Canadian retailers including Aritzia and Lululemon are projected to increase their prices in response to U.S. tariffs.Isabella Falsetti/The Globe and Mail
Tariff pressures may force Canadian and multinational apparel brands to raise prices for goods they import into the United States – but those hikes might be coming home as well. To keep prices level for consumers across different markets and average rising costs, some brands may also increase prices in Canada, according to several industry experts.
A number of Canadian-owned and international clothing retailers – including Lululemon Athletica Inc. LULU-Q, Aritzia Inc. ATZ-T and Groupe Dynamite Inc. GRGDF – do business in Canada and the U.S., and to some extent rely on manufacturing in Asia. Many countries on that continent are now reeling from U.S. President Donald Trump’s latest round of tariffs, which, as of Wednesday, are 10 per cent for most countries but 125 per cent for China.
Retailers selling in U.S. markets will likely need to raise prices to accommodate increases in costs, ranging from tariffs on raw materials to hiring customs brokers. But many global retailers try to maintain price parity – setting comparable prices for a product regardless of where it’s sold – to uphold consistency and customer trust, according to Liza Amlani, principal at Retail Strategy Group.
“You can’t have products cost $20 more in the U.S but leave it cheaper in Canada. That can’t work,” said Ms. Amlani.
Trying to uphold price parity and cost-averaging total imports – spreading out added costs across various markets – may be a common practice for some multinational retailers, but is by no means a formal rule nor a law, said HEC Montreal professor Jacques Nantel.
However, it ensures that consumers feel like they’re being treated equitably, and companies want to discourage customers from buying clothing in a different, lower-priced jurisdiction.
“If you go into large retailers that have tickets within multiple currencies, typically the retail price is very consistent regardless of where it is sold around the world – it’s just adjusted for the currency,” said Dan Kelly, president and chief executive officer of the Canadian Federation of Independent Business.
Lululemon Athletica Inc. is one of the Canadian brands that to some extent rely on Asian manufacturing and may have to raise product prices in Canada.Isabella Falsetti/The Globe and Mail
Globalization and the prevalence of online shopping has put more pressure on retailers to aim for standardized pricing, according to Jean-François Ouellet, a marketing and entrepreneurship professor at HEC Montreal. “It’s very, very difficult nowadays to have a very different price point from one market to another, simply because most of the information is online,” he said.
But this doesn’t always mean consumers will pay the same price for an item in every country. Canadians have long paid slightly more for the same goods due to the country’s vast geography and higher logistics costs. If all businesses upheld strict price parity, cross-border shopping wouldn’t exist. “We as customers realize that it’s a little more costly to do business in Canada than it is in the U.S.,” Mr. Ouellet said.
But today’s economic upheaval exemplifies when having localized pricing – that reflects a region’s specific circumstances – would be a better move for consumers, according to Geoff White, executive director of the Public Interest Advocacy Centre. That said, adapting prices for different markets can also be a double-edged sword for consumers.
“If Canadians paid for products at a rate more closely in line with the size of our domestic market, at our weakened Canadian dollar, I would hazard that many products would be even more expensive,” he said in an e-mail to The Globe and Mail.
Whether retailers choose to raise prices on either side of the border hinges on how long brands expect tariffs to last and how much inventory they’ve stockpiled, said Ms. Amlani.
People walk by Aritzia on Robson Street in Vancouver, B.C.Isabella Falsetti/The Globe and Mail
But with goods from Vietnam, Indonesia, China and other countries in Asia – where roughly half of the world’s apparel manufacturing happens – currently facing U.S. levies of 10 per cent to 125 per cent, most brands won’t be capable of absorbing the added costs for U.S. customers, according to Ms. Amlani.
For now, stockpiling has offered businesses a temporary buffer from taking on added costs.
Some retailers may want to keep prices standardized for “better optics,” greater transparency and operational simplicity, said Michael Mulvey, an associate professor of marketing at the University of Ottawa’s Telfer School of Management. But there are risks, too.
By hiking prices in a standardized way across markets, “Yes, you’re probably going to make more on each unit, and you may end up being more profitable, or you may attract the ire of consumers who will stop buying from you,” he said.
Trying to keep prices comparable for customers in different markets, as some retailers may have tried in the past, might also no longer be a priority as tariffs plunge retailers into uncharted waters.
“The U.S. went and imposed really ridiculous taxes on themselves. So that’s a bit of an anomaly,” said Matt Poirier, vice-president of federal government relations for the Retail Council of Canada. “Companies might not respond as normally they would.”
Still, some experts argue that market pressures will drive prices down rather than up. International business professor Thierry Warin of HEC Montreal said that while many companies with high brand recognition may opt for uniform price adjustments, the prices may be difficult to uphold if consumer responses to changes in cost vary substantially from one region to another. “In markets more sensitive to price changes … any significant increase can lead to a considerable drop in sales,” he said.