Canada/US: CDN Retailers put a price on parity

Canadian retailers big and small are starting to slash prices amid a growing chorus of complaints from consumers about higher prices here than in the U.S., despite the red-hot loonie.

Responding to mounting public pressure, Finance Minister Jim Flaherty is encouraging retailers to reflect the strong dollar in their pricing and stem the tide of cross-border shopping – an increasingly popular pastime now that Canadians have more purchasing power.

Flaherty is expected to reinforce his message when he meets with the Retail Council of Canada and several large retailers on Tuesday in Ottawa. Companies expected to be represented at the meeting include Toys "R" Us Inc., Forzani Group Ltd., Staples Inc., Wal-Mart Canada Corp. and Hudson's Bay Co., an aide to Flaherty confirmed.

A few are relenting ahead of that. Yesterday, Zellers became one of the first national retailers to move prices closer to U.S. levels on more than 250 items, from diapers and detergent to digital cameras and camcorders.

Wal-Mart Canada also cut prices this week on "higher profile" items, namely video games, DVDs, music and toys, ahead of the key Christmas shopping season.

Toronto bookstore Mabel's Fables, at Mount Pleasant Rd. and Eglinton Ave., has posted a sign at its cash register saying it is selling its children's books for the U.S. price on the jacket, in Canadian currency, plus $1 for paperbacks and $2 for hardcovers.

"We thank you for your understanding, support and loyalty and in the meantime ask your friends to not abandon our local neighbourhood stores for the U.S. Internet goliaths. Negotiate with Canadian retailers before you go south, please," says the sign at Eleanor LeFave's quaint shop.

"The way that stuff is priced coming out of the States is kind of dopey," noted Bay Bloor Radio manager Peter Kelly, who says he's mystified by the price spreads lately on identical products.

The Toronto electronics store has been waving the Canadian flag in its recent radio ads, saying it can now offer a Yamaha stereo system for $100 less, at $699, thanks to the weaker U.S. currency.

The seemingly unstoppable Canadian dollar closed at $1.0355 yesterday, up another 0.85 of a cent (U.S.) Many forecasters are saying it's expected to climb higher in the coming months, mainly due to the sluggish U.S. economy.

While some retail chains and individual shops are coming around, they're only the tip of the iceberg. Big-ticket items in Canada are still super-pricey compared with the U.S., including cars and electronics.

Retailers have been under fire in recent weeks for refusing to trim prices despite the soaring loonie. Consumers are complaining that even though the Canadian dollar has overtaken the U.S. greenback, prices across the country are still far higher for comparable products.

For his part, Flaherty is claiming victory in putting the retail industry's feet to the fire.

"This is good news for consumers in Canada that some of the retailers have started to be responsive to the need to reduce their prices, given the increased purchasing power of the Canadian dollar.

"I've been encouraging them to do that," the finance minister told reporters at meetings of the G7 finance ministers and central bank governors.

But Retail Council president Diane Brisebois said everyone is pointing fingers at the wrong people.

Product manufacturers and importers are to blame for the price disparity, she said.

"We're upset and we've had enough. We're not gouging people and we're going to tell him (Flaherty) exactly that at our meeting," she said.

Flaherty said he has already encouraged representatives of the Retail Council to do two things: disclose their pricing practices in terms of the U.S. dollar so Canadian consumers understand the differences, and get their prices down as soon as possible.

"It won't all happen overnight ... and different sectors of the retail economy have different realities in terms of pricing, but they should explain that, and that helps consumers be more informed. And then above all, consumers should shop and get the best prices," he said.

"I just want the market to work and I want prices to go down to reflect the increased purchasing power of the Canadian dollar."

Zellers' privately run parent company HBC may eventually expand its pricing initiative to all five of its Canadian retailers, including The Bay, Home Outfitters, Designer Depot and Fields.

HBC spokesperson Hillary Marshall said the company made the move on its own and was not pressured by Flaherty.

"We wanted to do something that makes an immediate difference on the average Canadian's wallet," she said, noting everything from Windex to Xbox can be bought now at a lower price.

"Consumers should not have to pay a higher price if our dollar is higher," agrees Andrew Pelletier, a spokesman for Wal-Mart Canada.

He said the company is aggressively negotiating with suppliers to achieve parity – and even beyond – on items that are currently much cheaper in its American stores. More price announcements will be made next week, he said.

Both federal and provincial governments worry that if prices don't start to drop, the number of cross-border shoppers will grow in leaps and bounds, resulting in lost tax dollars.

About 90 per cent of Canadians live within 160 kilometres of the U.S. border.

Flaherty said that, in the end, he can only use moral suasion.

"We're not about to fix prices," he said.

However, he added, the Department of Finance and the federal government have an obligation to speak for Canadians and to say to participants, "Hey, make sure that you let the market work."