The Canadian dollar’s fall in value over the past year has caused some residents north of the border to make fewer shopping trips into the U.S., according to a recent poll of people living in lower British Columbia.
Steve Mossop, president of Insights West, a Canadian market research firm, shared the results from his company’s latest survey of border-crossing habits during a Feb. 19 panel discussion in downtown Vancouver, organized by Retail Marketing and Advertising Canada, a trade group. Panelists’ commentary focused on cross-border shopping and its impacts to Canadian business.
The Insights West survey, which polled 810 lower B.C. residents online between Feb. 3-5, found that 61 percent drove into the U.S. to shop at least once during the past 12 months. That’s down 13 percentage points from a similar survey last year, which reported 74 percent of residents in the area made at least one cross-border trip by car annually.
The loonie’s recent drop in value compared to the American dollar has raised concerns in Whatcom County that southbound border travel will suffer, and with that could come hits to local businesses boosted by Canadian shoppers.
The loonie averaged 91 cents to the American dollar in January, according to the monthly average exchange rate at market close, calculated by the Bank of Canada. During the same month last year, that average was $1.01.
Although the Insights West survey suggests more Canadian shoppers are staying home, overall southbound travel into Whatcom County has risen steadily over the past five years, according to data from Western Washington University’s Center for Economic and Business Research.
The total number of people crossing into the county in 2013 increased 5.7 percent to 16.2 million, compared to the previous year, according to the center’s data.
Vehicle travel into Whatcom County is currently the busiest it has been since the late ‘90s.
For business advocates in British Columbia, the number of Canadians who travel south to shop at American retailers remains a threat to the health of their own stores back home.
Large Canadian retailers, such as London Drugs, have even initiated advertising campaigns designed to convince hometown shoppers to keep their business in Canada. Among the company’s recent efforts are major flyer blitzes centered around Black Friday.
“We’re doing all we can to compete,” said David Thorpe, general manager for marketing at London Drugs, who was among the panelists. “It’s a very, very challenging, competitive marketplace.”
Anita Huberman, CEO of the Surrey Board of Trade, who was another panelist, said that stagnating retail sales are occurring across Canada, but the effects appear to be heightened in British Columbia.
Huberman said that according to the retailers she speaks with in lower B.C., the general sentiment is that the lure of American shopping contributes to a “stopped economy” up north.
“The convenience of going across that border is quite significant,” Huberman said.
In terms of solutions, Huberman said her organization is lobbying Canadian lawmakers to lower trade tariffs and enact policies that would narrow pricing gaps between products sold in Canada and the U.S. She said the focus is to use public policy to help create a more level playing field.
Insights West’s survey showed that a majority of respondents said lower American prices for retail goods, as well as other items such as airline tickets, remain one of the key elements attracting them to shop in the U.S.
But James McCafferty, assistant director of WWU’s Center for Economic and Business Research, who was the only American on the panel, said Canadian retailers’ woes are attributable to more than just prices.
McCafferty said he believes the real challenge for Canadian stores is not simply matching the prices of their American competitors, but instead gaining a better understanding of their customers’ behavior and shopping preferences.
In short: It’s not just an issue of pricing; it’s also one of marketing.
“Understanding what makes consumers tick is very important,” McCafferty said.
A major question remains for business owners and economists watching the border: How low in value must the loonie fall before Whatcom County sees significant drops in Canadian traffic?
Huberman cited figures from the B.C. Business Council predicting that noticeable effects would come if the loonie falls to between 83-85 cents on the U.S. dollar.
McCafferty highlighted data from WWU’s Center for Economic and Business Research that puts the threshold lower, at 70-75 cents.
Should the loonie fail to recover its value, or drop even further, McCafferty said he doesn’t expect the currency exchange rate will have a blanket impact on Whatcom County business.
Local companies on solid financial ground would likely be able to weather the impact, he said. But businesses already struggling would certainly have a more difficult time.
“It’s going to impact each one differently,” McCafferty said.
Evan Marczynski, associate editor of The Bellingham Business Journal, can be reached at 360-647-8805, Ext. 5052, or email@example.com.
A version of this article appears on page 11 in the March 2014 edition of The Bellingham Business Journal.