Why products are more expensive in Canada

The Canadian dollar has been hovering near par with the American dollar for two years, yet consumers are still waiting for the gap to narrow between Canadian and American retail prices. In some cases, Canadians pay between 30 and 40 per cent more for the same products. 

The relationship between a stronger dollar and consumer prices is complex. Here are some of the factors that retailers claim influence the price difference between Canadian and American products. 

• Higher labour costs in Canada
• Import tariffs (Canadian book import regulations allow American publishers to tack a 10 per cent mark-up on top of the U.S. price of a book sold in Canada)
• Higher freight costs (the population of Canada is about the same as California but our geographical area is roughly that of the continental U.S.)
• Bilingual labeling requirements
• The time and cost to update price listings and catalogues
• Import contracts are often signed weeks or months ahead of the product arriving on store shelves.

There’s also the tendency for retailers and wholesalers to simply absorb profits or losses due to changes in the exchange rate. For this reason, the fact that cheaper consumer goods are arriving from the United States or China does not mean prices automatically decrease for Canadian shoppers.

Canadian retail prices likely won’t fall dramatically compared to our American neighbours, but there are several ways you can take advantage of the purchasing power of the Canadian dollar.

Vote with your feet: Retailers charge whatever the market will bear for their products. One successful tactic that caused some Canadian retailers to lower their prices was the number of Canadians willing to go cross-border shopping.

Import a big ticket item: Buying a car, motorcycle, boat, or snowmobile in the U.S. and importing it to Canada can save you thousands of dollars. Be sure to do your homework first, as not all manufacturers will honour their warranties across the border.

Shop Online: One of the best ways to take advantage of our high dollar is to shop online at American retail stores. Walmart.com offers free shipping to any of their stores, and Amazon.com offers free shipping on orders over $25.

Ship to the border:  Many online merchants don't ship to Canada, or charge high fees to do so. ShiptotheBorder.com helps make cross-border shopping easier for Canadians by providing a U.S. shipping address in almost every major border crossing. Shipments cost as little as $5. 

Buy U.S. assets: Take advantage of the low foreign exchange rates by purchasing some quality U.S. stocks for your RRSP. With the U.S. housing market still slumping, consider picking up a cheap rental or vacation home.

Take a vacation: Not only has the loonie strengthened against the U.S. dollar, but it matches up well against other currencies around the world.  Now is a perfect time to take a family vacation to the U.S. or abroad.

How do you take advantage of the strong loonie?

Robb Engen is half of the Boomer & Echo personal finance blogging team with his mother, a former financial advisor.  Reach him at robbengen@gmail.com