A follow up to this. It would appear that the answer is likely, in fact, regulatory-based transaction costs (or at least perceived transaction costs). Not nearly as exciting as I'd hoped, though I'd need a rigorous study to have any real confidence in the answer. Anyhow, as a Canadian business person competing with U.S. companies, I'm painfully aware of the differences in cost structure between U.S. and Canadian companies. However, from the matter of price, it matters not if the law of one price holds. Of course, it matters to the Canadian retailers, who either have to find a way to compete with U.S. retailers, or die.
This is an issue that will not die. From yesterday's Globe and Mail:
Popular U.S. fashion chain J. Crew Group Inc. has backed down in the face of a backlash from customers angry about higher prices at its newly opened Canadian store and website.
Starting on Thursday, it is reversing its decision to charge its e-commerce customers in Canada for duties, which raised the final price to as much as 50 per cent above those at its U.S. stores and on its U.S. website.
Still, J. Crew will continue to charge an average of about 15 per cent more in Canada than at its U.S. outlets and website. But to ease the e-pricing pain, it offers a flat $9.95 shipping fee.
I have found a couple companies that charge similar rates in the two countries, including my favourite jeans company Guess, where their in-store products are the same absolute amount in the two countries (89 CAD vs. 89 USD). Canadian locations of Mexx, on the other hand, list their products in about 8 different currencies, including CAD, but not USD. Gee, I wonder why?
A friend of mine pointed me to Revolve, where you can toggle between USD and CAD and see that the prices are equivalent after taking the exchange rates into effect (e.g. a product that sells for 204 USD sells for 200.79 CAD). I haven't seen anyone else do this, though. It will be interesting to see if Canadians flock to Guess and Revolve and avoid the J Crews and Mexxs of the world.
Updated to Add: A piece that came out today on the J. Crew 'duties and customs' situation: J. Crew price war underpinned by loose duties rules.
For any students reading this blog:
If you're buying a big market textbook - e.g. a graduate micro theory textbook that's used all around the world - you may be able to get an 'international student edition' through amazon.co.uk or another international website.
Identical except for paper back and about half the price. Half the $US price. To say nothing of the $Cdn price.
You need to read the fine print as there may be high customs, shipping, brokerage etc charges. But it's worth looking into.
Posted by: Frances Woolley | August 26, 2011 at 11:13 AM
And as if it wasn't hard enough to carry on business in Canada, British Columbians just decided to make it that much harder by scrapping the HST. I guess economists just don't have the pull that David Suzuki think's they do.
Posted by: Bob Smith | August 26, 2011 at 04:48 PM
Those "International Student Editions" are intended for places like India or Africa where the income of each student is (perceived) to be less. Affluent North Americans get full-price hardback editions with thicker pages.
It is the publishing world's equivalent of Region Zoning in DVD's and movies.
It's just like the thriving trade region-free DVD players in New Zealand and Australia so you can import American DVD's when they are released instead of waiting months for the Region 5 version.
Posted by: Determinant | August 26, 2011 at 05:47 PM