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Canadians Still pay almost 20% more for goods
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Speculation is awash after a BMO report stated Canadian shoppers are still paying 18 per cent more on average than Americans for the same items. Despite the strong dollar (that remains around par) Canadians pay more, but the question is why?
BMO economist Douglas Porter found the price gap remains large even though the dollar “has averaged almost parity over the past year – 98.8 cents U.S. to be precise, so time's up!”
When Mr. Porter and his colleagues comparison-shopped a year ago, they found a price gap of 24 per cent in a basket of 17 items for sale in Canada and the U.S. The price gaps in hardware and appliances “are relatively bigger gaps than we would have expected,” Mr. Porter said.
BMO reported a year ago that retail prices in Canada had been “painfully slow to respond to the historic run-up in the Canadian dollar, creating a massive and unsustainable price gap for many goods between the U.S. and Canada,” Mr. Porter wrote in a research report.
Despite the stable CDN dollar retailers haven't dropped prices. Not so says Wal-Mart Canada spokesman Kevin Groh. Much of the merchandise now on Wal-Mart shelves in Canada was purchased a year or more ago. As the loonie has strengthened, the large discount retailer has been able to make its purchasing dollars go a longer way with suppliers, Mr. Groh said. In the next month and right through to Christmas, Wal-Mart Canada expects the prices to consumers will reflect that increased buying power.
The Retail Council of Canada said Canadian retailers are still at a cost disadvantage for a number of reasons – higher labour costs, the higher cost of transporting goods over vast distances, labelling requirements and import taxes.
The BMO economists actually compared the prices of 80 products in the course of their research, although the list of items that accompanied the study was considerably shorter.
BMO noted in its report that the modest narrowing in the Canada-U.S. price gap “has apparently been just enough to staunch the wave of cross-border shopping, with sky-high gasoline prices playing a loud second fiddle.”
BMO's cross-border shoppers found that bestseller books that retail for $30.79 (Canadian) sell for $25.30 (U.S.) south of the border – a price gap of 22 per cent. Mid-range vehicles that retail for $32,766 (Canadian) sell for $27,485 (U.S), a gap of 19 per cent,.
A chart that accompanied the report also included the following cost comparisons: a large Tim Hortons coffee and doughnut ($2.27 Canadian and $2.13 U.S.); Nintendo Wii ($279.99 Canadian and $244.99 U.S.); a package of 40 Huggies Pullups ($18.97 Canadian and $14.97 U.S.); Toro Snow Thrower ($399 Canadian and $299 U.S.); Maytag washer and dryer ($2,050 Canadian and $1,699 U.S.) and Gucci shoulder bags ($920 Canadian and $830 U.S.).
Barbecues included in the survey cost 33 per cent more in Canada, lawn mowers cost 31 per cent more, cordless drills cost 21 per cent more in Canada and air conditioners cost 12 per cent more.
The only item on the list of 19 items that had the same price tag in both Canada and the U.S. was the Grand Theft Auto video game, which retailed for $59.99 in both countries.
Mr. Cran said the consumers' association has been advising Canadians to bargain with their retail outlets, “and this has worked to a degree."
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econmod
Broker
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Jun 12, 2008, 3:20 PM
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