Perils of inconsistent pricing have just recently attracted media attention, but they have been affecting brands for many years. Chanel revealed this March plans to unify its bags prices across continents, raising prices in Europe and lowering them in China. Part of Chanel’s motivation has been to stop the proliferation of the gray market surrounding its products, which can be bought in Europe and sold on sites such as Taobao for a higher price (still lower than that of official Chanel retailers in China).
But disjointed prices are not limited to top of the line, exclusive players. Many global brands – even ones with direct-to-consumer e-commerce and e-tailer partnerships have failed to adhere to a global standard for prices. Among fashion and specialty retail brands studied by L2, Calvin Klein has the largest price disparities across countries. Bloomingdale’s, for example, advertises Calvin Klein jeans for $56 while they are sold at an average price of $101 on the brand’s official Brazil site.
Price disparities exist within borders as well. In the U.S., for example, third-party retailers offer ‘perceived discounts’ by listing products at a lower price and adding shipping fees and taxes. As shown in this graph from an L2 presentation, frugal shoppers many think they are saving $19.51 by purchasing on Calvin Klein jeans on Macy’s instead of the brand site. Yet, the savings shrink to $6.56 after taxes and shipping fees.
E-commerce has made it easier for shoppers to compare prices and look for deals within and outside of their regions. In fact, 25% of Chinese Internet users say they have made a cross border purchase and 53% say they plan to make one in the near future. This should increase as retailers expand international shipping offerings, and therefore price harmonization should be among the top priorities of global brands.
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