, the deals were good, so imagine now at 1.04$... 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.
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
My book seller is great but in the states my latest book cost 14.95 in US but 22.95 Canadian. As I buy about 2 books a month the costs are really very high.
I'm yet another citizen pissed off about the car price difference. The car manufacturers are worst than a comunist country, they are begining to be like the Oil companies. They are starting to stop Canadians from purchasing cars in the US. They are restricting the US dealers from selling to us, and they are starting to revise the modifications required to make the car 'fit' for Canadian roads. How can they sell a car that was made in Oakville for $8 000 less in the US, than at an Oakville dealership. Not to mention that the delivery charge is less in the US than in Oakville ???? Don't they think that they could sell more cars if they drop the price, not to mention make some customers happy about spending 30k for something they'll bring to the junk yeard in five years. GM, Chrysler, and Ford should be the first companies to bring their prices even with the US. They are struggling to sell their cars and wonder why no one will pay $30 000 for their piece of junk. No one should feel sorry if they go bankrupt. We need cars, and a new company will always pop out to replace them, a company that will pay their workers a fair wage and actually guarantee them a steady job, and make better cars!
No way in hell I'd buy the same car in Canada if there is a large price difference. Even a $1000 is WAY too much, let alone over $10,000 in many vehicles.
Do these retailers think that Canadian are so stupid that we would not simply take a trip to the States? With all the info. available online, the whole process is quite clear and transparent.
I am interested in the 2008 Acura RDX and have compared the US and Canadian prices. I could save approximately $8,000 by purchasing in the US. The closest Acura dealer is 15 miles away, in the US. The closest Canadian dealer is 150 miles away. I have been told the warranty would not be valide in Canada, if I purchased the car in US. I have written Honda Ca. to see when the will honour the US warranty in Canada or when they plan to reduce the Canadian cost. I will decide if I will purchse the Acura upon hearing from Honda.
In regards to Halina's comments regarding the price differences between the US and Canadian Vera Cruz. The Models may seem the same by name, but the options in the Canadian Vera Cruz are more than the American. Do you also know that you have to pay a 6.1% duty as this vehicles is made in Korea.
Although difficult, something should be done from consumer side, targeting at one major market segment -- say automobiles, and other segments will learn a lesson.
Let alone the foreign cars, the price differences on domestic cars are big enough to be considered as price discrimination: Fully loaded Buick Enclave priced at least $15,000 more here in Canada.
The thing might be done is stop buying cars in Canada (either delay change cars or go to US if a new car is really necessary) until the price differences, taken into account such things as purchase power, are reasonable. If 30% of the the potentail new auto buyers do so, there will be a result.
Unless the manufactures feel some pains, they won't change.
Canadian consumer need to fight.
Recently purchased a Toyota truck in Duluth MN and saved approximately $10,000 on a $40K truck as priced in Canada.
Unfortunately the government is weighing in on the side of the automakers and restricting the vehicles that can be imported by Canadians. So much for a free market.
As a retailer, I can assure you many of us are being held ransom by manufacturers and distributers. Due to our dealer agreements we are not permitted to purchase from any other than the designated distributer, and in fact even when we have tried to reduce booked future shipments due to lost sales to the US, have been required to pay significant cancellation fees, and in some case been threatened with cancellation.
In many cases these policies are dictated by foreign-owned companies, who extract their Canadian-made profits back to their own countries. In a national market that, for many products is smaller than the state of California, what happens in Canada doesn't really hold much sway. Plus for many manufacturers, THEY sell the product regardless of whether it comes from a US retailer or Canadian one. If they can get away with not honouring warranty for imported products, it is a win-win, profit-wise.
I urge you to keep in mind we local businesses employ your friends and neighbors, pay taxes in your communities, and support local charities. We are on the consumer's side here.
I am withholding buying a new vehicle in Canada.
The significant price differences between Canadian and US MSRP is the prime reason.
Consumers need to put pressure on retailers (e.g. new car dealer) who in turns apply pressure to their distributors.
