Dollars Still Not Equal at Canada’s Cash Registers
Deddeda Stemler for The New York Times
Munro’s Books of Victoria negotiated with a publisher to reduce the gap with American prices.
By
IAN AUSTENPublished: September 22, 2007
OTTAWA, Sept. 21 — Elene Fromanger saw
little evidence of the Canadian dollar’s new might when she went
shopping for health care books on Friday afternoon.
Skip to next paragraph RelatedCurrency Parity Brings Canadian Shoppers South
(September 22, 2007)
Deddeda Stemler for The New York Times
David Hill, a bookstore manager, has to explain to shoppers why the
strength of the Canadian dollar is slow to show up in retail stores.
All of them were marked with
separate prices for Canada and the United States. With the Canadian
dollar now at par with the United States currency, no calculator was
needed to discover that Ms. Fromanger paid $18 more before sales tax
than an American shopper would have for the same three books.“It’s
ridiculous,” she said outside a downtown Ottawa bookstore. “They still
charge more, but the dollar has been going up for two years. I find it
inexcusable.”Canadians may now be wealthier in global terms, but
the even exchange rate with the United States dollar now makes it
immediately obvious that they also pay more than Americans for many
goods. A report released Thursday by BMO Nesbitt Burns, a unit of the
Bank of Montreal,
estimates that products are priced 24 percent higher in Canada than in
the United States despite the Canadian dollar’s steady five-year march
to parity with the United States dollar. During the three-decade slump from which the Canadian dollar just rebounded, Canadians became accustomed to paying more.Not
all price differences are a result of exchange rates. Some agricultural
products, including milk, chicken and eggs, are produced under
supply-management systems. Those closed markets maintain farm incomes
but also elevate prices for Canadian shoppers.And for marketing
reasons, many companies absorbed the currency differences when the
exchange rate was less favorable. Even when the Canadian dollar traded
well below American currency, for example, songs on Apple Canada’s
iTunes stores sold for 99 Canadian cents.But as Canadians once again start comparing American and Canadian prices, two products stand out: books and automobiles.Despite the Canadian dollar’s rise, the price gap for high-end cars is sharp. In the United States, the base price for a 2008
BMW550i sedan is $59,275. In Canada, the same car starts at 82,900
Canadian dollars. The difference, 23,625, is slightly more than the
Canadian price of a Volkswagen Rabbit hatchback with an automatic
transmission.“I wish I could sell cars at the same price as in
the U.S., but we happen to be in a very expensive country to do
business in and we happen to live next door to the world’s biggest and
most competitive market,” said Lindsay Duffield, the president and
chief executive of BMW Canada. “We price to the market. We’re very
competitive to our competitors here and our prices compared to the U.K.
or Germany are low.”Despite popular Canadian perceptions,
however, the large differences in luxury models may not be reflected in
the automobile market as a whole. In his annual Canadian price review,
Dennis DesRosiers, an automotive analyst based in Richmond Hill,
Ontario, found a price difference of only $1,000 on the cars that
account for about two-thirds of Canadian sales. A potential
savings of $1,000 is not enough to motivate most buyers to deal with
the bureaucratic and technical hurdles involved in importing a car from
the United States.“For the vast percentage of cars and trucks
being purchased by Canadians, the vehicle companies are not ripping
Canadians off,” Mr. DesRosiers wrote.As Ms. Fromanger’s shopping
trip demonstrates, the anger toward book publishers largely stems from
the fact that theirs is one of a small number of products, including
newspapers and magazines, that typically display prices for Canada and
the United States.“We’re always the lightning rod when the
dollar goes up or down,” said Dave Hill, the manager of Munro’s Books
of Victoria, a large independently owned shop in Victoria, British
Columbia. “But it’s a lot more complicated issue than the customers
perceive.”Mr. Hill was among the booksellers that started
pushing publishers for price cuts about three years ago when the
Canadian dollar was clearly heading upward. On the whole, he said, the
industry has been responsive.Random House of Canada, one of the
largest publishers and distributors in the country, has given Munro’s
what Mr. Hill called “extra margin” on many titles. As a result, the
store has posted signs indicating that books from that publisher will
be discounted by 10 percent.A random review of new titles shows
that they are generally 15 percent to 20 percent higher in Canada, in
part a reflection of the higher distribution and marketing costs of a
smaller market. Older titles, however, still show much larger
differences. At the store where Ms. Fromanger shopped, the hardcover
edition of “The Da Vinci Code” by
Dan Brown sells for 37.95 Canadian dollars but has a United States price of $24.95.Diane J. Brisebois, the president of the Retail Council of Canada, said Canadian shoppers should be patient.The
merchandise now on the shelves and racks in most stores, she said, was
ordered and priced at wholesale earlier this year, when the Canadian
dollar was worth about 15 percent less than it is now relative to the
United States dollar. But she also cautioned that price
differences reflect more than just one exchange rate. Economies of
scale, different tax and cost structures, and exchange rates with third
countries all play a role, she said.“For Canadians to believe
that our prices will be at par with American prices under any
circumstances is not realistic,” Ms. Brisebois said. “Americans have 10
times the purchasing power. That’s the reality.”