The price is right (or it’s getting close)

Canada was once the place to go if you wanted a cheap book. In the late 1800s, Canadian publishers took advantage of their proximity to the United States and the absence of international copyright laws to sell new bestsellers at a fraction of U.S. cover prices. In 1876, Mark Twain was scandalized when Canadian versions of Tom Sawyer sold for a sixth of the price of American editions.

But that was a long time ago. Since then, the relative price of books, and many other items, has shifted substantially. Lately it’s Canadians who’ve been scandalized by paying more for books, chainsaws, rice cookers, cars, golf clubs and nearly everything else. The reasons given for this disparity range from the benign to the deceptive­: time lags, Canada’s smaller population and naked greed have all been implicated. If the tide is now slowly turning, it’s largely because Canadians have made such a big deal about it.

In 2007, Bank of Montreal deputy chief economist Douglas Porter began a series of annual reports on the gap between Canadian and U.S. retail prices. While the loonie reached parity that year, he found the average cross-border price gap to be 24 per cent. Books were 12 per cent more expensive in Canada. Last year a Maclean’s special report (“Why you’re still getting gouged,” Aug. 18, 2008) built on the BMO survey by adding more goods to the basket. We found the gap remained at 24 per cent despite fluctuations in currency values. Bestselling books cost 21 per cent more in Canada.

In an update released last week, Porter reveals the average price gap is down to 6.8 per cent. Some items, including an Apple iTouch and a Starbucks tall non-fat latte, are actually cheaper here. And the average sale price for books is identical on both sides of the border. It’s not perfection, but it’s far better than it used to be.

So what happened? To be fair, it’s possible many price adjustments simply took a long time to work their way through the system. Canada’s smaller population means we aren’t always top of mind when prices are set. But then again, retailers are in the business of making money, and higher prices mean higher profits.

Which is why consumers and the media had their roles to play as well. Comparing prices, demanding greater clarity from retailers and shining a light on indefensible gaps were all key parts of this process. As Porter points out, it’s no coincidence the items showing the greatest price drops, such as books and cars, are those most easily compared across borders.

Finally, Canada has a substantially different tax and regulatory regime than the U.S. This raises the cost and complication of doing business here. And it isn’t changing very fast. Which is a big reason why we’re also missing out on many new consumer pursuits—from the Kindle e-reader to hulu.com to Payday chocolate bars—currently available south of the border (see: “You can’t buy that here,” June 15, 2009). Many of these items are intricately connected to an innovative, high-tech economy. Despite some success in closing the price gap, consumers, retailers, government and the media still have lots of work left to do.