Retail profits, higher salaries at heart of price gap with U.S.: manufacturers

OTTAWA — There are many reasons why retailers charge consumers more in Canada than they do in the United States, but one is simply that they can, witnesses told a Senate committee Tuesday.

OTTAWA — There are many reasons why retailers charge consumers more in Canada than they do in the United States, but one is simply that they can, witnesses told a Senate committee Tuesday.

Representatives of Canada’s manufacturers and consumer advocacy groups focused on the same point — the lack of competition in Canada’s retail sector — as a possible key component for the continuing price gap between the two countries.

Bruce Cran of the Consumers Association of Canada told the committee that he is somewhat baffled by what has happened over the last five years, a period during which the loonie gained about 50 per cent in purchasing power as it has risen to parity with the U.S. dollar.

And yet, he said, his own sampling of the price differential over that period shows that the gap has never fallen below 25 per cent.

An informal study conducted by Bank of Montreal economist Douglas Porter last spring came up with similar results, putting the average differential at about 20 per cent.

“How can a snowmobile that’s made in Quebec sell for a third less in the United States?” Cran asked.

“How can a pickup truck manufactured in Canada sell for $5,000 or $6,000 less across the line? Why is a book printed in the United States selling for a third to half more in Canada.”

Even ordering a book online from the U.S. jacks up the price by up to 30 per cent if the customer lives in Canada, he pointed out.

“If there’s an answer, I have yet to hear it,” Cran said. “I finally figured out you can join a U.S. ISP (Internet service provider) and get your Amazon books down there for about 25 to 30 per cent less.”

A published study from Ryerson University finding a trend toward concentration in Canada’s retail sector since 1980s could provide some of the answers, said Michael Janigan, head of the Public Interest Advocacy Centre.

In earlier testimony, the committee heard that the top four retailers garner 28 per cent of all retail sales in Canada, compared with only 12 per cent in the United States. And profits among Canadian retailers average 12 per cent of sales.

“While increases in size (of retailers) may have increased profitability, they have also given big chains more market power,” Janigan explained.

“High levels of concentration tend to lead to standardization and a lessening of competition.”

That’s a theory that bears closer scrutiny, Janigan added.

He, as well as a Quebec consumer advocate, recommended that the Senate committee ask the Competition Bureau of Canada to conduct a market study to determine what is really behind the “stickiness” of prices regardless of fluctuations in the currency.

Since launching hearings last fall, the Senate finance committee has called a variety of witnesses, from government officials to industry groups. But on Tuesday, some senators appeared as confused about the issue as they were when they began.

Factors they have heard included transportation costs, higher tariffs on imports, Canada’s protectionist supply management in poultry and dairy, higher minimum wages paid by retailers, higher taxes on such items as gasoline, alcohol and tobacco and preferential treatment by exporters courting the bigger U.S. market.

In some cases, there’s even different pricing policies within product lines. For instance, auto manufacturers consider Canada to be predominantly an entry level market, the senators were told, so there is often no price disparity on lower cost vehicles, but a wide gap for luxury lines.

The problem for the committee, said Senator Pierrette Ringuette of New Brunswick is that each sector appears to have its own unique reasons for why prices are what they are.

“There doesn’t seem to be a specific recommendation, because depending on the sector you are looking at, there’s a variety of different issues,” she said.

Martin Lavoie of the Canadian Manufacturers and Exporters said manufacturing and wholesale costs are not to blame, saying they represent only a small portion of the overall consumer price.

Where the most likely answer lies, he said, is in labour costs and profits, which combined make up 60 per cent of retail sales.

The Senate committee has until June 30 to report its findings.

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Red Deer has a new welcome sign at the south end at the new entrance from Hwy 2. (Photo by SUSAN ZIELINSKI/Advocate staff)
Red Deer ranks 241st on MacLean’s Best Communities list

The list features 415 Canadian communities

Dr. Wayne John Edwards, 66, died Tuesday at Chinook Regional Hospital. (Cornerstone Funeral Home)
Lethbridge doctor becomes 7th Alberta health-care worker to die from COVID-19

Dr. Wayne John Edwards, who was 66, died Tuesday at the Chinook Regional Hospital in the southern Alberta city

A FedEx worker loads the 255,600 doses of the Moderna COVID‑19 vaccine which came from Europe into a freezer trailer to be transported during the COVID-19 pandemic at Pearson International Airport in Toronto on Wednesday, March 24, 2021. THE CANADIAN PRESS/Nathan Denette
Canada’s incoming supply of Moderna vaccine slashed in half through end of April

