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Each day TFO Canada publishes a sample of trade news on the Canadian import market along with any new, updated or changed regulations and legislations regarding international trade; countries in which TFO Canada offers services and on the export sectors which it promotes.

 

Cross-border shopping, reversed: This Black Friday, Canadian outlet malls set to be packed with Americans

Wednesday, November 25, 2015 > 09:26:08
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(Stockhouse)

As holiday shopping ramps up, it’s likely that this year there will be more than a few U.S. license plates in the parking lots at Canada’s outlet malls, as the flow of cross-border traffic has begun to reverse.

This Black Friday, the Outlet Collection at Niagara, on the Ontario side of the border, will probably be packed. And not necessarily just with Canadians who’ve snuck away from work to take advantage of what historically has been a U.S. shopping holiday.

Americans looking to take advantage of the favourable exchange rate have been heading north, and the expectation is that it will continue as long as the loonie is low, says Carley Rupcic, the tourism manager for the 720,000 square foot mall owned by Ivanhoé Cambridge.

“It’s been a trend that has been increasing all the way throughout the summer and into the fall and we expect that it is going to continue into the holiday season,” said Rupcic, adding that the mall, unveiled in May 2014, targets the 10 million tourists who visit the Niagara region annually and wasn’t built to cater specifically to Americans.

“We’ll have a lot of Canadians who would be thinking about crossing the border but think twice because of the exchange,” she adds, about Friday expectations. “We are hoping for a lot of Americans too, and we will be doing an additional advertising campaign.”

The message to Americans is outlet mall prices, Black Friday specials and an exchange rate that has seen the purchasing power of the greenback go from about about $1.20 Canadian for every U.S. dollar to $1.33 since the mall opened. “Our angle is you can save three ways,” she says.

The turn of events in spending patterns has sent Americans travelling to Canada at levels not seen since 2000, says Doug Porter, chief economist with Bank of Montreal. Americans are not just coming up here to shop in malls, they’re buying big tickets items like cars and helping to send hotel occupancy to record levels.

“Travel does have two-way flows. It had been pretty one-sided for years but it does look like the drop in the dollar has turned the tide,” said Porter, adding there has been about 10 per cent increase in U.S. resident entering Canada over the past year. Canadian trips to the U.S. are down 25  per cent to 30 per cent from highs in 2012.

The economist said some of the cross-border shopping numbers have to be thrown out because in the aftermath of the Sept. 11, 2001 terrorist attacks, travel plunged. Passport controls were later brought in and that’s had a profound effect on shopping patterns.

Even with the increase, the number of Americans coming to Canada still remains lower than it has been in the last 40 years, says Porter, who chalks that partially to border and passport controls. Only about 125.9 million Americans had a passport in 2015, about 40 per cent of the population.

Still cross-border shopping is planted firmly enough in the American psyche that droves of U.S. car wholesalers have been coming to Canada to pick up used vehicles at a massive discount to what they would cost stateside.

“It’s huge,” said Viraf Bailwalla, owner of Automall Network Inc. “We know a lot of dealers (in Canada) who are involved and in many cases some of these dealers are more or less closing down their retail operations because they can ship their cars to the United States.”

Four years ago, Bailwalla was importing cars from the U.S. for Canadians, but that market all but dried up as the exchange rate shifted and American car dealers realized they could raise their prices.

“Prices in Canada went down because of the competition and prices in the U.S. went up because there were so many being imported,” said Bailwalla, referring to how the price advantage quickly disappeared and Canadians cut back their shopping even before the loonie collapsed.

But the market has been slow to react again and, for now, Americans are scooping up used cars here and selling them for a large profit. U.S. import/export rules are a little more stringent, so it’s mostly wholesalers taking advantage of current market conditions.

Nish Raja, an owner of Autodome Ltd., whose family has been in the used car business for 30 years, said his company has mostly closed its retail operations in Canada because of the volume of demand coming south of the border.

“It just so happened we were getting more into wholesale in the Canadian market but then the dollar went the other way found ourselves exporting,” Raja said. “You might buy a car here for $20,000 (Canadian) and sell it down there for US$19,000. You lose $1,000 but once you start counting exchange you are ahead of the game.”

The market might catch up this competitive advantage, but for now dealers like Raja are happy with the situation.

You can put hoteliers in the same camp. They’ve been able to take advantage of the double whammy created by the slumping loonie: Canadians staying at home because of the high cost of travelling and Americans heading north because of that currency play.

Tony Pollard, president of the Hotel Association of Canada, said it’s hard to say how much of the improving market can be attributed to Americans or domestic activity, but his Ottawa-based group’s statistics show occupancy rates on a national level will reach 65 per cent this year after dipping to 58 per cent in 2009. Nationally, revenue per available room has climbed from $73 in 2009 to an expected $90 this year.

Pollard said generally Americans don’t follow the exchange rate as closely as Canadians, but in border towns it does make a difference in tourist traffic.

“Clearly the high dollar is keeping Canadians home and driving travel to Canada,” he said. “We saw the numbers growing, particularly over the summer. It’s a nice little tick up. It’s the way it was 10 years ago.”


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