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Sunday, February 5, 1995 - Page updated at 12:00 AM

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Border Blues -- Shoppers Are Deserting U.S. Stores As Canada's Currency Keeps Sinking

BELLINGHAM - Bill Gabriel is a member of what is fast becoming an endangered species.

He is a Canadian shopper in Whatcom County.

And on this day, even he isn't doing much buying.

No. Today, Gabriel, a bus driver from Delta, B.C., is content to window-shop as he strolls down the half-empty corridors of Bellis Fair Mall in Bellingham.

"A few years ago," Gabriel said, "my wife and I used to pop across the border almost every weekend. We'd have lunch, walk around the mall a bit, pick up a few items, maybe do some grocery shopping, get some gas and go back home."

Now, weekly trips have become monthly or bimonthly visits. Spending sprees have turned into spending freezes.

"It's just the dollar," he said. "Whatever savings we would have achieved by shopping in the U.S. are gone."

While all eyes have been fixed on the collapse of the Mexican peso, the Canadian dollar has been in a tailspin of its own. Nowhere is that felt more than in border towns such as Blaine, Bellingham and Custer, whose retail economies were built, in part, on the back of the Canadian currency.

When the Canadian dollar was at its strongest in 1991, British Columbians flooded Whatcom County in hopes of finding bargains and a greater variety of goods.

"People used to make a weekend of it, going to Bellis Fair and throwing tailgate parties (in the parking lot) in between shopping," said Heather Shannon, director of retail industry services for Ernst & Young's Vancouver office.

Some items in the United States were selling about 35 percent to 40 percent below Canadian prices, in part because of higher costs associated with doing business in Canada and the collective effect of provincial and national taxes.

But the decline of the Canadian dollar's value has all but wiped out potential savings, Canadian consumers said, removing a number of incentives to do their shopping here.

The Canadian dollar is now worth about 71 U.S. cents, down 5 percent in the past four months and more than 20 percent from 1991. Unlike the peso, which plunged more than 40 percent in one month, the Canadian dollar has been in gradual decline, fueled in part by concerns over Canada's growing national debt and the possible secession of Quebec, which represents 25 percent of the national economy.

And until the ruling Liberal party submits its budget later this month, and until the Quebec issue is resolved - perhaps as soon as June - analysts said it is impossible to predict how soon the Canadian dollar will rebound.

In the meantime, the effects are felt throughout Whatcom County - in places such as Bellis Fair, which was built in 1988 just as the Canadian dollar was gaining strength.

"I remember a time when it was so packed in (Bellis Fair) with Canadians that you could barely walk down the halls," Gabriel said. "Now, you can shoot a cannon through it."

Dave Merrifield, a Western Washington University economics professor, estimates that for every 1-cent reduction in the exchange rate, Whatcom County loses about $8 billion in retail sales.

Between 1991 and 1993, the number of British Columbians making day trips into the United States has fallen by more than 21 percent, according to figures compiled by the Canadian government. Border crossings directly into Whatcom County fell more than 36 percent in the past two years.

What's more, Canadians are spending less. Canadians making day trips into the states spent $347.1 million in 1993, down more than 20 percent from the previous year.

Canadian shoppers who once represented as much as 40 percent of the local retail base now account for about one-quarter, said Mike Brennan, executive director of the Whatcom County Chamber of Commerce and Industry.

Cars with British Columbian license plates used to take up more than half the spaces in the Bellis Fair parking lot, retailers said. Now, it's down to about one in three or one in four.

One store manager said Canadians once represented about 75 percent of his customers; now they're about 10 percent.

Mallwide, business was down last year by about 8 percent with some segments, such as apparel, impacted more significantly.

To stave off further declines, some stores have begun running specials, offering Canadian shoppers 80 U.S. cents on the Canadian dollar.

At one point, Afterthoughts, a store that sells women's accessories, was offering 85 U.S. cents on the Canadian dollar, but that began to eat into the store's margins, said store manager Pat Stanek, especially because the company was offering storewide sales for the post-holiday season.

"There are some days when I don't see a single Canadian dollar," Stanek said. "The Canadians are the ones who kept us going. But they learn quickly. They're pulling out of Bellingham."

Les Keithley, owner of Country Boots, said that "immediately after the mall opened, sales in this sleepy little town quadrupled. Word got out that Bellingham was a good place to do business."

That's why Keithley established a store in Bellis Fair to go along with the original Country Boots store he opened more than 20 years ago in downtown Bellingham.

Then the Canadian dollar began to fall. And sales fell in lock step.

In 1992, sales dropped off 22 percent at his Bellis Fair store, Keithley said. The next year, business dropped off 19 percent more. That was followed up last year with an additional 18 percent decline.

