Why you're still getting gouged

Why you're still getting gouged
Inflated profits, regulations, taxes and timid shoppers keep prices high
COLIN CAMPBELL | August 6, 2008 |
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Once a month, Henry Tenby jumps in his car — just after the morning rush hour and with a tank close to empty — and makes a 45-minute drive from his Vancouver home to Blaine, Wash. After zipping across the border using his recently acquired Nexus pass, he fills up with cheaper American gas and stops off at a packaging store, Hagens of Blaine, where the aviation buff and Internet entrepreneur picks up the computer parts and memorabilia he routinely buys online from the U.S. and has shipped there under his name. The cross-border shopping ritual saves him anywhere from $50 to hundreds of dollars a trip — at the very least, the equivalent of a nice dinner out, he says. This month, he plans to buy a piece of new computer hardware in the U.S. for about $200. Buying the part in Canada would cost $320, he estimates. As for Canadian retailers charging more than their American counterparts: "I think they're just being greedy and gouging Canadians," he says. "I don't like it."

It wasn't supposed to turn out like this for Canadian consumers. When the Canadian dollar reached parity with the U.S. greenback on Sept. 20, 2007, Canadians celebrated. The news was trumpeted in headlines like the results of some epic sporting match. "$1 Cdn = $1 US," one simply stated. For the first time in over three decades, Canada seemed to be back on equal footing with its neighbour to the south. But after reaching such great heights, Canadians quickly discovered that the view wasn't all it was cracked up to be. Shoppers noticed they were still paying alarmingly high prices for basic goods compared to Americans — in the case of big-ticket items like cars, sometimes many thousands of dollars more. Retailers and distributors vowed these cross-border price gaps would narrow over time as they adjusted to the stronger loonie. Well, almost a year later, we're still waiting, and savvy shoppers like Tenby are still saving thousands by taking their business to the U.S. — even after factoring in things like the cost of gas and duties.


http://www.macleans.ca/business/economy/article.jsp?content=20080806_54958_54958

And today the Loonie was about .9350, the rise was tied to oil, gold and other commodities. Oil is $30 off it's highs, gold dropped $32 today alone, about 20% off it's recent highs, more from it's record high. How long until retailers start "adjusting" prices down?

One thing no-one seems to mention when taking into consideration about the difference in pricing to the U.S. is the volume of sales. Over there they have some 300 million to our 30ish or so million people. I would think by those numbers alone, that they can still afford to sell for less. They can make up the 'loss' per item by accounting for sheer volume over Canadian purchases, even with our dollar at par or a bit better.
...But I mean if you want to go and give the bulk of your paycheque to the Americans well that's lost on me. I don't care what the price difference is I will never go to the states to buy things. It's bad enough we don't make enough of our own product (although from what I usually see it's a better product when we do), but at least when purchased in this country we can reclaim some of that money spent.

I also find it a bit funny when some people buy heavily in the U.S. then bitch about high taxes...

The loonie has not appreciated as much against the greenback as much as input (commodity) prices have risen, over the same time period. So even though the loonie gained 40%, if oil costs 100% more, Canadian retailers can't lower their prices and still remain competitive. However, you can NOT increase prices as quickly as the US.

To illustrate this point consider:

June 2007 annual rate of consumer price inflation (CPI ex. food and energy):

Canada = 2.2% (2.2%)
US = 2.7% (2.2%)

May 2008 annual rate of consumer price inflation (CPI ex. food and energy):

Canada = 2.2% (1.2%)
US = 4.2% (2.3%)

The price of consumer goods in the US to US consumers has increased at nearly double the pace that Canadian consumers have experienced, both in terms of total CPI and CPI ex. food and energy.

I feel that this is a good illustration of my above point: a higher (lower) currency results in slower (quicker) price appreciation when input price appreciation (depreciation) outpaces the exchange rate appreciation (depreciation).

(NOTE: Although Canada and the US have similar consumer preferences, it's too complex to compare and contrast the entire spectrum of market conditions faced by Canadian retailers vs. US retailers. So although this example is relevant, it is far from a complete analysis.)

The various governments think that we are a bunch of idiots easily seperated from our money and we consistently prove them correct. Our governments tax the hell out of us and we just meekly take it.

There is a great deal more to this issue than the exchange rate.
When goods cross the border the exchange rate is the critical factor, but in order to get to the store shelf, the retailer must add his cost of doing business. In Canada, that is much higher than in the US.

Our entire social structure is heavily tax supported and, like it or not, that works its way into the final sale price of everything we pay for.

Remember, if a canadian gets sick, his health care costs are covered. Not so south of the border where a non-unionized blue collar worker can be sadled with the entire costs of his own health care. Same thing for post secondary education. First year undergrad tuition at Queen's University in Canada can be had for around $ 5,600. The same thing at Duke University in the US is $ 35,900.

Sure I'd like to pay less for everything but in the end what will it really cost me?

What bothers me the most is a car build in Canada is shipped to the USA and sold for less than we can buy it