Higher Retail Prices in Canada – Good for Government Tax Revenue
Many large US and foreign manufacturers use country specific pricing for their products sold on Canadian retail shelves. If you buy a book, CD, or television at Best Buy, Chapters, or Walmart, you probably paid the Canadian country-specific price. That pricing is causing a lot of controversy and retailers and consumers are complaining about these differences which may result in retail prices of 50% higher in Canada. Why do you think prices are higher here and who benefits?
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According to a Moneyville report, it was said that Canadian retailers are claiming the higher costs are due to import duties, transportation and distribution. Is that plausible, or are the prices charged by multi-national brand owners as the reasons? Duties certainly add to costs and getting over the border might pose problems too, however the US/Canadian price differential is often fairly high. It may not account for the 30 to 50% price difference you see for some books sold at Chapters. It could be US companies are using it as an excuse to raise their profits.
This issue first hit the fan back in 2007.
This screenshot of Indigo’s web page seems to tell us that retailers are powerless to change producer’s Canadian pricing policy. Intead they’re offering free shipping and other discounts to compensate.
Is the real reason for Canadian pricing due to retailer’s give and take negotiations with its US suppliers? I’m not suggesting that retailers and US manufacturers don’t have a right to charge what they want. It’s just a bit of a PR problem for everyone.
Apparently Flaherty told the senate committee he shares Canadian consumers’ irritation with a persistent price gap still lingering 5 years after the Canadian dollar hit parity with the U.S. dollar. Despite consumer complaints and attention to this issue, and promises from the Federal Government’s Jim Flaherty back in 2011, it doesn’t appear there will be any action taken by anyone. What did the Federal Government learn during this past 12 months?
The feds collect duty on the imports and then gst on the retail price so they stand to capture very high levels of tax revenue. Flaherty and Harper frequently gloat about the Federal Government’s improved financials. Excessive taxation might really be a key component of the pricing issue and they may not want to give it up.
Canadian Made Products Selling on US Shelves
The litmus test for this type of pricing controversy is to find a Canadian-made product on US store shelves and compare the price there to prices on Canadian store shelves. The US has import duties too. Since cross border shopping by Vancouver, Sarnia, Windsor and Niagara Falls residents is so frequent, you’d have to believe prices are much higher here.
If country-specific pricing was abolished and prices were set to the lower US price levels, it would definitely increase consumption of American made products here in Canada. So while country specific-pricing is bad for consumers, it could be a good thing for Ontario manufacturers. Manufacturers here can undercut those high US competitor’s prices.
If country-specific pricing was to end, it may force Revenue Canada to raise import duties in order to protect small Canadian manufacturers. Therefore, is the current country-specific pricing is a pseudo form of duty that the manufacturer/brand gets to keep?
Even if Canadian manufacturer’s retail prices were forced into the country-specific model, it can provide more profit margin for them. Any strategy that can inflate retail prices should benefit Canadian producers who can at least compete on price.
In the world of commodified products, it probably all comes down to money and perhaps manufacturers just want more. If Apple can beat the price-sensitivity hurdle, why can’t all manufacturers and retailers do the same? What effect will the loss of Canadian specific pricing have on Canadian manufacturers? Will Canadian producers have to improve and step up their productivity and marketing prowess to compete with aggressive US manufacturers? Can Flaherty increase duties or would the US use that as a public relaitons gambit to discredit Canada’s integrity within the Free Trade Agreement?
It’d be nice to know your thoughts. Leave a comment below.
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