With the Canadian and U.S. Dollars At Par, Why Do Macs Still Cost More In Canada? [UPDATED]

By Charles W. Moore Friday, September 21, 2007.
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7175 On Thursday, the Canadian dollar hit par with the U.S. greenback for the first time in nearly 31 years - since November 25, 1976, to be precise, and officially opened at exactly U.S.$1.00 this morning after closing yesterday at at 99.87 cents US.

I remember it well. Through much of the 1950s, �60s and early '70s the Canabuck had been worth more than the greenback, peaking at $1.06 in 1957, but in the fall of '76 the separatist Parti Quebecois was elected as the provincial government in Quebec for the first time, spooking the money markets with the apprehension that Canada might be on the verge of breaking up, hence a loss of confidence in the Canadian dollar.

Thus began what turned out to be a 25-year slide in value, with the nadir being reached of just above U.S.61.79� on Jan. 21, 2002 amid gloomy speculation that it might be headed as low as 50 cents.

An entire generation of Canadians has never seen their dollar at par with the greenback, until yesterday.

However, the tide turned, and currency, now known as the "Loonie" in reference to the Common Loon that appears on Canada's $1.00 coin, began its power-climb out of the basement, to reach parity with the U.S. dollar again in roughly 5 1/2 years.

The Canadian dollar has actually been flirting with parity for several months now, but It hasn't been reflected commensurately in prices at the retail level. Books and magazines are still priced on average, it was reported this week, some 23 percent higher than the U.S. price, and 30 percent is not unusual, which amounts to brazen profiteering on the part of somebody in the context of what the Loonie has been worth for a couple of years now.

Apple has adjusted prices somewhat, but as of today, the base MacBook is still listed at The Apple Canada online store at $1,249.00, as opposed to $1,099.00 at the U.S store, while the entry level iMac is a whopping $1,299.00 in Canada, vs. $1.199.00 in the U.S. and an iPod nano is $169.00, compared with $149.00 in America. Other prices are proportionately (now) still inflated in Canada relative to the exchange rates of the past six months or so.

So, when will we see parity in Apple prices in Canada and if the Canadian dollar goes significantly higher than the greenback, as some money traders are anticipating thanks to Canada's strong economy and oil exports, will that be reflected in Apple (and other) retail prices here in the Great White North? Just asking.

Charles W. Moore

Tags: Blogs � Commentary � Hot Topics �

�Posted By ozpete On� Sunday, September 23, 2007 �at� 01:53 AM

Common my Commonwealth buddies lets not get too paranoid

1. The US price does not include local sales taxes which can add 10% in some locations.
2. The Canadian Price includes 6% GST
3. The currency rate isn’t the rate quoted on the TV there is a conversion spread that the banks charge, 1-2% so when it’s parity its really 98c.

Companies forward buy currency to enable them to “fix” the price whenever currency goes up or down. They reprice after a period if the currency moves up or down, they dont reprice every day.

Just my 2c from downunder.....

�Posted By tgarbutt On� Sunday, September 23, 2007 �at� 03:08 PM

To downunder…

I notice a hint of pricing ‘support’ from downunder. Some corrections to note;

1. In the case of Apple, all Canadian items are shipped from China or US giving them duty free status. There is no warehousing or inventory overhead in Canada. Of course, the Big Box stores and the five or six Apple stores ‘warehouse’, but their product is imported, their cost Apple wholesale.
2. The 10% sales tax is a ‘red herring’. It comes after sale and is not included in the advertised sale price.
3. GST is charged after sale - Apple (and others distributors) get the credit on the ‘retail’ sale.
4. 1 to 2% is another red herring. Apple (and other distributors) don’t finance with credit cards.

Note:

Let’s compare apples to apples. We are talking about the Apple store advertised sale price. After the sale, in Canada, we have provincial sales tax, GST tax, and bank charges. Our GST is a ‘creative’ Canada ripoff at the Federal level (to support that so-called free health care and other ‘above our means’ spending). Our credit card costs e.g. the dollar conversion PLUS an additional service charge is another creative Canadian creative ripoff. The conversion is traditionally higher than the US; the service charge uniquely Canadian.

