14 August 2007

Rip-off, Canadian style

Demand lower prices from retailers, analyst says

Consumers should be "quite demanding" with retailers that are slow to adjust their prices to the stronger Canadian dollar, possibly by buying online or going cross-border shopping, says one retail analyst. "I would have thought that [Canadian retailers] would have started pressuring their suppliers [to cut costs] some time ago," said Wendy Evans of Toronto-based retail consultants Evans and Company. "It's so long overdue." The increase in buying power that suppliers and retailers have enjoyed with the run-up of the dollar to about 95 cents US from the mid-60-cent range in 2002 "certainly hasn't translated to the cash register," added Evans. The Canadian dollar touched a 30-year high of 96.71 cents US on July 25. "Retail prices in Canada have responded to the loonie's moonshot with all the speed and alacrity of a three-toed sloth on a hot summer's day," said Douglas Porter, deputy chief economist at BMO Capital Markets in a recent report.

Consumer price index data shows that prices for food and clothing have dropped about 1.1% over the past year, Evans said. "It's the right direction, but there is farther to go," she added. "Canadian prices on many directly comparable goods have been achingly slow to respond to the major shift in the exchange rate, and, in some cases, appear far out of line with their US counterparts," said Porter. The most glaring example is book prices. But cars, tech gadgets and many high-end goods also see gaps between Canadian and US sticker prices of 16%, on average, Porter noted. Earlier this month, federal Finance Minister Jim Flaherty told business leaders the government expects retailers to pass on savings from the higher Canadian dollar. If consumers don't see benefits soon, Flaherty said, they should shop around for the lowest prices. However, Flaherty was concerned that Canadians shopping in the US would hurt the economy. "It's a buoyant economy, things are going well, and consumers are going to demand more," said Evans, adding retailers should use a "sharp pencil" when negotiating with suppliers, who often come up with "as many excuses as possible." Porter said the economic effects of prices not adjusting to the new exchange rate include inflation being higher than it should be; interest rates rising as a result of higher inflation; and cross-border shopping increasing -- "it may be only a matter of time before the cross-border shopping dam bursts again."
(Vancouver Sun 070814)

We really noticed this while in San Francisco, where the prices of things - with the loonie nearly on par - were substantially cheaper to buy in the U.S. since the price differential on items hadn't been reflected in the prices the items are sold for in Canada. Books, magazines, and CDs are all very blatant examples of this, since they print the prices right on the items. We were surprised too that the Canadian prices had not been already changed....what are they waiting for? They can make excuses that the prices take some time to adjust, but really -- are we living in 4 B.C. or what?

No comments: