Pricing Risks – Parallel Distribution Channels

Pricing Risks – Parallel Distribution Channels

PRESS STATEMENT

A Wellington business consultant has warned New Zealand exporters to learn from the recent rugby jersey pricing experiences of Adidas.

David Miller, Director of Vantage Consulting Group, says that companies must be very careful when they are operating parallel distribution channels internationally, particularly with consumer products.

“There are major reputation risks to brand and company when customers can access product at different prices from different channels," said Mr Miller.

“This is over and above direct impact on sales if the issue becomes a public one and large numbers of customers decide not to buy a product because they perceive a lack of equity amongst pricing alternatives. The greatest risks arise when online prices are significantly cheaper than local, traditional retail prices"

Mr Miller said that companies must be very careful to maintain consistent pricing across channels when they are operating in different currencies.

“It may well be perceived by consumers as arrogant if manufacturers take the approach that foreign exchange fluctuations are the customer’s problem rather than theirs. And it is perceptions rather than reality that drive customer behaviour.”

"Consumers in other countries have no interest in the level of the New Zealand dollar. They are interested in what they have to pay for a particular product and its price relative to competing products in their own currencies. This is something that our commodity exporters have to deal with on a daily basis, but it can become more complicated for manufacturers of consumer products where a multiplicity of distribution channels, traditional and web-based, are available.”

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