Cross-Border Shopping: The View From Canada

The indicators are pretty much all pointing in the same direction: Canadian shoppers crossing the border to do some U.S. buying is sharply increasing. The fact that it's going up isn't in dispute. The reasons why are.

Some of the statistics: Same-day car trips by Canadians to the United States rose 0.7 percent in February to 2.79 million, marking the fourth monthly increase in a row, Statistics Canada said on Thursday (April 18). In January, such trips had jumped by 1.5 percent to mark the highest level since February 2012. On Wednesday (April 17), the Federal Reserve's Beige Book of regional economic conditions reported that mall sales in upstate New York were "brisk" in March, up from a year earlier, and that "some of the recent strength is attributed to Canadian shoppers," according to a story that ran Thursday in The Globe and Mail, one of Canada's largest newspapers.

The Bank of Canada, in its monetary policy report on Wednesday, also cited the "increase in cross-border shopping, stimulated by the persistent strength in the Canadian dollar and the rise in travelers' duty-free exemptions for short stays implemented in June 2012."

As for the reasons for the increasing cross-border activity, there are several. First, the Canadian and the U.S. dollars are worth just about the same right now. (On Thursday, $1 U.S. was worth $1.02 Canadian.) That makes conversions a lot easier. There are also a series of new duty-free rules in Canada, so Customs poses less of a hurdle.

That said, while those are all reasons currency and rules shouldn't discourage Canadian shoppers from making the trip,  they don't explain what pushes those roadshows in the first place. Much of those reasons are perception. There is a perception that many products are cheaper in the U.S.. Whether that's true or not is irrelevant as long as the perception is out there. Logically, are the prices so much lower that it compensates for the gas, tolls and hours of extra effort?

The Globe and Mail's Michael Babad writes that it's also about the U.S. shopping atmosphere. "There are bargains galore and the consumer experience is often different. The malls and shops are easy to get to, and it can be fun to head across the border with friends or family to spend the day shopping in cities like Buffalo, N.Y., or Bellingham, Wash.," he wrote.

There are also no indications that the intrigue runs both ways, with no reports suggesting that a lot of Americans make the trek into Canada to shop. Complicating this are that many chains—Target is a good example—not only have stores on both sides of the aisle, but they take great effort to make each country's stores customized to be most attractive to the local audience. Are these border crossings an indication that some are getting it wrong? If Canadians forgo visiting Canadian Target and instead cross the border to visit U.S. Target, what does that say about how effective the local Canadian marketing has been?

For more:

- See The Globe and Mail story

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