October 24, 2008 / 6:13 PM / 9 years ago

U.S. bargain-hunters hunt closer to home than Canada

TORONTO (Reuters) - There's unlikely to be a rush of bargain-hunting U.S. shoppers flooding into Canada to take advantage of a rapidly weakening Canadian dollar because tough times at home will keep them away.

While the low-cost loonie, the Canadian currency's nickname, has been a big draw for American shoppers in the past, things are different now due to the U.S. housing crisis and general economic malaise. It hardly matters that the value of the Canadian dollar has slipped more than 20 percent this year, and that it was around 79 U.S. cents on Friday -- its weakest point against the U.S. dollar since September 2004.

"Americans are going through a tough time right now and so even while they may be hunting for bargains, they probably will tend to hunt closer to home," said Peter Woolford, vice-president of policy development and research at the Retail Council of Canada.

"The decline of the (Canadian) dollar may attract a few more people across the border. You may see them in border towns shopping tactically for items that are cheaper in Canada, but generally our members are not expecting a huge upsurge."

When the currency was at par with the greenback or even higher in late 2007 and earlier this year, Canadian shoppers were the ones border-hopping, causing hour-long waits most weekends at border crossings. But the tide of shoppers is not expected to turn again.

Recession fears and still-high transportation costs will see Americans sticking close to home, said Hart Hodges, an economics professor at Western Washington University in Bellingham, Washington, who tracks cross-border shopping figures in the U.S. Pacific Northwest.

"I don't think you're going to see a lot of that, just because of people not wanting to drive as far," he said.

"We're celebrating that gas is back below $3 a gallon, but the mindset is that gas is still expensive. And whether or not we are technically in a recession, the mood is certainly that."

The Retail Council's Woolford said Americans -- unlike Canadians -- are influenced by a big surge in patriotism when the economy turns down.

"Americans are very nationalistic and they tend to shop American when times get tough. Whereas Canadians are very pragmatic and very value-focused, and we will shop wherever we can get the best deal."

WAITING GAME

Canadian retailers in towns along the U.S. border have not noticed much of an increase in U.S. shoppers.

"We are seeing a few, but with the economy the way it is, it has slowed down a bit," said Cindy Bolton, store manager at a Levis clothing outlet in Niagara Falls, Ontario.

Bolton said part of the problem is that most Americans are unaware of the price differential between the two currencies.

Malls in Canada's Niagara region, traditionally a bellwether area for crossborder shopping activity, also have not seen a change in the consumer patterns.

"We haven't seen anything yet. It's only been in the last week that the we have really seen the (Canadian) dollar begin to devalue against the American currency," said Rick Woodward, marketing manager at the Pen Center in St. Catharines, Ontario.

National Canadian retailers paint a similar picture.

"In looking at some of the numbers over the past few days, we have seen a slight rise in trend for specific markets but it's still very early days," said Alexis Redmond, a spokeswoman for department store chain Hudson's Bay Co.

If there is a silver lining to the falling Canadian dollar, it is the hope that at least it will keep Canadians from heading south, which was a source of frustration for Canadian retailers during the 2007 holiday season when a strong loonie gave Canadian shoppers increased buying clout in the United States.

"We're optimistic that we may keep some more of our shoppers here at home this holiday season," Woodward said.

Even if there has been no influx of Americans yet, the Niagara region -- which boasts a number of wineries and casinos, as well as the world-famous waterfall --- is ready to take advantage of the currency differential.

"It is great news for tourism when the American dollar strengthens because the Americans definitely like to come to Canada to get that kind of value-added vacation with us," said Anna Pierce, executive director at Niagara Falls Tourism.

"The dollar coming down really helps. Anything that removes obstacles is a good thing."

(Additional reporting by Allan Dowd in Vancouver, British Columbia; editing by Rob Wilson)

Reporting by Scott Anderson; editing by Rob Wilson

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