Canadian retailers are expected to raise their prices in the coming months due to the weakening of the Canadian dollar and growing cost of imported goods. The loonie’s value has slid 16 percent over the last year against the U.S. dollar. This has made purchasing across borders more expensive for Canadian companies and is pushing Canadian retailers to hike their prices to combat depreciation. According to an internal Retail Council of Canada study, 49 percent of retailers said that the Canadian dollar’s devaluation increased their costs greater than 5 percent. The RCC study predicts that the biggest impact of the devaluation is yet to come, and that retailers won’t be able to maintain current sales price much longer.
Retailers ranging from Dollarama Inc. to generalist Canadian Tire Corp. get a lot of their inventory from the United States. But the value of the U.S. dollar has soared, making merchandise buying significantly more expensive. This is forcing Canadian retailers to make some tough decisions that include reducing staff or raising prices. To buy more time, large retailers are hedging their currency which gives them breathing room for an additional year. They are also in negotiations with their suppliers to give them bigger discounts to offset the currency pinch.
But small and medium sized retailers may not have these options. Very few have the flexibility or scale to move overseas sourcing to lower-cost markets. As a result, many have substituted international suppliers for domestic suppliers to stabilize costs. Despite these types of profit saving strategies, the report states that the cost increases are simply too much and consumers will have to bridge the gap. The study predicts that consumers will feel the pinch in January of 2016. On a positive note, the drop in the loonie has encouraged retailers to spend at home.
For now, retailers must decide which products and services should experience a price hike. They must be careful to balance the need for profit margins against customer loyalty. As the Canadian dollar struggles, customer service and loyalty become increasingly important. Customers expect fast and convenient payment processing. Providing these services could affect customer loyalty and retention. eMerchantBroker has helped many Canadian merchants obtain premium payment processing services. Now merchants can retain customers and grow their customer bases in partnership with EMB.