Golf Prices USA vs.Canadian Dollar

[Baxter]

Guys, I have not been into a golf shop in a few weeks. As anyone noticed if the prices are dropping because of our dollar....

I know Sony did a huge price drop..Bought a new TV.....Did not need it but wanted it...and the price reduction made it happen.....

[cldale]

Guys, I have not been into a golf shop in a few weeks. As anyone noticed if the prices are dropping because of our dollar....

I know Sony did a huge price drop..Bought a new TV.....Did not need it but wanted it...and the price reduction made it happen.....

I was at the Walden Galleria on Friday and I picked up a couple boxes of Titleist NXT's and a pair of Nike cold-weather gloves. The gloves were $10 cheaper ($20@Dicks vs. $30 at GT) and the Balls were $15 cheaper a BOX. So I saved ~$70 compared with GT.

We did other shopping, and declared a lot of stuff at the border. If you check your prices in advance (as we did) you can save significantly in the states as a lot of stuff is MUCH cheaper there, even when you figure in the 15% + Duty you pay when you declare.

[golfisforfun]

Ok, time to chip in with a few thoughts on the currency and savings in the US...

Too many people are saying that Canadian retailers have to drop their prices and they are being greedy and prices should be the same here as they are in the US... NOT POSSIBLE !!!

I work for an apparel company that is based in the US. They have a US price list. We are the Canadian Distributor for them and have developed a Canadian Price List, which happens to be 35% higher..., which means retail prices will be around 35% higher. So let me try and explain why...

In the states, the product goes from the warehouse to the retailer. Shipping is paid and commission is paid to reps, along with many other things such as advertising and cost of operations and that is how they determine the selling price of an item.

We then take their price and add our own marketing and advertising costs, commission percentages, additional shipping costs and cost of operations to end up with a price here in Canada. We also have to factor in duty, tax and exchange rates along the way...

The only way you can get equal pricing is if the US company covers advertising here in Canada, sales here in Canada, shipping to Canada, duty in Canada, tax in Canada and the stores have to buy directly from the US instead of through a distributor here...

And if this happened, US costs would go up to reflect their additional expenses...

Retailers are in a tough spot. Prices in the US are going up, which means prices here will go up as well. And although you may save some money, eventually, you will have to shop south of the border because you won't have any stores here to chose from!

[Kilroy]

If they cover the costs of advertising and shipping to thier US distributors I'd say they should for you too. They are leaving you out to dry and puting you in a very bad spot where you cannot compete.

If the item is made in the US there should be no duty, just tax and broker fees at the border. That would not add up to a 35% hike.

[cldale]

Two problems with your claims:

[1] You're asserting that CDN Price (in $CDN) = US Cost (in $USD) + CDN Cost (in $CDN). This means that while we shouldn't expect price PARITY, we'd at least expect to see to see price movement as the FX changes over time. Only recently when the issue has gotten play in the media (and the evidence is becomming clearer that Canadian retailers are losing money to cross border shopping) have prices started to move.

[2] You are claiming that Canadian consumers are actually bearing the costs of US advertising. If true thats a major ripoff and a problem with the pricing structure.

Canadian retailers should be prepared to lose business so long as I can drive to the states and save money even after I declare the goods, as I did this weekend. Some of the stuff we bought was ridiculously cheaper in the states (over 100% difference in price).

In my original post I stuck to golf only purchases, but in total across everything we bought, we saved ~22% by going to Buffalo, and thats after Tax and Duties were paid.

Ok, time to chip in with a few thoughts on the currency and savings in the US...

Too many people are saying that Canadian retailers have to drop their prices and they are being greedy and prices should be the same here as they are in the US... NOT POSSIBLE !!!

I work for an apparel company that is based in the US. They have a US price list. We are the Canadian Distributor for them and have developed a Canadian Price List, which happens to be 35% higher..., which means retail prices will be around 35% higher. So let me try and explain why...

In the states, the product goes from the warehouse to the retailer. Shipping is paid and commission is paid to reps, along with many other things such as advertising and cost of operations and that is how they determine the selling price of an item.

We then take their price and add our own marketing and advertising costs, commission percentages, additional shipping costs and cost of operations to end up with a price here in Canada. We also have to factor in duty, tax and exchange rates along the way...

The only way you can get equal pricing is if the US company covers advertising here in Canada, sales here in Canada, shipping to Canada, duty in Canada, tax in Canada and the stores have to buy directly from the US instead of through a distributor here...

And if this happened, US costs would go up to reflect their additional expenses...

Retailers are in a tough spot. Prices in the US are going up, which means prices here will go up as well. And although you may save some money, eventually, you will have to shop south of the border because you won't have any stores here to chose from!

[golfisforfun]

The product is made in the US but uses parts that are not exempt from duties (purchased internationally).

I can tell you that at 35%, we are lower than a lot of our competitors.

If our head office were to cover our advertising and marketing costs, the per unit cost in the US would climb to reflect their additional expenses.

The fact is, as soon as you add a "middle-man" or 3rd party, costs in Canada will go up.

It is very difficult to predict the exchange rate and last week was a great example. I bought US money at 1.08 and at 1.02... Distributors have to be able to handle fluctuations like that, which is another reason for the difference.

[golfisforfun]

Saving 22% is a fair valuation of what it costs for a distributor to operate in Canada.
Assuming the dollar is at par, adding 20% cost of operations in Canada is realistic.

[cldale]

You say that the US shouldn't cover your ad costs and I'd agree, but why then do we in Canada have to pay for the US ad costs?

And you cannot tell me its cheaper to advertise in the states, a much more competitive and sophisticated ad market.

The product is made in the US but uses parts that are not exempt from duties (purchased internationally).

I can tell you that at 35%, we are lower than a lot of our competitors.

If our head office were to cover our advertising and marketing costs, the per unit cost in the US would climb to reflect their additional expenses.

The fact is, as soon as you add a "middle-man" or 3rd party, costs in Canada will go up.

It is very difficult to predict the exchange rate and last week was a great example. I bought US money at 1.08 and at 1.02... Distributors have to be able to handle fluctuations like that, which is another reason for the difference.

[Kilroy]

If our head office were to cover our advertising and marketing costs, the per unit cost in the US would climb to reflect their additional expenses.

I have no problem with that. If that is the case and they help them advertise, they should do the same for you. IMHO you are being abused by shouldering the cost of thier US advertising to no benefit.

[cldale]

Saving 22% is a fair valuation of what it costs for a distributor to operate in Canada.
Assuming the dollar is at par, adding 20% cost of operations in Canada is realistic.

So you are claiming that the Canadian consumer is being "double charged" for operations in the US AND Canada.

Many companies are moving towards Parity in pricing, so perhaps your business will find itself pinched soon if you are not able to offer a competitive price?

And historically, Canadians have paid LESS after exchange for many goods when compared to the US. Notable exceptions I've seen are clothing. Funny that when our currency starts to rise, then suddenly it becomes so expensive to operate here.

As for the current cost, do you set your prices based on inventory cost, or replacement cost? In a competitive market, companies generally sell at their replacement cost, writing down inventory which sold for less than its initial value. This is what major manufacturers do, and is the reason that JIT manufacturing became such a big deal, lowering your inventory levels means fewer write-downs.