I can't help but get upset and a little teed off at the difference in prices between items purchased in Canada and the US. I just got back from a weekend shopping spree in the US. The money I saved more than paid for itself and we had a nice little getaway to boot. One example is I bought a parka regularly sold for a $160.00 for 60.00 and I bought 3 nice hoodies from Foot Locker for $34.00 those same hoodies are being sold 2 for $50.00 at Foot Locker in Winnipeg. I also bought 2 GB USB drive for $14.00 and they are being sold in Winnipeg for $70.00. Plus I bought three 2 gb MP3 players for my kids made by Sandisk for $34.00 that are being sold at the same store in Winnipeg for $99.00 each. I didn't have any wait at the border coming or going and to make it easy make sure you declare everything because if they think you're lying they will pull you in for an inspection. I could go on but my point is that it's not too costly to go cross border shop. Even after paying for our hotel room and dinners we still saved ourselves a large sum of money. Plus the point for us was to have access to something different such as Bath & Body Works.
Thanks for reading my rant.
We asked sales and Marketing people from North Face (as a example) why one winter footwear( Baltoro 200) would cost you $CAD180 whereas the same pair is priced $US100- $105 in the US( online and direct). The aswer was that the cost of rental, salaries, energy has tremendously increased ( in Quebec!!!) this is nonsense rental costs much more in New York for example, not to talk about the much higher salary wages. most of us have friends families in the US. Yes we can ship to a US address or even wait to cross the border and shop over there. Unfortunately Canadian retailers will be paying the price, but we( consumers)cannot pay double the price espcially when you can save hundreds of $$.
Thank oyu CBC for raising this major issue.
I think the gap is ridiculous. The Roxy sweatshirts for instance. In Canada it costs around $40, but in the US it only costs $21! It's pratically 50% cheaper!
I think that Iris from edmonton is really stupid. I don't think people should always wait for the prices to go down untill they buy books. It's not that easy for all the prices to go down. People have their difficulties and want to earn money just like everybody wants to save money. It's not that bad out anyways.
always request shipping via USPS, who doesn't charge any brokerage or taxes upon crossing the border - UPS will brokerage the hell out of your wallet - my last orders with UPS for $250 and $160 respectively had a $70 and $50 brokerage fee attached AFTER shipping. One of those orders was wrong and had to be resent - and after another order for $500 with a different retailer came to me with no additional charges, i had them send the corrected order via USPS. So while you're out there saving a couple dollars, save a couple more and demand using USPS and stop helping UPS (or FedEx, i'd imagine) make a mint on our cross-border purchases.
We retired to Canada in 2005 and receive both Canadian and US Social Security. We are Canadian and wanted to spend the "Golden Years" here at home. Our SS that come directly to our bank here in Canada is charged a large transfer or exchange fee.How do we get passed their fee? Will a direct deposit to a US bank and than a postal money order to be deposited by us here save us this fee?
I just spend quite a bit of time trying to locate a dealer to sell me a new car here in Florida, I would be happy to hear from anybody where to find a dealer who would sell to a Canadian, the problem with warranty and the state with the lowest sales tax. Any info would be greatly appreciated.
I am a Canuck who live in both countries and everyone is correct when they say that things do cost more in Canada.I purchased a car here for 17,000 US with taxes and the same car in Burlington was 26,000Can + taxes.But on a positive note,we in the US are being ripped off by the medical and drug companies,while Canadian have nothing to worry about.
Just my 2 cents worth
Just bought a Whirlpool Gold Range - for $999.00 cdn plus taxes from a small appliance dealer in Ontario (no delivery charge). Sears and the Brick had it on for the same price, but had advertized as $600.00 off msrp - $1599.00 cdn (plus delivery charge). I wanted to verify this BIG DISCOUNT, so I checked the cdn msrp on a whirlpool site, and sure enough, it was true. BBBUUUTTT, I also checked the US Whirlpool msrp, and it was $1049 Usd. The same stove I found for $849.00 Usd on US on-line stores. So, the question is why does Whirlpool Canada have a $1599.00 msrp, while Whirlpool US' is $1049.00. The currency differential doesn't come close to explaining the 52% Canadian excess. The discrepency is ridiculous, irritating, disgusting and unjustifiable.