Procurement Minister Anita Anand says Canada’s incoming vaccine supply from Moderna will… Continue reading

Energy Minister Sonya Savage speaks during an event to mark the start of right-of-way construction for the Trans Mountain Expansion Project, in Acheson, Alta., Tuesday, Dec. 3, 2019. A committee that is supposed to consult Albertans on coal development in the Rocky Mountains won't be able to ask questions about water or land use. THE CANADIAN PRESS/Jason Franson
Alberta coal consultation terms of reference rule out land use, water concerns

Alberta coal consultation terms of reference rule out land use, water concerns

Brittany Lausen, RDC Students’ Association president. (Advocate file photo).
RDC Students’ Association takes aim at ‘period poverty’ in Red Deer

Vulnerable clients of several non-profits can access free hygiene products

Red Deer Public Schools will not pilot the new draft curriculum at its elementary schools. (File photo contributed by Red Deer Public Schools)
UPDATED: Red Deer Public Schools says no to piloting new curriculum

Alberta Teachers’ Association support school boards

Have an opinion you'd like to share? Submit letters to the editor through our website, via email or the postal service. (Heather Colpitts/Black Press Media)
Letter: MLAs who are against tougher restrictions have no plan for consequences

The group of UCP MLAs pushing to end lockdowns are exacerbating what… Continue reading

Former Parti Quebecois leader Andre Boisclair leaves the police station after being charged with two counts of sexual assault dating back to 2014, Friday, May 29, 2020, in Montreal. THE CANADIAN PRESS/Ryan Remiorz
Preliminary inquiry in September for ex-PQ leader Boisclair charged with sex assault

MONTREAL — Former Parti Quebecois leader Andre Boisclair will have a preliminary… Continue reading

Three vials of the Moderna COVID-19 Vaccine are pictured in a new coronavirus, COVID-19, vaccination center at the Velodrome-Stadium in Berlin, Germany, Wednesday, Feb. 17, 2021. THE CANADIAN PRESS/AP/Michael Sohn, pool
Trudeau sending help to Ontario as Pfizer vaccine supply bolstered by 8 million doses

Prime Minister Justin Trudeau says more doses of COVID-19 vaccines are coming… Continue reading

Teachers demonstrate outside a school during a morning walk out in Longueuil, Que., Wednesday, April 14, 2021. Around 73,000 Quebec teachers say they will walk off the job for several hours on April 27. THE CANADIAN PRESS/Paul Chiasson
73,000 Quebec teachers plan to walk off the job for more than two hours April 27

MONTREAL — Around 73,000 Quebec teachers say they will walk off the… Continue reading

People line up in the rain for a COVID-19 vaccine at a pop-up clinic at the Masjid Darus Salaam in the Thorncliffe Park neighbourhood in Toronto on Sunday, April 11, 2021. THE CANADIAN PRESS/Frank Gunn
Ontario science advisers urge six-week stay-home order as province pleads for help

TORONTO — Ontario’s science advisers called for a six-week stay-at-home order and… Continue reading

Dr. Wayne John Edwards, 66, died Tuesday at Chinook Regional Hospital. (Cornerstone Funeral Home)
Lethbridge doctor becomes 7th Alberta health-care worker to die from COVID-19

Dr. Wayne John Edwards, who was 66, died Tuesday at the Chinook Regional Hospital in the southern Alberta city

Alberta Premier Jason Kenney updates media on measures taken to help with COVID-19, in Edmonton on Friday, March 20, 2020. Alberta is set to join three other provinces in exploring the feasibility of small modular reactors as a clean energy option. THE CANADIAN PRESS/Jason Franson
Students in Alberta town ready to return to school after quarantining

ATHABASCA, Alta. — A superintendent of schools in northern Alberta says the… Continue reading

Britain’s Prince Charles, with Camilla, Duchess of Cornwall, visits the gardens of Marlborough House, London, Thursday April 15, 2021, to look at the flowers and messages left by members of the public outside Buckingham Palace, following the death of Prince Philip. (Jeremy Selwyn/Pool via AP)
Princes William, Harry won’t walk side-by-side at funeral

LONDON — Prince William and Prince Harry won’t walk side-by-side Saturday as… Continue reading

Most Read