Michael Weiss has discovered an unlikely lesson: costs at his Express Inc. fashion chain aren't much higher in Canada than at his U.S. stores.
As a result, he has joined a small but growing band of U.S. retailers that are lowering prices in Canadian outlets to match those at their U.S. stores, moving counter to the prevailing trend.
"We didn't quite know what the additional costs of doing business would be," Mr. Weiss, chief executive officer of Express in Columbus, Ohio, said in an interview. "But the cost of business was not as different as we anticipated. More important than that: With the Internet and the Web, anybody in Canada could get on our site and see the difference in price." The move comes at a critical time as U.S.-based Target Corp. begins opening its first stores in Canada, highlighting the fractious issue of price disparity. Target's prices are higher than those at its U.S. stores, although they are close to rates at rivals such as Wal-Mart Canada Corp.
Express's pricing effort raises the stakes for other U.S. retailers that are feeling the heat of Canadians demanding that they match U.S. prices. Its betting that in an increasingly transparent retailing environment – where consumers can easily check prices online – introducing price parity will draw more customers to its stores.
Target and others have argued that costs are steeper in Canada than in the U.S., forcing them to raise prices here. But now Express' experience could touch off a new round of debate and prompt others to follow suit.
Already some U.S. chains have introduced parity: U.S. fashion retailer Ann Taylor arrived in Canada last fall with prices at par with those in its U.S. stores; Abercrombie & Fitch and Hollister also have moved to match prices at its stores in Canada. Hollister, which is owned by Abercrombie, will finish the process of lowering prices by early June, spokeswoman Mackenzie Bruce said.
Last fall, Abercrombie lowered its prices 15 to 25 per cent in its namesake Canadian stores. Where prices were anywhere from 25 to 30 per cent higher compared to the United States, the new pricing makes them closer to 5 to 7 per cent higher, she said. Prices are still slightly higher because it has to pay duties to the Canadian government that it doesn't pay in the U.S., she said.
At Ann Taylor, with exchange rates close to parity, matching U.S. prices here was an opportunity to offer its products at "accessible prices," president Brian Lynch said earlier this year.
Express, which runs 11 stores in Canada and plans 50 over the next several years, found it difficult to justify higher prices, Mr. Weiss said. Some prices were about 15 to 20 per cent higher in Canadian stores, although some items, such as shoes and other accessories, were at par when Express arrived in 2011, he said.
"In a world as small as it is, when you get on the Web and you see that a particular thing that's maybe an hour from where you live is less expensive – that's not good," Mr. Weiss said.
Some Canadian retailers with stores in the U.S. have begun to even out their pricing as the loonie reached par with the U.S. dollar. Shoe specialist Aldo Group Inc. offers parity pricing for 95 per cent of its collections, said president David Bensadoun. It can't justify the same prices for the other five per cent of its offerings because duty rates are so steep – almost twice as high, he said.
But Aldo's distribution costs and rent are five to 10 per cent cheaper, and payroll is about the same on both sides of the border, he said. "We live in a borderless world; the customer is smart, and expects fair prices."