Vehicles from B.C. line up to head south into the U.S.

Cross-border shopping a drain on retailers: study

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B.C. residents spent an estimated $2.6 billion cross-border shopping in the U.S. last year, according to estimates from the Business Council of B.C.

And it says the higher-than-normal level of spending south of the border is contributing to the weakness of retail sales for businesses in B.C.

According to the study, the rise of cross-border shopping in recent years has been driven by three main factors – the strong Canadian dollar, recent increases in duty-free exemptions and the large gap between gas prices in Metro Vancouver and Washington State.

The business council estimates short-term spending by B.C. residents in the U.S. added up to as much as $1.6 billion last year, while that figure rises to between $2 and $2.6 billion if longer vacation-type trips are counted.

And those figures count only shopping for goods, fuel and groceries, they don’t include services, restaurant meals or entertainment, which the report says might add another $1 billion or more.

Same-day trips across the border by B.C. residents have soared 143 per cent from 2.3 million crossings in 2009 to 5.7 million last year.

“The increase in trips is plain to see,” the report said. “There are frequently long line ups at border crossings, gas stations in adjacent U.S. communities are busy, and parking lots at shopping centres are filled with B.C. licence plates.”

It also recounts calls in Bellingham for American-only shopping times when locals won’t have to jam into stores with hordes of bargain-hunting B.C. visitors.

Increases in B.C.’s carbon tax and TransLink’s fuel tax in the Metro region “have compounded earlier price discrepancies, creating powerful incentives for many British Columbians to fill their tanks south of the border.”

A 70-litre fill-up costs about $25 less south of the line.

Report authors Ken Peacock and Jock Finlayson noted a 2.1 per cent drop in 2012 fuel sales in the region following TransLink’s two-cent increase in the gas tax to 17 cents a litre.

“The ability to increase taxes on fuel in the Metro area may be reaching a tipping point,” the report said.

Rising fuel taxes here may have led some B.C. motorists to drive less, it says, but the steep rise in cross-border shopping suggests cross-border gas buying is the cause of the B.C. fuel sales drop, “rather than meaningful underlying changes in consumer behavior.”

The report notes cross-border shopping is not at an all-time high, contrary to some media coverage. More trips were consistently recorded in the early 1990s, but that was an era with fewer big U.S. retailers operating in Canada and no online shopping.

The business council also notes the number of B.C. residents making one-night trips to the U.S. has more than doubled after the federal government’s decision a year ago to increase the duty-free limit for overnight stays.

The report said per capita growth in retail sales in B.C. rose by a “very slim” 0.9 per cent last year – actually a slight decline after adjusting for inflation.

The “leakage” of retail spending to the U.S. could represent more than four per cent in total B.C. retail spending, it said, and that proportion would be higher when looking just at the Lower Mainland, where many more residents are in position to regularly cross the border.

On average, B.C. residents made twice as many same-day trips to the U.S. as Ontarians and 60 times as many as Albertans.

Graph, chart courtesy of Business Council of B.C.

 

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