Online sales slow in Whatcom border towns as loonie falters

Steven Elsner unloads a direct shipment from Amazon at Hagen’s of Blaine, a shipping and receiving business, on Thursday, March 24, 2016.
Steven Elsner unloads a direct shipment from Amazon at Hagen’s of Blaine, a shipping and receiving business, on Thursday, March 24, 2016. pdwyer@bhamherald.com

It’s clear fewer British Columbia residents are shopping at Whatcom County stores since the Canadian currency has weakened, but it appears they also have cut back on having online products shipped here.

Online sales have become one of the leading retail categories for Blaine and Sumas in recent years, outpacing brick-and-mortar categories like restaurants and clothing. When the loonie was near par compared to the U.S. dollar a few years ago, getting a mailbox in Whatcom County was popular with British Columbia residents, who could save money not just on the product but in shipping costs.

A recent report by Western Washington University’s Border Policy Research Institute took a look what’s happening lately, concluding that online sale are slowing in those communities, and it could cut into local government funding.

26, 22 Percentage drop in online sales in Sumas and Blaine, respectively, between the third quarter 2014 and the third quarter of 2015

According to data from the Washington State Department of Revenue, online sales in the third quarter of 2015 were down 26 percent in Sumas and 22 percent in Blaine compared to a year earlier. Overall in Whatcom County, online sales in the third quarter rose slightly.

The decline in online sales in Blaine and Sumas happened at the same time the Canadian dollar was weakening, according to the Border Policy institute report. During the third quarter, the loonie was hovering between 71 and 77 cents compared to the U.S. dollar, well below the 90-cent range it was at during the third quarter of 2014.

So far in 2016, the loonie hit a low of 68 cents in January before bouncing back to 77 cents on March 17.

Steve Hagen, owner of mail services company Hagen’s of Blaine Inc., said they noticed a slowdown when the Canadian dollar weakened. It wasn’t necessarily fewer people coming into the business, though; a customer who had regularly been picking up five packages when the loonie was strong might be picking up two packages when the currency is weak. Hagen has noticed an uptick in orders the past two weeks after the Canadian dollar strengthened past 75 cents compared to the U.S. dollar.

If the Canadian dollar remains low, it could test whether mail services are another retail component that goes from boom to bust in these two communities. It’s happened before in Blaine and Sumas, with the gas station boom and bust in the 1990s to early 2000s being a recent example.

For Canadians to forego online shopping, they are also foregoing product variety and retail options.

Laurie Trautman, associate director of Western Washington University’s Border Policy Research Institute

Mail services could have a bit more staying power than gas stations, said Laurie Trautman, associate director at the institute. She believes the volume of online sales will fluctuate based on the exchange rate but won’t be as price sensitive.

“(Gas) is the exact same product whether you buy it north or south of the border, the only difference is price. For Canadians to forego online shopping, they are also foregoing product variety and retail options,” Trautman said.

Hagen agreed that customers continue to do U.S. online shopping because of the product variety, but he expects some mail service businesses to close if the loonie remains weak. Hagen’s of Blaine has been in business since 1977 and has seen the ups and downs that come with being in a border community, including the plethora of new mail service businesses that opened in Blaine and Sumas a few years ago.

He said the drop in online sales is being felt down to Bellingham.

“It’s part of a countywide change we go through,” Hagen said.

Online sales are important to government budgets in Blaine because they have become a significant part of retail sales tax collection. So far tax collections for retail sales are down slightly for Blaine, but revenues from the city’s 1-cent-per-gallon gas tax are down 21 percent, said Jeff Lazenby, the finance director at Blaine.

Fewer Canadians coming across the border and filling up at Blaine gas stations will affect the street operations budget for 2016, he said.

In February the number of people who went through the five southbound border crossings into Whatcom County totaled 743,582, a monthly total more typically seen in the months following the Sept. 11, 2001, terrorist attacks.

The weaker Canadian dollar isn’t all bad news for Whatcom County’s economy. The low currency gives Canadian businesses a break on exports, so they are more interested in establishing themselves in the U.S. market, including in border areas like Whatcom County.

It is also more appealing for Canadian businesses to sell products in the U.S. and get paid in U.S. dollars. Hagen recently opened a business called PNC Fulfillment, where Canadian companies can drop off their products that will be shipped to U.S. customers, eliminating some international shipping costs.

What happens with cross-border shopping and online sales will be influenced by the Canadian dollar. In a recent report the Bank of Canada predicted the loonie won’t be reaching anywhere near par through early 2017. If the loonie remains this flat, it would be at a value seen in 2004, when 52 percent fewer passenger vehicles passed through the southbound borders than in 2015, according to the border report.

Dave Gallagher: 360-715-2269, @BhamHeraldBiz