Dear Canadian Retailers,
I just wanted to write you a quick note to let you know that I’m going to try my best from now on to avoid purchasing items from you. This is specifically due to your inability to properly recognize that the exchange rates between the Canadian and American dollar are almost equivalent, and that your prices should be adjusted accordingly.
To support my point I would like to identify a few examples. Yesterday I walked into Chapters to buy a new book. After looking at the price on the back of the book, I promptly walked out of the store. The price was $24.99CAD and $10.99USD. This clearly is not the exchange rate. Recently I was doing research for a client on a Nikon D200 model camera. The price of the camera is $1099USD, and in Canada, is sold for over $2000CAD. As a result, my client has opted to buy it from the US, and have it shipped here. It is still cheaper, even with having to pay duty.
As far as the book goes, I decided to order it online from Amazon. I ended up paying $22.93CAD total, including shipping and taxes. This saved me over 15%. Now answer me this, why would I pay this extra 15% when it is clearly just an extra 15% markup on the price? You are taking advantage of your customers, and before long, they will start to catch on. Once upon a time this was an acceptable price because of the exchange rates, but let’s face it, the times have changed. The Canadian economy is stronger than ever, and your pricing structures should be altered accordingly.
I purchase and resell electronics from my suppliers for my clients upon their request. We make a very good profit margin on our sales, and we still beat prices by over 100% in some cases compared to retail giants like BestBuy and FutureShop. These stores can make over 400% in markup on some of their sales. The prices in the United States are still high, but they are much more reasonable.
For the time being I’m going to order the majority of my goods online from wholesalers.
Sincerly,
Dave Lahn
15 comments ↓
I agree. There is no way retailers can justify getting away with this type of pricing shenanigans any longer.
For a lot of items that Future Shop and Best Buy mark up, you can source them from the States or eBay without getting hit too hard on customs. For example, Monoprice is my preferred source for A/V cables. They continually beat any Canadian retailer and it’s worth the wait to get the items shipped in.
Damn, didn’t see that one coming. Nicely put.
[...] I hit up my friend Dave’s blog today, and he had something interesting to say about Canadian Retailers. Its worth the read, so check it out here. [...]
If you can put aside the right-wing spin of most of its content, the current issue of Maclean’s magazine has a great article that explains this problem. It’s called “The Economy Is Better Than Ever, So Why Do You Feel So Poor.” Not sure if it’s available online.
Also, in regards to huge product mark-ups; sure some are obtusely large, however, in the case of consumer electronics, it’s usually to absorb the cost to the company of selling certain products at minimal, and sometimes even below wholesale cost. This, of course, doesn’t take into account the dollar difference.
For reference, here is the article Andrew mentioned - http://www.macleans.ca/business/economy/article.jsp?content=20070625_106278_106278
I understand the need for a reasonable markup percentage, but the retail giants sell their products at MSRP quite often. With regards to companies selling below cost, if this is absolutely necessary, the manufacturer’s will often compensate you for you losses if you yell at them enough. This happens more in the case where some other company is selling the same product at a lower price than your cost.
I bought a BMW motorcycle last year. The MSRP in Canada was about $2,500 higher. I e-mailed BMW North America twice for an explanation. No reply. It’s the same company that brings in the bikes for both markets. I finally went down to Oregon (no state sales tax) and bought the machine at a fair price, paying PST & GST on the “fair” price when I brought the motorcycle back into Canada. Apparently BMW in Canada was still using the old exchange rates to price their bikes. No way.
[...] head down to an outlet mall in Grove City, PA to acquire some inexpensive American merchandise. As Dave’s Canadian retailers post mentions, there is really no excuse for some of the pricing disparities between Ontario and a [...]
I had a good experience today: I walked into a store in Guelph to purchase some new luggage. The manager saw to me, showed me everything I wanted to see and then explained that because the Canadian dollar was doing so well, they had reduced the price of their luggage (they’re made in the US). He even gave me a price guarentee. I walked out with my new luggage (plus a few other things I hadn’t planned on buying).
Not all Canadian retailers are evil.
I just got the credit card statement for my purchases in the States. $19.99US = $21.49CDN; that’s even with the “convenience” fee or whatever the credit card provider charges for currency exchange. A $101 purchase was $109.12.
Now that’s the kind of bargain I can get behind.
