Duty free stores suffering ‘severe impact’ from U.S. travel boycott, with revenue losses of up to 50%
Duty free stores are bearing the brunt of the travel boycott to the United States as the steep decline in traffic at Canadian land borders has cut revenues in half for some businesses.
The duty free shops at Canada’s land borders depend entirely on cross-border traffic into the U.S., and the downturn is placing extreme pressure on small businesses in border communities across the country, said the Frontier Duty Free Association in a press conference in Ottawa on Thursday.
On Monday,
Statistics Canada
released its travel data for the month of January, reporting a
22 per cent decrease
in trips to the U.S. by Canadian residents compared to the year before. Of these, 1.3 million were made by automobile — 26.3 per cent of trips that month.
“This decline is hitting land border duty free stores immediately,” said Barbara Barrett, executive director of the group, which represents Canada’s 31 land border duty free stores. “Our members… can only sell to travellers leaving Canada, which means when traffic declines, revenues decline with it.”
January marked the 13th consecutive month of year-over-year declines in cross-border travel to the U.S., which totalled 2.1 million trips in the month, according to Statistics Canada.
Barrett said that, for many duty-free businesses, revenues are down “between 40 and 50 per cent,” with even steeper declines in smaller or more remote crossings. The stores are small, often family-run Canadian businesses, she said.
She added that the stores — federally regulated, licensed, export-only businesses operating under the oversight of Canada Border Services Agency — has no domestic market to fall back on and no alternative channel to offset the losses.
“There is no way for these stores to pivot their business,” she said. “Across the country, stores are seeing severe impacts.”
Barrett said the downturn in cross-border travel is “temporary” and not structural, driven by external pressures — political tension, trade friction — and “not a permanent shift in travel behaviour.”
She said that while those conditions will change, the businesses are operating at a disadvantage relative to their U.S. competitors. The group has already presented solutions to the federal government.
Canada’s duty free businesses face a structural tax disadvantage relative to their American counterparts and are not treated consistently with other Canadian export channels, the group said.
“Duty free stores represent the final opportunity to keep dollars in Canada that would otherwise be spent in the United States,” Barrett said. “When these businesses are competitive, that spending stays here; when not, it goes directly to the U.S.”