Keithley said he was forced to sell his boat, his house and his car to keep his businesses afloat. But that didn't work. Last year, he closed his downtown Bellingham store.

He and his attorney are currently weighing the company's options, including filing for bankruptcy protection.

"That at 62 years old I'll be looking for a job makes me sick," said Keithley, who also blames the mall management for what he describes as an inflexible lease arrangement during trying times.

"I'll tell you, it's like Detroit when the automobile industry went in the tank," he said.

It's not just in Bellingham. A couple exits north of Bellis Fair on I-5 in Custer stands Peace Arch Factory Outlets, a big discount mall that was built less than two years ago with Canadian shoppers in mind.

"Surely, we've seen sales decrease," said Wendy Ripley, the mall's manager, noting that Canadian shopping is down by about 10 percent. "We're not making any huge profits now."

Plans to nearly double the strip mall's size - which would have added 25 stores to the outdoor mall - were put on hold last year.

But all 28 stores are occupied, so Ripley said she hopes to go ahead with expansion some time next fall, by which time she hopes the Canadian dollar will have strengthened.

Dave Bell, executive director of the Fourth Corner Economic Development Group, a nonprofit government-supported agency that helps companies locate in Whatcom County, said there is light at the end of the tunnel, evidenced by the willingness of national retailers to move into the county under these trying circumstances.

In recent months, Whatcom County has witnessed a steady influx of larger national retailers - including Eddie Bauer, Future Shop, The Gap, Good Guys and Circuit City - which can withstand tighter margins in the short term in hopes of capturing an ever-growing Vancouver metropolitan region in the long run.

In fact, Merrifield, who directs the university's Center for Economic and Business Research, predicts personal income and taxable retail sales will continue to grow at a steady, moderate rate in Whatcom County through 1997.

That may be, but some Canadian analysts said it might take more than a slight tweak in the exchange rate to get Canadians to contribute to that growth.

Shannon, of Ernst of Young, noted that Canadians no longer have to cross the border to find some of their favorite retailers, including Wal-Mart, The Gap, Toys R Us and Talbots.

So variety is less an issue. In addition, she said, "B.C. retailers have responded to their American competitors in recent years. They have sharpened their skills and become more sophisticated in marketing their products."

Sal Badali, head of international business services for KPMG Peat Marwick Thorne's Toronto office, said: "The retail market just north of the border has changed remarkably. If the dollar strengthens only marginally, I don't think you'll see too many Canadians return."

Christina Snyder hopes that's not the case.

Within walking distance of British Columbia, in the town of Blaine - population 2,860 - Snyder has the Bordertown Blues. In more ways than one.

Bordertown Blues is the name of the store that she runs and that her granddaughter co-owns. The name refers to the fact that the shop sells blue jeans, in addition to antique clothing.

"But I guess the name is kind of fitting these days," Snyder said, seated inside an empty store, talking with Leanne Waltrip, who owns South of the Border Pet Emporium next door.

Neither of the women have any customers at this moment.

"Blaine really goes in cycles," said Waltrip, noting that most Canadians stop by the tiny border town to pick up gasoline and dairy products on a regular basis. "It comes with the territory. But things will pick up. They always seem to."

That's what Joan Buchan believes. Buchan, a Vancouver resident, still does her grocery shopping at the Blaine International Center, a strip mall in the center of town.

Milk. Eggs. Cheese. Gas. Meats. All those things, she said, are still a bargain in the United States.

"Once we get our interest rates stabilized and the dollar back to strength, you'll see a lot more Canadians come back," and they'll be buying more expensive items, she said, as she loaded her car with groceries.

In the meantime, the center, which opened in 1990, continues to be affected, retailers said.

International Marketplace, the grocery store that anchors the complex, reports sales declines of 10 percent to 20 percent. There are a few new stores in the center, such as Radio Shack, but there are several empty storefronts as well.

The one thing that local retailers can take comfort in, though, is that U.S. consumers don't seem to be flooding to Canada to do their shopping, Canadian retailers said.

To be sure, Americans who are in Canada for other reasons may be buying more. But few U.S. consumers are crossing the border specifically to pick up everyday items, said Paul Dumontet, manager of Keith Ridge, a men's apparel store in the Semiahmoo Centre in White Rock, British Columbia.

"It's just the way it's been," he said.

Published Correction Date: 02/07/95 - Because Of A Typographical Error, This Article Incorrectly Stated One Economist's Estimates Concerning The Effects Of The Devaluation Of The Canadian Dollar On The Whatcom County Retail Economy. Western Washington University Professor Dave Merrifield Said The County Loses Approximately $8 Million For Every 1 Cent Drop In The Exchange Rate.

Copyright (c) 1995 Seattle Times Company, All Rights Reserved.

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