Weak loonie has cross-border shoppers changing tactics
As recently as the beginning of 2013, when the loonie was worth more than the greenback, Canadians could head to the U.S. knowing their dollar could go so much further than it would at home.
However today with the value of the Canadian dollar hovering around the 75 cent US mark, not nearly as many Canadians are rushing to go south of the border for shopping sprees.
But for 2017, when the loonie is expected to stay well below the value of the American dollar, some Canadians are still finding reasons to shop in the U.S. — they’re just not doing it the way they were four years ago.
Border shops take a hit
Over the years, some U.S. stores and malls have come to rely on eager Canadian deal hunters as a major source of store traffic, but even with the lower value of the Canadian dollar, it isn’t all doom and gloom for them.
“[Cross-border shopping] hasn’t declined as much as you’d expect given the change in the dollar,” Maureen Atkinson, a partner at retail consultancy company J.C. Williams Group, said.
According to Statistics Canada, in September 2012 when the dollar was above parity, Canadians made 4.8 million trips to the U.S. In September of 2016, when the Canadian dollar was worth approximately 76-78 cents U.S., there were 3.5 million trips. That’s a drop of approximately 27 per cent. Year over year, however, there was a slight increase of 1.3 per cent in trips made to the U.S. despite the dollar being well below parity then, too.
Bargains still important
While it’s well known that the Canadian dollar won’t go as far as it used to, consumer and marketing expert Tony Chapman says it’s still important for American retailers to deliver good deals to attract Canadians.
Treasure hunts, where shoppers could potentially find quality items that are not available in Canada at rock-bottom prices, could be key to luring Canadians to spend their money down south once again.
“Treasure hunting is still very, very important,” Chapman said. “You let your friends on social media know how successful you were on that treasure hunt, what did you land, what kinds of deals you made. That’s a big part of the psychology of shopping.”
Last year, some U.S. businesses made headlines for running promotions targeted to Canadians to get them shopping south of the border again. However, some of the promotions have received a tepid response from shoppers.
Choice and variety
With a wider variety of stores and products available, the U.S. can offer a shopping experience superior to what Canadian retailers are currently able to offer. It’s something Chapman says U.S. stores should exploit.
“If I was a U.S. retailer, what I would do is try to win on choice — that we have things you can’t get [in Canada],” he said.
Retailers like J.C. Penney, Kmart, Target and others, which do not have stores this side of the border, also carry some items that aren’t available in Canada. By taking a trip down south, Canadians have the opportunity to pick things up in stores that they may otherwise have to order online — if they’re available online to begin with.
U.S. shoppers in Canada
While Canadians were eager to take trips to the U.S. to save when the loonie was at or above parity, now that the American dollar is back on top, that doesn’t necessarily mean Americans are looking to do the same here.
U.S. travel to Canada has increased two per cent from September 2015 to September 2016 to 2 million trips, and 15 per cent from September 2012, when Americans made 1.7 million trips to Canada.
What’s now more attractive to Americans is Canada as a tourist destination, and while Americans may not come north with the intent to spend a significant amount of cash in stores, there are still ways Canadian retailers can get Americans to open their wallets.
“Remind Americans they could come up to Canada, have a great experience, and by the way, your dollar carries a lot more weight when you walk into our stores,” Chapman said. “When people come in on vacation, they have a propensity to spend more just because they’re in that holiday mood.”
Even if there isn’t a sudden spike of Americans in Canadian stores, retailers this side of the border still have reasons to smile as the lower Canadian dollar has kept many Canadians at home to spend money in their stores. Online shopping, however, remains a thorn in the side of Canadian brick-and-mortar stores.
“Now what we say is your competition isn’t the store beside you in the mall, your competition is the world,” Atkinson said.
The Trump effect?
With a Trump presidency only days away, no one really knows what impact he may have on the retail world. His protectionist sentiments could still be a reason for Canadian retailers and shoppers to watch their backs for a potential shakeup.
“He’s talking a protectionist game,” Chapman said. “You don’t know how much is rhetoric and how much will be listened to by more sensible people in Congress and Senate.”
If Trump follows through on taxing products brought in from overseas and that causes a trade war, there could potentially be problems regardless where Canadians choose to shop.
“Canadian retailers depend on being able to have access to goods, so if there’s an ‘I’m going to slap a tariff on you for this,’ then that would probably not be good and would concern retailers,” Atkinson said.