New Cross-Border Shopping Rules Could Be a Big Win for U.S. Companies

New Cross-Border Shopping Rules Could Be a Big Win for U.S. Companies

New cross-border shopping regulations in Canada could be a big win for retailers and manufacturers in the U.S. In fact, the changes appear to already be having an effect. Since Canada increased its duty-free limits on June 1, 2012 as part of its federal budget, Nielsen research shows an influx of Canadian shoppers in U.S. border markets like Buffalo, N.Y. and Seattle. Almost one million Canadian households have made the trip south to shop over the past year, a 24% increase from 2011.

Retail sales to Canadians visiting U.S. border markets are even outpacing average U.S. sales, likely because of the higher prices north of the border. “Canadians love a good deal and they’re willing to travel to get it, says Carman Allison, a director of consumer insights at Nielsen. “And the holiday season was a perfect time for Canadian consumers to take advantage of better selections, a wider array of brands, and lower-priced goods across the border.”

The loosened cross-border shopping limits increased the amount of goods that Canadians can bring back from the U.S. after a 24-hour trip to $200, four times the previous $50 limit. With a 48-hour trip, consumers can legally bring home $800 worth of goods, double the previous limit. “Canadians are flexing their spending muscle south of the border as the Canadian dollar remains strong against the U.S. Greenback,” says Mr. Allison. “Roughly 60 percent of Canadian travelers to the U.S. return to Canada the same day. Thus, one could speculate that a large portion of those travelers are engaging in cross-border shopping.”

Compared with 2011, Nielsen research from this year’s Q3 showed a 20 percent increase in trips across the border to U.S. retailers, a 10 percent rise in total dollars spent and a 24 percent increase in Canadian shoppers at U.S. stores. Nationally, penetration of Canadian shoppers to U.S. stores is up 1.6 percentage points, up 0.4 points from Q2. The number of overnight trips by car rose 7.5 percent to 1.9 million, the highest quarterly level since 1972.

“The overall amount that Canadians spend across the border also continues to increase, as does the number of cross-border shoppers,” says Mr. Allison. “However, the dollars and trips per shopper have become diluted, due to the influx of new, first-time cross-border shoppers.”

Cross-border shopping trends vary across Canada. For example, households in Ontario and British Columbia are fueling the majority of cross-border shopping growth, likely because of their proximity to major U.S. metropolitan areas. Twice as many British Columbian households shop in the U.S. than the national average, and shoppers from this province tend to spend the most ($1,126 versus the national average of $846).