Cross-border shoppers at a crossroads in B.C.

Canada-U.S. shopping ‘habits may be lost’ due to pandemic, says retail analyst

The Bellingham Regional Chamber of Commerce, which tracks B.C. licence plate counts and volumes at border crossings, says this month’s long weekend represented a return to pre-COVID-19 levels of cross-border shopping | Rob Kruyt, BIV

The easing of Canada-U.S. border restrictions lasted only a handful of weeks late last year before COVID-19’s highly contagious Omicron variant tightened crossings right ahead of Christmas.

Earlier this month, as Remembrance Day aligned with the Americans’ Veterans Day long weekend, the stream of cross-border shoppers flowing along the I-5 at least felt “a little bit normal,” according to Guy Occhiogrosso.

“We saw a large volume of Canadian shoppers out and about,” said the president and CEO of the Bellingham Regional Chamber of Commerce, whose organization tracks volumes at border crossings, licence plate counts and anecdotal conversations with local retailers to get a sense of the presence of Canadian shoppers.

“We’ve given people time to warm up to the idea of crossing the border again. We’re in this, I would say maybe ‘new normal’ of a shopping season that starts after Halloween … coupled with the economic pressures that exist, and so retailers [are] having discounts, having sales, promoting inventories, so you have a little bit of a perfect storm.”

But after two years of pandemic-induced border restrictions, questions remain over whether a return to cross-border holiday shopping akin to the pre-COVID era is in the cards.

“The borders were not open for a while. Some of those [shopping] habits may be lost and some people may be a little more sheepish about going over the border at this point,” said retail analyst Craig Patterson, founder of Retail Insider Media Inc.

He now expects Canadians to cross the border to shop for just two main reasons: To buy their favourite items that come much cheaper south of the border, like eggs and milk; and to shop for their favourite brands that they can’t find in Canada, such as the private-label items found at the popular and quirky Trader Joe’s grocery chain.

“Retail has gotten better in Canada, and it wasn’t like that decades ago. Definitely the griping about retail in Canada was warranted, but I don’t think it is so much now. We’ve got a lot of stores that have entered the market as well as some homegrown brands which have done very well,” Patterson said, pointing to the likes of Vancouver-based Lululemon Athletica Inc. (Nasdaq:LULU) and Aritzia Inc. (TSX:ATZ).

“We’ll still have cross-border shopping. Some people will still do it. They might do it out of nostalgia, because it’s been a tradition in British Columbia, especially if you live near the border.”

Thirty-one per cent of Canadians who identify as living close to the U.S. say they’re likely to travel across the border to shop this Christmas season, according to PwC’s 2022 Holiday Outlook survey released earlier this month.

“They represent a core group of cross-border shoppers whose numbers are unchanged from previous years,” the business services firm said in its report.

But those numbers are down slightly from last year when 33 per cent of respondents said they were likely to cross the border for holiday shopping, despite tighter border restrictions at the time.

More than half (55 per cent) of the 2022 respondents said loyalty to Canadian brands and retailers is among the reasons that keep them shopping in Canada. Those respondents include Canadians who do not identify as living close to the border.

Meanwhile, 45 per cent listed the increasing expense of cross-border shopping among the reasons for sticking to Canadian retailers.

The loonie’s value has taken a beating in recent months amid Bank of Canada rate hikes aimed at cooling decades-high inflation.

The dollar was worth US$0.75 as of mid-November compared with US$0.80 one year earlier. Gas prices have also surged during that same period, particularly in Metro Vancouver, where refinery issues, historic floods and high gas taxes have made it among the most expensive markets in North America to fuel up.

At the same time, the U.S. inflation rate is exceeding that of Canada: 7.7 per cent versus 6.9 per cent.

Meanwhile, Occhiogrosso believes the recent long-weekend surge in cross-border shopping portends to things to come, assuming a new COVID-19 variant does not shutter borders again and a potential economic downturn doesn’t stifle consumer spending.

He added that the absence of Canadian shoppers hasn’t gone unnoticed by some local businesses during the pandemic.

“Is it observable? Absolutely. With that said, we’ve not seen national retailers close because of the border restrictions,” Occhiogrosso said. “Our retailers are certainly not dependent upon Canadian shoppers, but they certainly appreciate it and value it.”