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Book Pricing: When Canadian and US Currencies Are At Par

abstract:I know I am not the first person to wonder why the sticker prices quoted on the back of books are still significantly higher for Canadians than Americans when it has been a full year since the US and CND dollar achieved parity. "So why don't books cost the same in Canada as the US?" Consider the list price on Alan Greenspan's The Age of Turbulence is $35 U.S. and $42 Canadian. Suggested retail prices for James Patterson's You've Been Warned are $27.99 and $32.50. I took a look at the history of the two currencies and what the Association for Canadian Publishers (ACP) and the Association of American Publishers (AAP) had to say. Read this and weigh-in with your thoughts. If you are a publisher, share your experience.

article:

October 05, 2008

Currency Backgrounder

The Canadian dollar reached parity with the U.S. greenback on Thursday, September 20, 2007 for the first time in almost 31 years, capping a spectacular run that saw it rise 62 per cent since its all time low in 2002. It has since been hovering within a few cents on the up or downside. (Today's exchange rate is $1 USD = $1.07826 CND)

The previous time the two currencies traded at par was in November 1976, just after René Lévesque's election victory in Quebec, which sent the Canadian dollar reeling. By January 2002, the loonie had bottomed out at just 61.79 cents US.

The Canadian dollar's latest rise comes as the U.S. dollar falters against major currencies; it's not a factor of the Canadian economy being so much better, moreover it's the US economy that has slipped against the rest of the world currencies. The Canadian dollar has gained more against the U.S. dollar than any other major currency with the loonie up 16 per cent against the greenback, while the euro is up just six per cent, the British pound two per cent, and the Japanese yen about four per cent.

Publishing Issues

The ACP writes that "The price of a book, like the price of every other commercially sold item, is determined by two factors: costs and competitive market forces. Publishers price their books high enough so that they cover the costs and make a profit, if possible, and low enough so that buyers will choose their books instead of a competitor's. Costs drive prices up; competitive forces drive them down. Thus works a free market.

It is not at all clear to me why people assume that because the currency values are now the same, the prices should be the same. Canada and the US are two different countries, with different tax structures, labour regulations, funding systems. They are two different markets, with two different sets of costs, and two different sets of competitive forces.

For books that originate in Canada, this distinction comes into play at every stage. For example: freelance editors in Canada, who collectively offer very high-quality work, charge more than American freelance editors (who in turn charge more than editors in India). If you are publishing a Canadian book, and you need an editor who knows what a Timbit is, you are going to have to pay a Canadian editor. Up goes the cost of your book. Canadian publishers face higher costs across the board, but if they wish to sell into the US, they must address the competitive forces that keep book prices lower in the US. Traditionally, they have priced their books lower for the US market, and counted on higher volumes to offset the smaller margin.

The noise around this issue last fall arose, not primarily around Canadian-published books, but around US books coming into Canada. In those cases, most of the costs are incurred in the US, and so consumers might expect to pay US prices when the dollars are at par. But there are still differences that come into play. For example, the minimum wage is significantly higher in Canada, so the cost of warehouse staff in Canada who handle the book when it comes in from the US and ship it to Canadian stores is higher than in the US. Higher distribution costs mean higher prices.

For historical reasons, books, unlike most other products, present their dual (or multiple) prices to consumers, and so publishers and booksellers got these questions first, when manufacturers and retailers of, say, lipstick, or tractors, did not. Booksellers and publishers - two of the smallest-margin business models around - were somewhat bemused last fall to find their stock in trade, with its very small or non-existent profit levels, used as a symbol by the media and politicians wishing to exploit the larger issue of consumer concern about prices."

Canadian Book Distributer, Raincoast Books

Steven Beattie, formerly of Raincoast Books in British Columbia (the Canadian distributer for the lucrative Harry Potter series) had this to say. "In late October, Penguin Group Canada announced a plan to sell U.S. books in Canada at prices as close to par as possible. HarperCollins Canada began restickering books to close the price gap, and Random House Canada announced a rebate to booksellers who discounted their cover prices in-store.

Meanwhile, on the retail side, independent booksellers like Ottawa’s Collected Works began offering books at American prices, despite the loss to their bottom line that this policy was expected to take. Indigo, Canada’s largest bookseller chain, offered free shipping on online orders greater than $39.00, and deep discounts in-store (blithely ignoring the fact that it was Indigo’s practice of deep discounting that helped put many Canadian publishers behind the fiscal eight ball in the first place, but that’s another story).

All of this may seem like good news for consumers, who will enjoy lower prices at the cash register into 2008. But it’s not good news for retailers, whose profit margins are often not significant enough to allow them to sell books at American prices, or for publishers, who still have to pay editors, book designers, typesetters, printers, sales staff, and so on.

The problem, which consumers don’t see, or don’t take into account, involves economies of scale. The Canadian market is one tenth the size of the American market. American publishers are able to set prices lower than their Canadian counterparts because what they lose in individual sales, they make up for in volume. David Davidar, the president of Penguin Group Canada, told the Bookseller that '[w]e have entered an era of significantly lower prices, with new US hard-covers priced around $27, fully $10 less than they were two years ago. However, we’ll hope to make up in volume what we have lost in terms of price.' But Canada only has a population of 33 million, so his prognostications about increased sales volume seem a tad on the overly optimistic side."

Regardless of this, I've purchased many books from stores that maintain the old two-tier pricing system. So despite 2008 being heralded as the year for consumers, I don't think that's quite true. Also, in this terrible economic market, most of the book groups who were able to lavishly purchase hardcover anytime they wanted, are now thinking twice and steering away from the "newly published" hardcover racks to the "newly reissued" softcover racks.

What Does It Cost You

Take this brief survey. Copy and paste the questions and answers into an email addressed to: info@bookbuffet.com with "SURVEY" in the subject line.



  • Are you Canadian or American?
  • How many books do you purchase a year? _____
  • Would you say you spend on average per copy A) $15-25 or B) $25-45?
  • If the hardcover books cost under $25, would you prefer them to softcover? YES/NO
  • Would you purchase more than one book at a time?
  • Are you a member of a book club and if so, how many years? ____
  • Do you borrow books from the library? A) No B) Prefer to borrow than buy
  • Do you buy books online A) most often, B) least often, or C) not at all?
  • Do you purchase USED books A) sometimes, B) most often, C) not at all?

Additional Links

USA Today article: Dollar Parity and Books

 

 

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