Abbotsford businesswoman Gerri Charles is thrilled when prom season rolls around, because she gets to host hopeful girls at her dress boutique, Champagne & Lace. But for the last few years, many of these girls take what they learn at Charles’ showroom, and head down to the United States to make the purchase. Charles has had to let go of many staff, and finds it difficult to continue saying “yes” to community requests for event sponsorships and raffle ticket purchases.
As the Canadian dollar has grown to parity with the American in the past three years, Canadians living close to the border have been enjoying the lower prices — and generous duty exemptions — of the international town that’s often less than 30 minutes away. This is costing Canadian businesses, and their employees, dearly.
In 2010, the City of Bellingham’s finance director, John Carter, conducted a survey, and estimated that Canadian shoppers account for 10-20 per cent of all retail sales in Bellingham. That’s at least $140 to $235 million Canadian dollars flowing to Bellingham ever year for general merchandising, such as big box retailers, and restaurant food and drinks, says Carter. And this figure excludes groceries, a major purchase for people regularly shopping down south.
When US retail sales dropped by as much as 30 per cent in 2009, Bellingham saw only a small decrease, and has already rebounded, says Ken Oplinger, president and CEO of the Bellingham/Whatcom Chamber of Commerce & Industry.
“It was almost entirely because of Canadians coming across.”
On busy summer shopping weekends, the Chamber estimates that over half of cars in big box store parking lots have Canadian plates, mostly B.C. The estimate for the Costco lot is 70 per cent, although the store wouldn’t confirm.
Nationwide, through their 50 million trips across the border, Canadians could be spending as much as 10 per cent of their retail dollars in the States, according to Bank of Montreal chief economist Doug Porter. That’s more than $20 billion a year.
This means that, while the Bellingham Costco is planning an expansion, and hiring more staff, places like Abbotsford’s Sevenoaks Shopping Centre, a 12-minute drive from the border, have seen their retail sales flatten, and growth has been slower than expected — a result of cross-border shopping, the mall believes.
For specialty retailers, employee wages are about 18 per cent of retail sales, says retail consultant John Williams, head of J.C. Williams Group in Toronto. Sales of $140 million — the minimum amount that Canadians are sending to Bellingham annually — correspond with 800 potential retail jobs in Canada. That’s based on a Statistics Canada average of $15 per hour, for 40 hours per week.
Gerri Charles’ boutique, Champagne & Lace, has cut back to nine employees from 24 in the past four years. The $100 that Abbotsford shoppers might save by buying their prom dress over the line is linked to real jobs lost, she says, and that equates to fewer car and mortgage payments, and less tax income for public services.
“The Canadian consumer misunderstands the dynamics of the tariffs and duties, and thinks that somehow the Canadian retailers are just gouging them, and that there’s some inequities we have control over. And we don’t,” says Charles.
When Brent Murdoch’s customers come to his outdoor gear store, Valhalla Pure Outfitters in Abbotsford, they frequently compare his prices to those of stores just south. Murdoch is forever justifying the 18 per cent duty he has to pay on US items such as tents and footwear, from which American businesses are exempt. He hasn’t had to fire staff, but VPO has grown slower than expected.
“It really impacts our opportunity to grow. We’re constantly up against that,” he says. “We work very very hard on the pricing issue. It takes up a lot of my time, just trying to be competitive. But it is difficult.”
This year, he has been “bombarded” by local shoppers requesting him to install bindings on skis that were brought in from the US, often duty-free. VPO would need pay duty if he wanted to bring those same skis in.
There are tariffs on finished goods heading into Canada that don’t exist in the US, explains Allan Asaph, executive director of the Abbotsford Chamber of Commerce.
“No amount of shop local promotion is going to compete with people’s price sensitivity. What we need to address is the landed cost to Canadian retailers, so they can be more competitive.”
These price differences were 13 per cent on average last year, according to BMO.
While Canadians are propping up the Belligham economy, their neglect of their own is costing the community.
“I would love to continue to pay for gift cards and draw prizes for all the local high school grads. I would love to continue to support them in advertising in their annuals and their yearbooks. But that pendulum has to swing both ways,” says Charles, who explains that the money she has raised for various community functions over the years has come as a result of the business she has done.
Two-thirds of Canadians have shopped in the US in the past year, according to a recent Ipsos Canada poll. Of those, 72 per cent feel no quilt about it, and 15 per cent have lied to a customs agent. Canadian retailers, like Brent Murdoch and Gerri Charles, want a level playing field with regard to the tariffs that Canadian and American businesses need to pay. That, they say, will allow them to hire more staff and support more community events, ensuring that the dollars Canadians are spending actually benefit the local community.