How International Retail Brands Cope with Price Increases

                                             

As the Indian rupee is depreciating against the dollar international retail brands will increase prices in the upcoming Autumn-Winter season.Numerous companies have already seen costs escalate but up until now they have been reluctant to respond with any price increases due to fear of price sensitive consumers.

The German sports lifestyle brand Puma for example, has seen costs escalate by 30% since January this year and will now increase prices by 10% as a result. Other international apparel and accessories brands such as Tommy Hilfiger and Zara are expected to raise prices as well.

Any change in price can have a big impact on operating profits which is why these decisions should be carefully considered before executed. Operating on a global scale like most of these companies are poses numerous pricing challenges especially when it comes to pricing in different countries with different currencies.
 
In order to execute the price changes in the most efficient and profitable way, many companies have realised that a pricing tool is the best way to go forward when implementing pricing strategies.These international companies will of course face challenges when raising prices but it has been seen that customers are often willing to accept price hikes if they do not exceed 15%.

As we often argue at Stratinis, a transparent pricing approach has the potential to benefit both consumers and business – it is all about knowing how to set prices and what impact they will have on specific segments.

 

“Subscribing” to product purchases – pricing opportunities?

I have recently signed up for a service from Amazon UK, where I subscribe to deliveries of Gillette razor blades. Unless skipped or cancelled I receive every two months a pack of 8 blades. There is supposedly a saving for the consumer (me) when subscribing as Amazon can plan purchased better, or something along those lines. The price was £17.95 for a pack of 8 blades when I signed up in May, which IS a good price in the UK market (that prices on Gillette blades vary considerably across Europe is a different story).

Now I just received an email that my next subscriber delivery is about to dispatch, but at a “new price”. In all fairness, Amazon is not trying to hide the price increase, but the new price (with a discount for being a “subscriber”) is £21.64, that is an increase of 21% after discounts! I cannot help wondering, if either Amazon or Gillette are trying to exploit that once they have subscribers signed up, we become less price sensitive? It probably is true: why bother checking the new price or go back to the inconvenience of getting the razor blades (or other goods) elsewhere, when the next shipment is coming automatically from Amazon or another retailer. Even if the price has changed a bit…

Subscription systems for product purchases seem to popping up in different places these days. I have seen it with Amazon but also retailers and even at some services provides such as recruitment services. The supply chain team is probably excited and so could we pricing managers be. But we need to look out for getting too much out of the pricing opportunities and thus alienating the customer in the programme’s infancy.