Why the Canada-U.S. price gap is our own fault - Macleans.ca

Why the Canada-U.S. price gap is our own fault

Retailers are charging what Canadian consumers will pay


For five years now, the loonie has been at par with the U.S. dollar, but for a small deviation in 2009. And for all that time, Canadian shoppers have paid more than Americans for the same goods—often more than 20 per cent more, in fact, according to various surveys. A new Senate report last week promised to get to the bottom of this shake-down. What it offered were the same excuses used by retailers: we are a small, less competitive country with border restrictions and geographic challenges that drive up prices.

But is Canada really such an undesirable place to do business? Consumers here are richer on average than Americans, more likely to be employed and far more willing to go into debt to buy things. In the U.S., credit card debt rose just 0.1 per cent in December, while consumer debt just hit a new high in Canada. We are, if anything, a retailer’s dream. Our willingness to buy stuff is part of the rea- son Target and J. Crew are expanding here.

There are a few reasons to explain slight price differences. It costs something to print up French labels. It costs money to transport goods here (but that’s greatly overstated in a country where most people live next to the U.S. border). None of it explains the hefty markups on everything from appliances to cars, some of which are made in Canada.

When the loonie first hit par, retailers and manufacturers said it would take time to adjust. Some have matched prices, proving it can be done profitably. So what’s the real reason for the price gap? It can only be that Canadians are willing to pay more, perhaps because our economy has performed better than America’s. Retailers are charging what the market will bear. And until shoppers take their business elsewhere, i.e., across the border, that won’t change.

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Why the Canada-U.S. price gap is our own fault

  1. I agree the price gap is our fault but it’s not because Canadians like to pay higher prices because we are richer or we are too lazy to drive to US to do our weekly shopping.

    One thing you have forgotten in your calculations are the costs Prov and Fed Governments impose on businesses. There was a story recently about a plant in Windsor that existed solely because of unique Canadian label requirements and that added five cents cost to each can of tomatoes it labeled. I work in auto industry and cars made for US and Canada are mostly the same but Canadian bureaucrats demand a few minor tinkers so we have ‘Canadian’ cars but that adds $$$ to final cost of product. Supply management increases costs of basic food stuffs, here in Ontario there is minimum price for alcohol. Apparently brewers can sell beer at 70 cents per bottle and make profit but in Ontario they have to charge at least $2 per bottle or thereabouts. Governments are conservative, high prices are encouraged because it drains money from economy and makes Canadians less dynamic.

  2. I already do take most of my shoppings across the border, it’s called online shopping; the retailers just have to take a while to realize that…

  3. Very short sighted article, overlooking many facts. Many reasons for price variance. To overanalyze why, won’t change the outcome. The market will inevitably determine the price.

  4. To extend the thinking, why are prices the same across the US then, despite different tax structures, market sizes and rules in various states? Seems to me it’s because they essentially have one free-flowing market in which they can easily manage product flows in various ways that are indifferent to state lines. Charging different prices in difference states is more hassle than it’s worth really.

    From that perspective then, it seems obvious that border issues, bilingual requirements and other such differences between our two countries put the company’s in a position in which they are already forced to make substantial changes to product lines. In which case, the real question is: why wouldn’t they charge more if they think they can make a better return?

    Unless and until charging different prices becomes a hassle of some sort or triggers some form of diminishing return, our prices will be higher. That’s it, that’s all.

    Frankly I see no mystery behind this at all.

  5. Let’s not forget the role of government. Milk a pretty fundamental food stuff is twice as much as in the US because the marketing board artificially restricts supply. I’d suggest reading the book Why Mexicans Don’t Drink Molson if you want insight into why Canada is has difficulty competing on the world stage and has higher prices.

  6. I really had a hard time with this article. Before you tell Canadians to support US retailers maybe you should do a little research . As a independent sporting goods retailer here in Canada we pay more for the same products as our US competitors. Some of the reasons why… Not all companies have Canadian offices so they have distributors. Those distributors buy from the US companies and then add their profit and then sell to us Canadian retailers. So that is one reason. Another reason is the suppliers charge us more for the same product. Sometimes with no apparent reason . One other reason is when we bring products from the US is that we pay duty and brokerage fees. On some products this is not a small amount. Sometimes it can be as high 15 percent . Also the Canadian government has tariffs on goods manufactured outside of Canada to protect our Canadian manufacturers. Something that really needs to be addressed. As a retailer we would love to be selling at the same price as the US but it isn’t as simple as the dollar being the same value . So As a retailer I we are not making more money than the US retailers. In fact we may be making less. So instead of putting the blame on the retailers and promoting Canadians to shop out of the Country do a little more research and start laying the blame elsewhere .