As we reported earlier this week, the Canadian dollar has reached the pinnacle of its ascent towards parity with the American greenback. Perhaps, it hasn’t yet finished its climb in value. As a result, Canadians are naturally seeking deals south of the border considering that the loonie now carries more weight in the United States.
Canadian retailers, however, are fighting back in an effort to not lose precious sales to their American competitors. As QMI Agency’s Sharon Singleton reports, they “are beginning to act to cut prices to stop shoppers rushing south of the border for bargains as the loonie rises.”
Sears Canada, in particular, will be fighting the good fight to retain their customers by re-introducing “Sears Day” tomorrow featuring the “best of the season pricing”. The company released the following statement: “While much is being reported about prices across the border, Sears Canada emphasizes the great value Canadians can get right here at home especially considering the typical cross-border shopping experience.”
This past Tuesday, the Synergy Merchant Services Blog also mentioned that luxury carmaker Porsche would also be slashing prices to attract customers while the loonie is strong. Singleton also reports that clothing company, Brooks Brothers will be cutting prices in its Canadian stores by 15% for the duration of the loonie’s current value status.
Claudio Del Vecchio, chairman and CEO, Brooks Brothers had this to offer: “For some time, Canadians have questioned why the U.S. and Canadian dollar exchange rate has not been reflected in Canadian retail pricing. With the Canadian and US dollars approaching parity, cross-border shopping is at a ten year high for apparel.”
Turns out that, as expected, that Canadian shoppers will be the first to benefit from the stronger Canadian dollar. Economists are estimating that the loonie hitting parity with the greenback this week is not a short-term deal. Chances are that based on the strength of the Canadian economy and its quick rise from the impact of the recession, the nation’s money will remain as strong as U.S. currency for quite some time.
Singleton notes that the last time the loonie hit parity with the U.S. single, many Canadian retailers failed to reduce their prices, even though the cost to import the goods had decreased.
Explains BMO Capital Markets Economist Sal Guatieri: “What’s different this time around is the dollar is strong against a broad range of currencies, including the pound and the euro, which means that things we import should be cheaper. Retailers should be passing on the affects of these cost savings.”
Savvy Canadian shoppers, however, will look for the right bargain, and if it’s across the border, so be it. Singleton reminds us that it may take some time for Canada’s retailers to adjust their pricing, especially if the inventory was purchased when the dollar was weaker. We are certain that many will go out to seek those deals, putting their strong loonies to good use.