Low dollar equals higher prices when buying across the border

With busy schedules and busy lifestyles on the rise, Canadian consumers are always on the hunt for the quickest way to buy items. This need for speed and convenience began with the invention of credit and debit cards, the adjustment to a world of technology and virtual purchases followed soon after. Online buying has become a routine many of us take part in daily.

If fact, according to an Ipsos Reid study, 82 per cent of online Canadians made purchases online in 2014.

Among the many Canadians who frequently make online purchases, consumers may have noticed there have been a substantial increase in the cost of their online purchases.

According to Durham College economics professor, Peter Stasiuk, many consumers may not be aware of the location of the website they’re making purchases from.

“One of the things we run into as consumers here, we don’t always know where a website is located. We just find something on Google and we come up with the item and look at the price and think ‘this is great’,” says Stasiuk. “There’s two problems, the site is in the U.S., the price is in U.S. dollars and there’s going to be additional tax.”

Stasiuk’s theory, combined with the low value of the Canadian dollar (CAD) may play a significant role in why Canadians are seeing an increase in prices at the checkout.

According to the Bank of Canada’s statistics, the exchange rate between the U.S. dollar (USD) and CAD was reasonably equal between 2010 to 2013, at which time the CAD began its decline.

Using the price of a Rubik’s Cube on both Canadian and U.S. Wal-Mart websites as an example, the current price in USD is $9.96 and CAD $13. If the price of the Rubik’s Cube was the same five years ago as it is today and we use the current USD price ($9.96) and apply the CAD to USD exchange rate of 2010, the price for the Rubik’s Cube would be CAD $10.05.

What this means: five years ago, Canadian and U.S. consumers were paying nearly equal prices for their Rubik’s Cubes (CAD $10.05 vs. USD $9.96). Present day Canadians are paying three dollars more than their American neighbours (CAD $13 vs. USD $9.96).

Though the CAD doesn’t appear to be plunging any lower, it is too difficult to predict where the dollar will go in the future.

*Rubik’s Cube prices have changed slightly since this article was originally written