Competing to Stay Alive

The notion of cross-border shopping is nothing new, especially during the holiday season. For decades, Canadian retailers have lost customers to the United States. The rationale behind travelling to the United States to cash in on pre-holiday deals, however, is changing and so, too, is the strategy to keep Canadians shopping at home.

Retailers in the United States are generally able to offer a greater variety of goods to consumers at a much cheaper price than Canadian retailers. The precursor to the holiday shopping season, colloquially known as Black Friday, accentuates this disparity. Retailers dramatically reduce prices, stores open early, and customers travel from afar to wait in line for hours.

In 2012, the amount of purchased goods allowed to enter Canada with duty-free status increased dramatically. These new allowances encourage Canadians to take advantage of the aforementioned price disparity (which, however, is shrinking). Furthermore, a strong Canadian dollar makes shopping in the United States an even more attractive option, especially for those who live closest to the border.

Canadian retailers, as a result, lose profits because of fewer customers choosing to shop locally and many find it necessary to lower prices in order to stay competitive and remain in business.

To combat this issue (and the economic recession), Canadian retailers introduced their own Black Friday deals. This year, however, proved the most comparable yet to the United States Black Friday tradition. The Bank of Montreal’s 2013 Holiday Spending Outlook (conducted by Pollara), for example, reported that 47% of Canadians planned to shop on Black Friday this year, up from 41% last year, and 59% of Canadians plan to shop on Boxing Day this year, down from 62% last year.

Pre-Christmas bargains are evidently gaining popularity in Canada, however, Boxing Day sales, which typically account for the largest proportion of retail sales in the year’s last quarter, are taking a hit. In an attempt to stay competitive, Canadian retailers are mimicking American retailers by reducing prices and restructuring sale targets and timing. This year, for instance, retail stores and shopping malls across the country offered huge discounts, door-crashing specials, and, for some, extended hours to tempt shoppers to spend on Black Friday deals in Canada, instead of the United States.

Copying American traditions by targeting Black Friday over Boxing Day and reducing prices to stay competitive are essential if Canadian retailers intend on surviving. In addition to the profits retailers gain from introducing Black Friday, Canadian consumers have a greater chance to save on holiday spending without leaving the country. While there are several other issues to consider, the direction in which Canadian retailers are heading is, for now, clear.

Nevertheless, this rapidly evolving strategy has left me questioning how much the Canadian Black Friday will prosper. Will the friendly Canadian reputation be at risk from the same type of crazed consumerism witnessed in the United States? On the other hand, is it possible that online shopping presents the next challenge to both Canadian and American retailers?

Rachel Lowe is a 2013-2014 Atlantic Institute for Market Studies’ Student Fellow. The views expressed are the opinion of the author and not necessarily the Institute

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