Dollar Dilemma

For stores in Canada, although R. G. Mitchell is no longer with us, their approach to the Canadian dollar’s “reverse crisis” in 2008 is well-remembered.

Recognizing that lower prices could prove chaotic for retailers, while at the same time wanting to deal with the media’s influence on consumers, RGM tempered price adjustments with expanded margins until, at one point, 50% became the normative trade discount for the lines they carried, which represented about 90% of the best-selling Christian books.

While I was not a fan of everything that happened on Gordon Baker Road, I did agree that this was the best approach.   Furthermore, it wasn’t our industry’s handling of the currency issue that brought on the demise of RGM, but rather the availability of online purchasing that existed as a consumer alternative when the U.S. dollar got affordable.

Canadian customers were already paying conversion rates of 1.650 in the earlier part of that decade, and ironically, our stores were in much better financial health.   The industry couldn’t deal with declining prices fast enough, and suddenly, a whole consumer segment discovered the ease of purchasing from U.S. online vendors.

Here’s how our most recent dollar adventure tracks — these are the monthly closing numbers from the Bank of Canada:

March 2010  1.0158
February 2010  1.0525
January 2010  1.0693
December 2009  1.0510
November 2009  1.0556
October 2009  1.0819
September 2009  1.0707
August 2009  1.0950
July 2009  1.0775
June 2009  1.1630
May 2009  1.0917
April 2009  1.1930
March 2009  1.2613

The last six months have not been nearly as exciting as the first six, but anytime the dollar creeps toward parity our Canadian industry “blinks.”  In some ways, it’s a blessing that we aren’t dealing with fixed pricing here.   Our ties to the U.S. pricing and royalty structure certainly work to advantage here provided our dollar is going up against the U.S. dollar.

I also again want to go on record as saying that I don’t think our Canadian market will ever again survive conversions as high as 1.600 or 1.650.   In fact, I believe that if we ever back to anything over 1.400 consumers will gravitate to other media to provide them with spiritual input.   We would have to negotiate a separate arrangement at that point, no matter what they U.S. literary agents have to say about it.

All this to say…

I’m not sure yesterday’s announcement by David C. Cook that they are moving toward a conversion factor of 1.100 is the greatest news we could have heard, especially from a company that does so little discounting to begin with.

Frankly, when RGM changed the rules all those months ago, my own business decided we weren’t going back to 40%.   Pricing from DCC is already adjusted in our store, and will continue to be moving forward.   We need “real dollars” to pay heat, insurance, telephone, security, wages, and especially rent.   Customers are not nearly so price conscious as we think they are, nor are they as price aware as we are on the other side of the counter.

Dealers need to regard the announcement as a change in discount as much as a change in retail pricing, and find the balance point that works for your business.

Your future is hanging on your decision.

Related:  These days, this is a recurring theme at this blog, check out posts on April 7 and March 4.