I agree with your price beef but not with your target. It is not (usually) the retailers that are to blame for the price gouging in the Canadian market. Your book example: if the retailer were to sell the book to you at the USD price + exchange they’s lose alot of money because the publisher charges them based on the Canadian price. In other words, the villian in this scenario is the Canadian publisher/distributer who’s playing the exhange rate to boost their profits and the bookseller is as much a victim as the consumer.
As for electronics. You need to be very careful about where you purchase your goods because many of these multi-nationals enforce there price-gouging practices in Canada by refusing to recognize their own warranties if the product is not purchased domestically. Your Nikon scenario is a good example because Nikon Canada is known for not honouring Nikon warranties on USA purchased products. And they are far from the only ones, so be very sure you know the Canadian branches policies before ordering from the States; or be prepared to ship your product back to the States for warranty servicing.
Finally, there is a lot more at stake here than price markups at the cash register. These artificially inflated prices help raise the consumer price index (CPI) and the CPI is one of the indices used to calculate the rate of inflation. When the rate of inflation rises so does the prime interest rate and that affects every loan, mortgage and credit card interest rate. The bottom line is the markup at the register is a small inconvenience compared to the increasing interest costs on the huge debt most of us carry.
Free Trade was supposed to level the playing field for manufacturers and consumers. I’m no economist, but I think we got screwed.
Few predicted the plight of the USA dollar, I would love to know if Dave was one of these people. Dave is only echoing the confusion and frustration most consumers have towards these price differences. This is a much more complex issue to simply blame retailers for “taking advantage” of their customers. I am a retailer myself, an independent who uses a fair markup structure to support my business and expenses (not 400% profit as Dave claims). Like every store in my industry, I purchase 90% of my products 5-6 months in advance, an ample time used to make and distribute merchandise. At this time, the Canadian dollar was $1.25 to the USA dollar. If you are experienced in the costing of retail merchandise, you will understand that price adjustments cannot be made overnight! They require the partnership and cooperation of the manufacturers and distributors, most of which did not react right away thinking this dollar comparison thinking this financial shift was temporary. After realizing it was not a phenemenon, and at the pressure of retailers like myself, we worked together to lower retail prices immediately and going forward into 2008. I have lowered prices, and in some cases, sacrificed profits in order to remain competitive with the United States.
If it is blame you are trying to place, a good place to start is the United States government, who continues to devalue their currency by printing more of it and spending it on war overseas and failed domestic agendas. Then go down the line and blame the manufacturers & distributors (not all, because some reacted accordingly) who refused to help retailers cope with this situation. Then you can blame us, but only for the right reasons. Dave fails to mention anything about independent retailers, I watch my business and treat my profits with a great deal of care. I value the needs of my customers, but if I put them completely over the financial safety of my business, I would no longer be in the position to serve them.
A personal message to Dave. In your first paragraph, you claim the retailer’s “inability to properly recognize that the exchange rates between the Canadian and American dollar.” The fact is, we all share this same inability. I would have loved to have been the trailblazer, predicted the exchange drop, adjusted my costing, and lowered prices the moment the market fluctuated. Much like the recession in the 1980’s and the stock market crash during the Depression, no one saw this coming. Your examples have merit, but for a completely different argument. The retailer is not the villain, if anything it is the American dollar itself and the government that has tarnished its value that deserves the brunt of your stick!
DC,
I understand a lot of your points. I have witnessed first hand the pain retailers have been facing. When I wrote this post, quite a while ago, the retailers were not reacting properly to the changing dollar.
I’ve been meaning to write a new letter because I have witnessed that it is, in most cases, the suppliers and manufacturers that are refusing to change their pricing.
Retailers did not MAKE DRASTIC CHANGES at the time you wrote your article because any action on their part would have been premature. Competent retailers DID react by talking to their manufacturers to work out a solution, but this kind of change takes time. The consumer doesn’t see these efforts being made. It makes sense that they wouldn’t. The Canadian media did a terrible job reporting on the dollar change. They panicked the same way a consumer would, when really it’s their job to find the full scope of the situation. I think in a way, they only added wood to the fire.
If you wish to write a new letter, I would make sure to include topics like independent Canadian retailers, the role of manufacturers, the Canadian media, and most importantly the US government’s role in diminishing their own economy. I am by no means anti-American, but I hate to see Canadian business being accused of wrongdoing when really it’s the Repulicans who inevitably created this situation in the first place…
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