Why are prices more expensive in Canada?
Identical items sold in Canada for one price are almost always available for significantly less south of the border. Considering our dollars have been hovering at par for nearly two years, this has many Canadian consumers shaking their heads and asking, “Why is this happening?” Is it price gauging?
Retailers say that multi-national suppliers are the ones to blame for the discrepancy.
Diane Brisebois of the Retail Council of Canada recently told a Senate committee that Canadian merchants are being unfairly singled out for having higher prices than stores in the United States.
She said that one reason for the higher prices is Canada’s population, which is small in comparison to the US. This allows large vendors to enforce a special price for brand name products that can be anywhere from 10 to 50 per cent higher than in America.
“There are price differences between Canada and the U.S., but they are not always determined at the retail level,” she said.
Another problem, she said in an interview afterward, is that Canadian retailers have no option beyond purchasing from Canadian distributors of American products since they are not allowed to buy from the United States directly.
Canada is apparently not the only country facing the “country pricing” problem. “There are a lot of people who believe that American multi-national manufacturers use their secondary markets to ensure they can remain competitively priced in the U.S.,” Brisebois said.
A few examples of what Canadian retailers must pay suppliers compared to their counterparts in the US, according to Brisebois:
— Hair conditioner (1.18 litres) cost the Canadian retailer $10. By contrast, the U.S. retailer paid $6.23, representing a 43 per cent markup.
— The cost for a 46-inch LED TV was $1,001 in Canada and $888.75 in the U.S., a 13 per cent difference.
— An automobile tire cost $169.69 for the retailer in Canada and $128.21 in the U.S., a 32 per cent difference.
The biggest contrast on the list involved an over-the-counter painkiller, which cost Canadian retailers more than double the U.S. price.
Brisebois also noted other factors contributing to the issue, such as import duties charging as much as 18 per cent, transportation costs, government regulations, and Canada’s protectionist supply system on meat and dairy products.
So what can be done? One proposal was that Ottawa remove duties on goods unless there is a Canadian producer in competition.
“What we are showing is that Canada, supposedly known as the hockey country, is paying 18 per cent (duty) on hockey skates, 15.5 on all protective equipment and 8.5 per cent on helmets, while the U.S. is paying zero,” Eric Levert, from Reebok-CCM Hockey, told the committee, adding that he would have no problem with removal of all the duty fees, even on items they make in Canada.
He noted that a $15 duty on an item his store sells ends up costing the customer another $35.
Bank of Montreal conducted a price comparison last spring that found Canadians pay 20 per cent more than Americans for the exact same product, on average.
The Senate committee has yet to hear from major foreign manufacturers, and it is unclear whether it will do so before presenting its findings later this year.
What do you think? Let us know in the comments!
Sources: The Canadian Press; The Huffington Post; Yahoo