Retail Council of Canada sets the record straight on retail pricing

The Senate committee studying the Canada-U.S. price gap has heard many experts declare that international manufacturers and distributors charge Canadian retailers much more than retailers in the U.S., says Retail Council of Canada (RCC).

In addition, the Senate heard that retailers in Canada pay import duties on consumer products which are much higher than those paid by their American competitors. It was also acknowledged that our market is one-tenth of the size of our southern neighbour.

"We commend the Senate on the thoroughness of the hearings and the broad perspective presented by the individuals who have testified," said Diane J. Brisebois, president and CEO of RCC. She added that much of the testimony reflected the frustration and burden faced by retailers and consumers in this country.

With that in mind, RCC believes that recent testimony by Bank of Canada governor Mark Carney requires proper context, adds Brisebois. "Minister Flaherty asked the Senate committee to look into the price differential on retail goods sold in Canada. However, Mr. Carney's comments and finance department calculations lump retail goods in with an enormous array of other goods such as cars, dump trucks and construction materials. Obviously this is going to skew the facts."

Brisebois also noted that Mr. Carney acknowledged that the central bank has not done a detailed analysis on tariffs and that RCC, in its' Senate presentation, will provide industry data that will shed light on this issue. "Finance officials, and now Governor Carney are suggesting that tariffs are insignificant as they only apply to 10 per cent of all goods imported into Canada," said Brisebois. "However, Minister Flaherty asked for an examination of retail prices, so we must look at the percentage of products that a typical retailer sells. Our members have told us that the number of goods they sell that are subject to a tariff is far greater than 10 per cent and therefore tariffs are a significant factor in pricing for our industry."

She said one RCC member noted that duty on hockey skates from China into the U.S. is set at three per cent while Canadian rates are 18-22 per cent, thus making it more expensive to sell and buy in Canada.

RCC also notes that Mr. Carney's testimony stating that Canadian retailers were not as productive as Americans did not match the findings of a 2010 Industry Canada report. Based on investments in technology and equipment, the retail sector invested more than the U.S. retail sector. It also concluded that this investment contributed to the retail sector outpacing the Canadian economy in terms of labour and multifactor productivity growth.

Ian Gordon, president of Convergence Management Consultants, testified that retail price differences could primarily be traced to manufacturers, who accounted for 37 per cent of the total retail shelf price difference for all the goods considered in the non-automotive category.  Retailers accounted for just nine per cent.

As Canadians head into the busiest shopping season of the year, retailers in Canada will continue to provide consumers with competitive pricing and choice, Brisebois noted. "Everybody has a role to play, including manufacturers who must narrow the gap between what they charge U.S. and Canadian retailers, and the government which should eliminate import tariffs."

on November 3, 2011