Shoppers win, but what about retailers?

Federal budget boosts duty-free limits

Canadian retailers will lose sales when the value of goods that Canadians can bring home duty-free from a cross-border shopping trip quadruples in June, say analysts.

“It’s going to get a lot of attention. As we approach the holidays, I would count on people making a special trip down to buy stuff,” said retail analyst Doug Stephens, president of Retail Prophet Consulting.

The federal budget released Thursday raised the duty-free limit from $50 to $200 for a 24-hour visit to the U.S. and from $400 to $800 for a 48-hour trip.

Since the loonie reached parity with the U.S. dollar in 2007, crossborder shopping has returned to popularity in Canada.

In 2011, Canadians shopping in Buffalo, N.Y., helped boost income from sales tax in Erie County to a high of $401 million, an increase of 4.5 per cent over 2010.

Retailers in Canada, meanwhile, are facing a contracting market and increased competition from new retailers like Target and existing ones like Wal-mart and Marshalls expanding with more locations.

Diane Brisebois, president and CEO of the Retail Council of Canada, says Canadian retailers are handicapped by tariffs on products imported into the country from the U.S. by marketing boards that artificially set the price of eggs, milk and poultry, sending border residents to U.S. grocers.

“We need a good healthy dose of competition in this country, and I think we’re about to get it.” DOUG STEPHENS RETAIL PROPHET CONSULTING

She also noted that American manufacturers sell goods at higher prices in Canada and Europe to subsidize lower prices in U.S. stores.

“We need to start negotiating tougher with U.S. vendors who are selling to us at an inflated price — from tires to diapers to furniture to sporting equipment to shoes,” said Brisebois.

She said while stores in the GTA might not feel as pinched as retailers in border towns, there will be an impact.

Stephens agreed that some American manufacturers have different price cards for U.S. and Canadian buyers.

“Canada is not looked at as a volume market. In a lot of cases, companies look at Canada as a profitmargin opportunity, not a sales-volume opportunity.” He said Canadian consumers haven’t protested enough and retailers in Canada have held the upper hand until now because there wasn’t enough retail competition in Canada. “We need a good healthy dose of competition in this country, and I think we’re about to get it.”

Matt Davison, director of communications for the Peace Bridge Authority — the busiest local bridge between the two countries — says it’s unlikely the duty-free changes will trigger a surge of Canadian shoppers in June.

Traffic over the bridge depends on a variety of factors, including whether any special events are being held in any of the border towns and cities.

Spring break attracts a lot of Canadian shoppers but it really starts picking up in October, in the leadup to Christmas, says Davison.

Despite the recent increase in travel to the U.S., border traffic has not recovered from the terrorist attacks of Sept. 11, 2001, says Davison.

The number of vehicles crossing the bridge peaked in 1981 at 9.5 million, which was related to a gas shortage in the U.S., according to Davison. In the early 1990s, 7.2 million vehicles crossed the bridge every year. Now the average is closer to five million.