Of quarter pounders and pounds (also euros, kronas, rupees, yens, roubles)
As it was established in the previous post, "le Big Mac" tastes identical to "der Big Mac" and french fries bought in Ginza won't be too different from those purchased near the Kremlin. The Economist has been tracking Big Mac prices since 1986. The latest data can be seen here. The Swiss burger is almost 4 times as expensive as the Chinese one.
Emil noticed a similar phenomenon when shopping for the textbook for this class on Amazon.com and blogged it.
The Economist data illustrate the principle of Purchasing Parity Power (PPP). Its key point is that price discrepancies between similar countries tend to dissipate over time. Temporary variations in prices for similar products are influenced by differences in productivity across countries.
For price-conscious shoppers, though, any deviation from the PPP is a great find. My recent shopping trip to Amazon.ca for Mylene Farmer's "Avant Que L'ombre" instead of buying it on Amazon.com resulted in almost $20 saved. It would be interesting to hear Amazon.com and price experts' comments.
posted by Andre Grachev @ 3:42 PM
5 Comments:
nice saving with amazon. until emil posted about his experience i had not given much thought to amazon being a facilitator for grey market transactions!
Andre,
The use of the internet as a marketing tool has made it really difficult for Global businesses in many ways. My company is constantly struggling with international pricing problems. If you go to the Edmund Optics website, you will notice that we have a choose-your-country gateway just like many larger global companies. Our webserver is intelligently designed so it can oftentimes direct customers to the proper country without having to ask, but because of the way internet protocol works this is not always possible. This leads to the situation you described where customers can search versions of the website that were not meant for their eyes.
In our case this can cause many complaints from European customers who see the US prices and want to know why the Euro price is higher. In our case (a B2B environment), the prices are different in different locations due to where the item was manufactured, various import taxes and customs fees, and the corporate exchange rates (which do not coincide with the public exchange rates). Our prices are the result of not only how to give the customer the best value, but also how to best manage the global cash flow.
I would be most interested to find out if Amazon is just responding to similar conditions as we are, or if they are aggressively pricing based on local demand. If they are able to charge more in the US because the demand is higher or because they think Americans are willing to pay more, then they are even more clever than I thought!
Hey Andre,
I have only been outside the US twice, once to Jamaica and once to Canada (which almost doesn't count as being outside the US in some ways-no intention to start a ruckus though). In neither case did I pursue any kind of fast food experience. I do recall though, that a friend of mine was just this side of militant when he returned home from France. He was not much into sampling new cuisine and so "relied" on McDonalds to provide him with familiar fare. He concluded that the Mac Royale (which I believe is the French Big Mac) was the worst thing he'd ever tasted in his life.
As I said, I've not been there nor have I done a taste test but just thought I'd throw in two cents (or two all beef patties) to include my friend's experience.
Take care,
am
Alex,
just to folow up on our conversation last Friday.. I cannot wait what the Amazon experts have to say on the subject of the company's pricing policy.. My initial thought was that such a difference in prices was simply an oversight.. Then, after reading the chapter (Kotler, p.346), I decided that it might've been a case of Amazon's customized pricing policy.. Further reading, however, left me convinced, that, after all, it is a case of geograpic segmentation (Kotler, 379-381)
Hi Annamarie,
that is very interesting. If I recall correctly, prior to launching resturants in a new country, McD does a thorough insepction of local suppliers -- meat, producs, etc. -- and select those that meet their standards. I wonder if the different taste of Parisian 1/4-pounders could be the result of tighter EU restrictions on antibiotics, hormone use in the meat industry.. I guess I'll have to try it myself next time I'm in Paris..
On a related subject.. When the very first McDonald's opened in Moscow, Russia, it was considered a restaurant, not a fast-food joint. People would stay in line just to get in.. A decade and a half later, McDonalds has finally moved into the proper position -- a fast, inexpensive eatery.
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