Industry Paul Sherratt


The Challenges of European Pricing Structures


Paul Sherratt of Solutions for Sport looks at European price strategies as more UK customers expand into Europe


Background In recent weeks we have been bombarded


with information regarding the European Union and whether we should be part of an enlarged Europe. The European elections may indeed have


thrown up some interesting debate, however never has the topic of Europe been as relevant to the UK sports trade as it is today. With the advance of Sports Direct and American Golf into more and more European markets and with an ever increasing number of UK-based ecommerce companies launching local language sites to attack key European markets, sports brands are being forced to not only consider how to service these markets but, as importantly, how to price goods across these markets. The enlargement of the European Union to


include Poland, Hungary, the Czech Republic, Cyprus, Malta, Slovakia, Slovenia, Lithuania, Latvia and Estonia calls for brands to assess their approaches to pan European pricing. Brands are findingtheir current policies being distorted and their product profitability challenged and many now need to definenew, profitable pricing strategies for the European market.


Two pressures There are two key pressures facing brands


when it comes to price harmonisation for the European market: Firstly retailers are choosing to centralise


their European purchasing departments to internationally source goods and services for their different country operations. Sports Direct, for example, have already implemented Central European buying with all purchases being processed through their Shirebrook headquarters rather than at local level in whichever country they have stores. These changes are pushing the brands to equalise their prices across countries and diminish their profitability in certain markets


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where, historically, margins would have been higher. Markets that would have been serviced in the


past through distributors or wholesalers are coming under increasing pressure as they are oſten competing directly with brand principle prices through the central purchasing strategy.


Can we learn from other industries? Sports brands will find it more and more


diffic t to sell the same products to retailers at different prices in different countries. Even though a company's subsidiaries in different countries may have different costs and margins, these pan-European retailers have centralised purchasing and now shop for the lowest prices across Europe. Furthermore, retailers now use the common


currency as a platform to centralise distribution across Europe. When faced with such issues, global electronics manufacturer Canon undertook major organisational changes, removing pricing and marketing power from its autonomous national sales organisations and introducing pan-European centralised pricing and marketing at its European headquarters. Many brands in the sports market have already taken, or are considering taking, a similar approach and this seems the most logical response to these changing market conditions.


Retailer consolidation The other factor that will continue to push


price harmonisation will be retailer consolidation across Europe. As already discussed, many multiples have made recent European acquisitions which will probably lead to more and more retailers centralising their buying strategies.


Price strategies To combat this increased pressure, sports


brands need to improve their pricing strategy. For many, a simple European price corridor


could be the initial answer whereby the difference between the lowest and highest price is small enough to avoid major parallel importing but big enough to accommodate country specific prices. For this to be effective, the brand must have complete transparency both internally and externally to its European customers. Another price strategy may involve giving


European products or categories exclusivity to certain retailers allowing the brand to optimise its pricing strategy and protect its wider interests. Brands should be looking to actively ‘rank’


core European businesses and evaluate their existing and current potential alongside that of the incumbent retailers in each local market. Inevitably over time, the European dealers are likely to become more important. Global customers like Amazon will only


serve to ‘muddy the waters’ further in future and, in time, a global pricing strategy will almost certainly need to be considered.


Develop a strategy now! However at present, those brands that are


looking at their European strategy and have the tools in place to implement a successful euro-pricing strategy will undoubtedly benefit in the sporting goods market over the next years. A successful policy will require a consistent, unifiedpricing information-base across countries, and a clear understanding of how multiple products in multiple countries through multiple retailers fits in with their overall development strategies. Whatever the position of the UK within the


European Market, these changes need to be considered and addressed accordingly as they have major implications across all sales and marketing elements of a sporting goods manufacturer.


If you don't have a strategy - develop one now!


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