Duty-free stores from coast-to-coast Canada are in the fight of their lives. They are facing a devastating and precipitous drop in sales and traffic, with many going out of business for good. After more than a decade of family operation, John Slipp’s Woodstock Duty Free Shop Inc. It’s a harbinger of the challenges that many venues in this space are experiencing.
Continuing the successful legacy established by his father, John Slipp took over his father’s duty-free store in 1994—expanding the operation and consistently growing the business. At its height in the early 2000s, Slipp’s store was the largest private employer in Caines Head and employed around 15 people. That landscape started to change drastically once the COVID-19 pandemic arrived in March 2020.
To weather the drop in steady customers, Slipp had briefly laid off four workers and reopened with only two employees. By the end of 2024, his line of work is likely to face a downturn. Sales are expected to be nearly a third lower than in 2019. This decrease is part of a broader trend occurring across the country. Duty-free shops have seen a mind-boggling 40% to 50% year-over-year sales collapse since late January. In fact, remote crossings have experienced annual decreases as much as 80%. This minerals- and metals-related decline underscores the challenging climate facing small, independent retailers.
Woodstock Duty Free Shop Inc. succumbed because of a decrease in traffic at the U.S.-Canada border crossings. Ongoing trade tensions compounded by the long-tail impacts from the pandemic exacerbated the situation. So understandably, fewer Canadians are heading south these days. This increase is partly attributable to former U.S. President Donald Trump’s trade war with Canada and his anti-Canadian rhetoric around the possible annexation of Canadian provinces. Moreover, travelers fear being discriminated against at U.S. border crossings — a fear that can further deter cross-border shopping.
Barbara Barrett is the executive director of the Frontier Duty Free Association. She’s an outspoken champion for hundreds of these land border stores, which tend to be independently owned and family-operated. She’s pushing for other “small regulatory changes,” such as tax relief, to save the foundering duty-free industry.
“I would describe our industry as being in a full-blown crisis, and we’ve been saying that for a number of months now,” – Barbara Barrett
Even with the government making big headlines about support programs, Slipp is unconvinced. These were the initiatives he was counting on. He admits they are unlikely to do enough to alter the industry’s dangerous course.
“I pinned a lot of hopes on those when both levels of government made those announcements. I was reminded of the pandemic support programs,” – John Slipp
Barrett emphasizes that travel within Canada remains expensive, discouraging domestic tourism while seeing some travelers choosing more popular destinations instead.
“We live in a country where it’s still very expensive to travel domestically. And while there are many people who are choosing to travel within Canada, we also see more people heading to popular destinations,” – Barbara Barrett
Tax discrimination is another key battleground in the fight for competitiveness. Barrett points out that Canadian duty-free stores are subject to taxes on products that their U.S. equivalents don’t have to suffer.
“We have some taxes on our products that, believe it or not, in a tax- and duty-free industry that our U.S. competitors don’t have. So we’re asking for those to be changed so we can be more competitive,” – Barbara Barrett
She particularly stresses that businesses do qualify for tariff relief programs. These programs should be designed like the pandemic wage and rent subsidies.
“Also, we’re asking to qualify for some of these tariff relief programs or pandemic-level supports along the lines of what they did during the pandemic with wage subsidy or rent subsidy,” – Barbara Barrett
Slipp admits he wouldn’t expect quick progress on border congestion even if successful. Though he hopes a change in U.S. administration will help, he says we can’t expect results overnight.
“Just realizing that even after the U.S. administration changes down the road, in our industry, we do not expect the border traffic to change overnight as a result of that. We believe it’s going to take years,” – John Slipp
The persistent pain of the situation hangs like a shadow on Slipp as he considers the future of his family’s longtime business.
“I’m grieving the loss of my business, but I’m also accepting the reality that the business environment has changed and there is nothing in the bag of tricks that would suggest positive changes in this industry in the short to medium term,” – John Slipp
As we get closer to summer, a time of year traditionally filled with hairpin turns of joyous activity, Barrett warns that the persistent downturn is still hitting sales hard.
“This should be our busy season during the summer, but it is not; it is pandemic-level traffic in the parking lots, and it has led to one store closing in the east. We are unfortunately afraid that we will likely see more closures as we draw to the end of the summer,” – Barbara Barrett