It looks like Canadian consumer advocacy groups have a long ‘education’ road ahead of them. And no, it’s not paranoia, it’s denial.

P.S. in the old, ‘par’ days, the Canadian retail price for imported goods was usually 50% higher. This was justified by Canadian distributors, operating with exclusive Canadian sales contracts (read monopoly) as the cost necessary to import, warehouse, prepare for Canadian use (CSA approval), advertise, etc., etc. ad naseum.
Again, the perceptive consumer bought south of the Border!

�Posted By Charles W. Moore On� Sunday, September 23, 2007 �at� 05:08 PM

G’dye ozpete;

Thanks for the comment, but......

1. The Canadian price doesn’t include sales taxes either, which in my neck of the woods adds another 14% to the sticker price.

2. The Canadian list price does not include any sales taxes. The 6% Goods and Services Tax is additional to the quoted price in all provinces and territories, while the provincial component of the VAT varies somewhat among the provinces. Only Alberta has no provincial sales tax, and 7% - 8% is typical, for a total tax bite of 13% - 14%. In Nova Scotia (where I live), New Brunswick, and Newfoundland and Labrador, the two taxes are “harmonized” at 14%.

3. You are correct about the banks taking their currency conversion rip… er..rake-off, which can be up to 2.5% with credit card purchases, but I expect that Apple Canada gets a preferential deal from its bankers, the currency exchange would be on the wholesale price, and likely most new Apple computers sold in Canada are shipped directly from China or Taiwan without going through the U.S., so a whole different currency exchange dynamic would obtain anyway.

As of this week, most retailers on either side of the U.S./ Canada border are accepting either dollar at par.

You’re also right about the frequency of price setting, but the Canadian dollar has been testing parity with the greenback for a couple of months now, staying pretty well above $0.95 U.S., and Apple’s prices have not been adjusted commensurately.

Charles

�Posted By ozpete On� Sunday, September 23, 2007 �at� 06:16 PM

Charles

Fair comment. Guess the Canadian GST is unlike our (aussie) GST in that it is applied after the sale - not clear from the Googling I did. So agree that this impact doesn’t apply.

As for point 3. Thats not how things work. Yes the products are shipped from Taiwan, but payment is made to the US company, not the manufacturer, so they expect income to be at least the same. By having a local operation in Canada they do have Canadian taxes to pay on any profit. (Note I am NOT arguing that the running expenses should be added - as Apple like other companies have branches within the US, so these costs are allowed for in the US price already)

Also fair comment on the exchange rate differential, but the point I was making was to compare the buying in US is affected by this and you were comparing Apple Store to Apple store prices.

Given the incentive offered by avoiding the hefty taxes, plus the retailers offering better prices than the Apple store - slipping down to the US for a purchase would be a great incentive, even with parity prices.

Down here we have to find the $US1200 for the 15 hour flight to LA........

�Posted By Charles W. Moore On� Monday, September 24, 2007 �at� 01:14 AM

Hi ozpete;

Prior to the GST/HST, Canada had a Federal Sales Tax of about 14% (it fluctuated somewhat) that was applied to manufactured goods at the wholesale level and was thus hidden in the retail cost of goods.

When the Mulroney Conservative government brought in the GST, there was considerable controversy over whether it should be hidden in the price or not. It was decided not, which I think was the correct way to go.

Cross-border shopping has gone nuts in the past few days since the Canadian dollar hit par. There were two-hour waits at border crossings. This is a bit bizarre, since the Loonie has been flirting with parity for a couple of weeks, but parity was a psychological threshold crossed.

Reportedly, substantial numbers of Canadains have been shopping for vehicles in teh U.S., with savings of $4,000 - $5,000 apparently possible for some comparable models.

However, Apple Canada has been equivocal at best about honoring warranties on Apple products purchased in the U.S., and the U.S. Apple Store will not ship to Canada, although some online Apple resellers will.

And yes, about 75% of Canadians live within 160 km of the American border, and gasoline is about 20% cheaper in the U.S., so if you tank up south of the border you can almost pay for your shopping trip.

Charles

With the Canadian and U.S. Dollars At Par, Why Do Macs Still Cost More In Canada? [UPDATED]

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