Saturday, October 20, 2007

Tired of paying high prices in Canada

My trip to the US has enlightened me to the fact that Americans pay less for the same goods. OK, I already knew this, however I never knew to what extent. Stuff in the US cost on average 15% less than in Canada.  Of course this has traditionally been the case because of the strength of the American Dollar.  However, lately the American dollar isn't doing so hot.  In fact for the last few weeks the Canadian dollar has been more powerful than its American counterpart.

So why are we paying more today for the same goods?  Retailers are saying that its because the goods were purchased months ago when the dollar was low.  That too sounds logical.  I learned in business school that orders are placed months before products are placed on the shelves.  However, I also learned that purchase orders are paid months after the products are received and assuming that the PO is in US dollars, its paid in Canadian dollars at the current market price.  So that explanation doesn't hold water.

Canadians too do not accept this explanation, so they have taken matters into their own hands.  Cross-border shopping has risen in the past few weeks, and doesn't look to be slowing down.  Internet purchases have risen as well, since the only tax that has to be paid is the GST.

Its has become quite the topic, even in  Parliament. Federal Finance Minister Jim Flaherty plans to meet with private retailers next week to urge them to reduce prices as the dollar soars in value.

It will be interesting to see what develops.  Is this just retailers trying to get away with a little extra profit while the Canadian dollar is high or do retailers simply don't know how to convert money?

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