Cross Border Shopping

Cross border shopping has hit the news in Canada recently, especially in border cities like Vancouver – it’s only 30-minutes (depending on where you live) to head down to Bellingham, WA or 1-hour to drive down to Seattle, WA and the numerous stores along the way.

The Vancouver Sun has an article in todays edition Cross-border bargains and the Internet or shop local?

Craig also notes in his story:

Even with the price of shipping and uncertainty over brokerage fees, the price  gap, the ease of shopping from home and the increased variety beats the local  alternatives. My latest purchase was a new battery for a cordless drill, which  was $80 plus tax from the local Home Depot and $55 from Amazon.com. Even after  shipping and duty, I saved $15 and it came to my door.

I’ve lived in Vancouver for about 8-years now, and only started cross-border shopping in the last few years.  Initially for gas as it was $0.30 – $0.50 per litre cheaper in the US (an average savings of $15.00+ for my Toyota Camry 2.2l 4cyl) every week or two.  Then it escalated.  We discovered stores like Fred Meyer that ran sales weekly and prices were upto 50% less than what we pay in Canada for the same items – and I’m talking everyday items that we would like like home cleaning products, paper products, cereal, snacks and even soda pop (we pay NO deposit fees in the US vs $1.20 [which you get back]+ $0.60 [which you DON'T get back] per 12-pack of cans in BC).

On average we’d spend $200 – $300 per month in BC with about 1/3 or less of that buying meat/chicken.  We now spend that much every three months by shopping in the US and timing it right to catch the sales, though you still need to be a smart shopper and know your prices (my wife is good at that).

Another example – about two years ago I had to get the shocks/struts on my car changed.  Head over to Canadian Tire and the shocks/struts worked out to $205.00 each (with tax for a total of $820.00).  Bought them on Amazon and drove down to Point Roberts, WA (about 30-60 minutes with my Nexus card) and picked them up for a total cost of $565.00 – $255.00 less for the exact same item.  It’s difficult to support the large chains (and other local businesses) when you can get the identical products for so much less and in this case a difference of 45% which allowed me to take my car to the mechanic and get it repaired for what I saved in parts.  So while I did not spend the money in the economy directly buy buying the parts, I did get it repaired here and put part of my savinga back into the economy (and still walked away with some cash in my pocket).

This year I needed to get additional parts for my car to repair the EGR system.  US price for all three items under $150.00 – Canadian price over $200.00, another savings of atleast 33% over Canadian prices for the identical items.

In addition to the price differences you get much more selection in the US since it is a much larger economy and population (compare 30 million people to over 300 million in the US).  I can easily find size 13w runners in the US, not so common here in Canada and when I can find them here they are rarely below $100.00 – I just found them in the US for $25.00; so I bought four pairs.  I’m good for a few years.

Now we don’t get everything from the US, some of our money is spent in Canada but it is definately just a fraction of what we spent previously.

Here is one more example for a cleaning product; you know those things that turn your toilet water blue?  They are normally $1.97 in Canada and on sale you can get them for $0.99 however in the US they are regularly priced for $0.99 and on sale for $0.69 – a price difference of between 50% and 65% – I’ve not taken the exchange rate into account but it’s quite nominal right now.

There is a great report by BMO about cross border shopping – http://www.bmonesbittburns.com/economics/reports/20120517/sr120517.pdf – read the full report (it’s only 3-pages long) to get an idea of the price differential between Canada and the US on a sample set of items such as magazines, Blu-ray Movies, Books, Cars, Huggies Little Movers, Gap Kids T-Shirt — you know, stuff that you would potentially use every day.

An interesting point made in the report:

The steady drain of Canadian shoppers heading south is weighing on retail sales in this country. For the first time in years, U.S. retail sales growth is running faster than in Canada (Chart 3). The better spending growth backdrop stateside is no small irony, given the wave of U.S. retailers heading north to seek greener pastures. Research by the Bank of Canada finds that cross-border shopping accounts for less than 2% of consumer spending, and is thus likely not a major macroeconomic issue Others complain about the long line-ups – yes, they can be long.  This past Victoria Day weekend they were up to 2-hours long, but getting a Nexus card can chop that down to under 15-minutes at the worst of times.

So while cross-border shopping isn’t significant it is taking roughly $20b from the Canadian economy, according to a report on the CBC (based on the BMO report).

There was a news story last week (either on CBC or News 1130) about a home owner who ended up buying siding for his home that was made in Canada CHEAPER in the US than he could purchase it here.  How can that be?

I’ve also noticed though that the gap is closing on some items with the difference being only a few dollars — however that gap only seems to exist when items go on sale at Canadian retailers and it never seems to be consistent.

The report from BMO says that with the new increased limits on how much you can bring back duty-free, cross-border shopping will potentially increase; I’m not sure about that.  While it makes it easier to bring items back from the US those that are already crossing that limit will continue to do so and pay any duties and taxes owed on those items.  They did it before the limits, they will continue to do it even with the newer increased limits.  As the Finance Minister stated the limits were increased to bring “reality” into the duty-free amounts.  I would agree.

For Canadians that are close to the border and where it makes sense for them to shop either online (and have it shipped to them) there are several websites that cater to cross border shopping, one that I found is called (quite simply) Cross Border Shopping, also Cross Border Shopping Deals – which is a forum based site, Cross Border Shopper.  Click the links to visit them.

Cross border shopping is here to stay, so long as the Canadian dollar is at or above parity with the US dollar.  Most analysts don’t expect the dollar to drop in value anytime soon.