A soaring Canadian dollar is bringing a surge of international shoppers across the Niagara River, but other factors will likely keep the influx from being too significant, Western New York business leaders and retailers say.
The Canadian dollar on Monday and Wednesday hit a 13-year high against the U.S. dollar, trading as high as 85.62 U.S. cents. That capped a steady climb over the past three years, as rising energy and commodity prices, together with expectations for a rate hike by Canada's central bank, have increased demand for its currency.
The loonie is still worth less than the U.S. dollar. But it's a sharp change from when it traded at just 61.98 cents in January 2002.
The result is that Canadians' buying power while shopping in the United States is now at its strongest point since mid-January 1992. At the same time, it's now more expensive -- relatively speaking -- for Americans to shop or eat in Canada.
"It's going to probably be good for communities that are located close to the border. I would think it's good for Buffalo and bad for Toronto," said Lewis Mandell, professor of finance and managerial economics at University at Buffalo.
Already, local retailers are benefiting. At Walden Galleria, the area's biggest mall, general manager James L. Soos said officials have "steadily seen increases in Canadian shoppers" over the last 9 months to a year.
Where a few years ago only about 8 percent to 12 percent of shoppers at the mall were from Canada, current vehicle surveys in the mall's parking lot show 14 percent to 18 percent have Canadian plates, he said.
Similarly, the Outlets at Niagara Falls USA, which normally gets about 50 percent of its customers from Canada, has seen sales rise 14.8 percent for the first half of the year. And while the mall has been spending more on advertising and touting its mix of stores, general manager Judy Sirianni attributes the increase in large part to Canadian shoppers.
"We're seeing a bigger influx of Canadians coming over because they're getting more for their dollar," she said.
And retailers are hoping for even more. Canada's Thanksgiving Day, which is the same day as Columbus Day, is around the corner and signals the start of the holiday shopping season in both countries. Soos said results for that weekend should be a harbinger of what's to come.
However, Soos and Buffalo Niagara Partnership President Andrew Rudnick caution that changes in the Canadian retail market, coupled with border delays and gas prices, means Western New York won't benefit as much as it used to.
"There was a time when the fluctuation of the dollar between the two countries had a bigger impact than it does today," Rudnick said. "People would talk about the number of license plates that were Canadian in the Galleria parking lot."
That's because as recently as 10 or 15 years ago, when the Canadian dollar was previously this strong, Canada didn't have the variety and quality of stores, or the breadth of products, that it does today, so Canadians flocked across the border to shop. In fact, as much as 30 percent of the Galleria's customers were from Canada at that time.
"The type of stores was far less fashionable. The product mix and quality was nowhere near what the U.S. stores had," Rudnick said.
But since then, several hundred American retailers -- including Gap, Old Navy, Banana Republic, Williams Sonoma, Wal-Mart and Sams Club -- have expanded across the border, giving Canadians the same options without leaving the country.
"I don't know if we'll ever see percentages we saw 15 years ago," Soos said.
However, on top of the expanded variety they have at home, Canadians also must still pay a tax on goods bought in the United States and taken back to Canada. Any savings on shopping will also be offset by high oil and gas prices, especially the further away someone lives from the border. And travelers may not want to deal with the increasing delays or perception of delays at the bridge crossings.
"People are not going to just get in their cars and go as they were at a time in the past when there was less congestion," Rudnick said. "If people are going to be doing it, they're going to be doing it pretty much for other reasons."
And even with the stronger currency, shopping here is still expensive for Canadians. "What we're talking about is going from U.S. goods being really expensive to Canadians to U.S. goods being more moderately priced," said Joel L. Naroff, an economist in Holland, Pa.
"Is it a bargain to come here yet? No, not quite. Will it make it more reasonable on the border towns to come across and do some shopping? Yes. But until the U.S. dollar gets weak, rather than less strong, the Canadians won't find a huge amount of bargains."
Naroff said he expects the loonie to remain strong against the U.S. dollar, at least for the time being, as the American currency is battered by factors such as a rising U.S. trade deficit. "I don't expect the Canadian dollar to strengthen a whole lot more, but I think there may be some more upside to it," he said.