Duty-free shopping changes worry retailers

Retailers are concerned about rule changes starting Friday that will allow Canadians to bring back purchases of $200 during a 24-hour trip away, up from $50.

Canadians allowed 4 times more in purchases during 24-hour trip to U.S., starting Friday

Cross-border shoppers will be able to buy more during trips to the U.S. but some retailers believe shoppers will remain at home to buy their goods. ((Darryl Dyck/Canadian Press))

Canadians will be able to bring four times more duty-free purchases back from 24-hour trips to the United States, starting Friday, which has retailers in Ottawa worried.

The change means travelers returning from a 24-hour trip can spend $200 at the duty-free shop, four times the current $50 limit. For a 48-hour absence, shoppers can legally cross the border with $800 worth of goods, double the current limit.

The seven-day exemption was also bumped by $50 to $800.

These changes were made as part of the 2012 federal budget and they are expected to generate more traffic towards the cross-border shopping trend, which is already busy thanks to a strong Canadian dollar.

Canadians make more than 30 million overnight trips outside the country, the budget estimated.

Ottawa mall expanding

Ottawa retailers such as those at Bayshore Shopping Centre believe the trend will continue to be a tough challenge. The mall is currently undergoing a $200 million renovation and expansion.

"We're looking at an addition of 160,000 square feet, the addition of 30 new retail stores," said mall general manager Denis Pelletier, who is aware of the American competitors.

"If we're going to lose something to someone else, it won't be without a fight."

Pelletier expects to lose some shoppers after Friday's change but hopes it would not last long.

The price gap has been narrowed from 20 per cent in 2011 to 14 per cent now, he added. That success showed last November on Black Friday when many shoppers of electronics stayed in Canada.

More than a bargain

The executive director of the Ottawa Chamber of Commerce said she believes bargains do not drive shopping trend, but rather the total experience.

Online shopping, she added, is taking a bite out of the traditional shopping at malls.

"That's the way retail is going. It's an entertainment thing and the Americans are leading the way in that," Erin Kelly said.

"But we need to be leaders too, or fast followers, because retailers have to entertain and delight their customers and not make shopping a chore."