Duty-free stores expect rise in business with alcohol tax increase

With the federal excise tax on alcohol rising by 6.3 per cent April 1, duty-free stores on the Canadian-American border may see a boost in business.

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The Detroit International Bridge Company operates stores at either end of the Ambassador Bridge as well as the store on the U.S side of the Windsor-Detroit tunnel.

Plus, the Windsor Tunnel Duty Free Shop operates at the plaza on Goyeau Street.

Duty-free stores have in the past welcomed more customers when alcohol taxes climb.

“We most certainly do,” said the Ambassador Bridge’s president of duty-free operations Jason Warzecha of whether they have historically seen customer volume increases tied to alcohol tax increases.

“It shows the impact of these taxes and it makes the duty-free stores an option. People are looking for assistance fighting rising costs.

“We’re exempt from that (tax increase). We don’t have duty taxes or sales tax applied. It’ll have zero effect on us.”

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Warzecha said Canadians represent an even larger majority of the company’s customer base since the COVID-19 pandemic.

What used to be a 75 per cent Canadian and 25 per cent American split has now shifted to 95 to five per cent ratio at the two duty-free stores at either end of the bridge. Canadians represent 87 per cent of the tunnel store’s clientele at the store on the U.S. side.

“We’re slowly getting back to 2019 numbers every day, but we took a 50 per cent hit at the height of the pandemic,” Warzecha said of the customer volume. “We were more fortunate than many border crossing points.

“We had the commercial traffic and auto industry still going. There were also a lot of Canadian healthcare workers crossing to work in Detroit.

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“We’re still not seeing as many American customers at land borders.”

Warzecha said a significant percentage of the bridge’s American duty-free customers were patrons of Caesars Windsor. The loss of that venue for two years is still being felt.

“I think the Ontario government should really be more aggressive in pushing tourism to Americans to remind them.”

Warzecha said duty-free stores are adjusting to the changing market dynamics by expanding the options. What used to be largely viewed as a place to pick up cheaper gas, beer, liquor, cigarettes and perfume now includes everything from groceries to clothing to electronics and home goods.

“For many people, we’re not just the place to get cheaper gas or liquor, we’re like the corner store,” Warzecha said. “They pick up milk, chips or some other grocery items.”

Canadians are allowed up to $200 of duty-free items for those out of the country 24 hours, not including tobacco or alcohol. The allowance rises to $800 for a trip of 48 hours or more, including limited amounts of tobacco and alcohol.