The rugby world cup is coming to New Zealand next month and the biggest news story recently has been about the price of the All Black jersey. The jersey retails for NZ$220 in New Zealand (about $182 US dollars), but can be bought from our customer, World Rugby Shop for just US$89.00. The New Zealand public has been outraged and there has been a backlash against Adidas who have failed to justify why there is such a huge difference in price. I’m sure our customer has benefited greatly from the publicity.
I suspect that Adidas’s market research indicated that Kiwis would be willing to pay more than the rest of the world for their team’s jersey. However somehow Adidas neglected to take into account the Internet. At best this was naive. And they now have a lot of work to do to rebuild the damage to their brand, although they’ll probably sell more jerseys as a result of the publicity, even though it’s negative.
The broader question is what should Adidas have done and how should manufacturers set prices around the world? Should there be a global recommended retail price? If I look at the price of an iPad in NZ it is about 30% higher than in the US. I think most of that difference is due to the US dollar dropping significantly in value since the prices were set. In my mind there shouldn’t be a significant difference in price. You have to assume that the consumers know how to use the internet and will find out and the market research should take that into account.
If Adidas had set the price a little higher in the US and significantly lower in NZ then they would have sold less jerseys in the US and more in NZ, but they probably would have made more money overall and they wouldn’t have damaged their brand. However, they wouldn’t have got this publicity, so there may not have been as much interest in the jersey. Obviously international pricing is difficult to get right.
What do you think? In the meantime I’m going to go buy one of those jerseys from our customer.
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With some merchandise, I would suspect that cost of transportation of goods to the distribution facility is a factor. We sell parts to New Zealand, but normally by way of a local distributor. Yes, clients can call us and inquire on the price and it will seem lower up front than what the local guy sells for, however, by the time they tack on the shipping expense from us to New Zealand, the local guy fares better because of consolidated shipping. I’d think that there would be differing expenses to transport the goods from the original point of manufacture to the different points of distribution. I agree that in this case it doesn’t make sense though. Probably the jersey was produced in Asia somewhere and theoretically should have cost less to transport from the manufacturer to the distribution point in New Zealand than to the distribution point in the US. Maybe Adidas has a huge supply chain issue and they are not routing merchandise properly from manufacturer to the distribution points.
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