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A Canadian Dollar Cost How Much?!!!

December 1, 2007

If you live anywhere in the U. S. near the Canadian border, you may have noticed an influx of Canadian visitors lately. No, the Canadians are not fleeing the cold weather or the moose; instead, they are taking advantage of the very strong Canadian dollar and coming here to snap up bargains. Last year, a Canadian dollar only bought $0.86 U. S. This year, a Canadian dollar buys about $1.01 U. S. That’s an increase in buying power of 15%.

Well, that’s one way to look at it. From the perspective of us U. S. citizens, it’s a 15% decrease in our buying power. And, if you, like me, are buying product out of Canada, it is going to cost us 15% to get these products from Canada. This doesn’t include the increase in freight rates or natural inflation.

My Canadian supplier doesn’t know what to do. She was working on her 2008 price list when I called her last week. That’s when she told me about her quandary. She couldn’t decide whether to price her products in Canadian dollars, keep the old U. S. dollar price and add an exchange premium that would change with the value of the dollar, or just add 20% to her prices to accommodate any further losses of the dollar. I empathize with her situation. I sold one of her products for $2,700 last year. It is going to have to retail for over $3,200 this year. I don’t know if my customers will pay that much.

The last few years have seen increases in costs for so many different reasons. Aluminum soared like a hot air balloon last year. Since aluminum is our biggest furniture category, it was a real headache. With the cost of oil at $90 - $100 a barrel, gas and freight burdens are much higher than the 8% we were used to. Casual labor after Katrina went from $10/hour to $15/hour, that is if you could find anyone in our shrunken labor pool.  Katrina also caused our insurance to double. By comparison, the 6% increase in our hospitalization costs seemed minor.

Katrina was a two edged sword. The destruction to New Orleans was horrible. However, it caused our business to see a huge spike in sales. This spike allowed us to deal with all of the cost increases with a minimum of affect on our bottom line. This has not been true across the country, as we all know. Retailers, both large and small, and manufacturers have gone out of business at an alarming rate.

We have been in business for 55 years. We have seen ups and downs, oil town booms and busts, banking fiascos, inflation, recessions, and good times. So, I assume we will get through this if we plan properly, buy wisely, and don’t panic. All easy enough to say, but hard to put into practice. I do pity the consumer who is going to have to pay for all of these increases, though.

Yours in confused retailing, Bruce