-Caveat Lector- >From Int'l Herald Tribune Paris, Monday, December 28, 1998 As Europe Aligns Its Currencies, Disunity Persists in Pricing COUNTDOWN TO THE EURO ------------------------------------------------------------------------ By Edmund L. Andrews New York Times Service ------------------------------------------------------------------------ KRONBERG, Germany - Klaus Gossens built his career by thinking more like a European than a German. As head of European trade management at Braun AG, he has nurtured one of the best-known European brand names for such household gadgets as coffeemakers, spice-grinders and electric shavers. So, as much of Europe takes a huge step toward unity by introducing a single currency, the euro, why is Mr. Gossens worried? His problem is pricing. A Braun Flex Integral shaver sells for about $90 in Spain, $103 in the Netherlands, $118 in Germany and $124 in France. There are similar variations for countless other products, from Chanel perfume to Volkswagen sedans to Levi's jeans to Bayer aspirin. And French or German consumers are not the only ones who pay more. Europe's biggest retailers themselves often pay their suppliers different prices in different countries. ''Until now, buyers tolerated those differences,'' Mr. Gossens said at Braun's headquarters in Kronberg, north of Frankfurt. ''But they aren't tolerating them anymore. We are entering a situation where everything is very transparent. If I am a buyer and I don't get satisfactory answers about prices, I'll go off to another company.'' That may sound like Economics 101, but until recently Europeans have been fighting it. Though the European Union abolished most trade barriers among member countries several years ago, European retail markets remain stubbornly balkanized. Now, as 11 countries prepare to start using the euro as their common currency Friday, the crazy-quilt system has become a battleground. The euro should theoretically make it much easier to compare prices and to pounce on discrepancies. It is also likely to give a new lift to cross-border transactions within Europe, because it will eliminate exchange-rate fluctuations and the cost of hedging against them. Though the new bills and coins will not begin circulating until 2002, the euro is already quite real. The participating countries - Germany, France, Italy, Belgium, the Netherlands, Luxembourg, Austria, Spain, Portugal, Ireland and Finland - will permanently lock their exchange rates to the euro on New Year's Eve and surrender control over monetary policy to the new European Central Bank. Some stores already are posting prices in euros and plan to start dealing in euros on credit-card purchases as early as next week. Banks are required to let their customers keep their accounts in euros or the local currency, and all interbank transfers will be cleared in euros. Companies such as DaimlerChrysler AG and Siemens AG are converting their books and prodding suppliers to deal in euros as quickly as possible. Big retailers such as Carrefour SA in France and Metro AG in Germany are beefing up their computer systems to catch suppliers' pricing discrepancies. Car companies are grudgingly bringing prices into closer alignment from country to country. Computer manufacturers, generating more sales through the borderless Internet, are doing the same. Still, those who expect Adam Smith's invisible hand to swiftly eliminate price differences are likely to be disappointed. European prices are rooted in big social and institutional differences that companies have learned to respect. Consumer buying power, for example, is much weaker in Spain and Portugal, where personal incomes are about 25 percent lower than the European average. Aspirin is more expensive in Germany in part because laws aimed at protecting small pharmacies prohibit supermarkets from selling it. Groceries are expensive in Paris; the city has prohibited high-volume hypermarkets within its boundaries. Sales taxes and luxury taxes also vary. ''I think the euro will bring lower prices over all but that the price differences will be more or less the ones we have right now,'' said Stephane Douchy, a market analyst at Test-Achats, a consumer research association based in Brussels. With the euro, ''there will be greater price transparency,'' added Harald Muenzberg, a retail industry expert at Gemini Consulting in Bad Homburg, Germany. Still, he said, it will remain ''relatively difficult'' to figure out prices. ''There are many different prices for many different products,'' he added. ''There are discounts, advertising allowances, rebates. All of that leads to different pricing.'' For people such as Mr. Gossens of Braun, which is owned by Gillette Corp., it adds up to big struggles ahead. ''Our customers are coming to us and saying, 'We want to pay the lowest prices possible,''' he said. ''But what is that?'' The customers Mr. Gossens has in mind are people such as Vincent de Meaux, who coordinates euro planning at Carrefour. Based in Paris, the company owns nearly 200 hypermarkets in Europe and 100 in Asia and Latin America. Mr. de Meaux says he is looking forward to the euro; he expects retailers to grab more influence over pricing from the hands of suppliers. ''The market dynamics have existed for several years already,'' he said recently in Paris. ''But this will make more pressure on suppliers; that is obvious. It's not going to happen overnight on Jan. 1. It will take a few years. But it will be a big change.'' Carrefour sells just about everything, from fresh fish to personal computers, relying on huge volume to eke out profits from small margins. With total sales this year of about $32 billion, it competes ferociously on price and puts constant pressure on suppliers. Yet European incongruities are sufficiently confounding - and so deeply rooted - that even giant retailers can hardly expect to call all the shots. For one thing, European consumers have widely varying tastes, which means that identical goods are not sold everywhere and that comparison pricing across borders can be tricky. Italians like big ''family-sized'' bottles of shampoo, for instance, while French families prefer smaller bottles tailored to individuals. Nestle has scores of variations on the formula for Nescafe, to take account of regional coffee-drinking preferences from Italy to Scandinavia. National regulations add to the complexity. French retailing, for example, is unique in Europe, because stores are prohibited from charging more for products than they show on their own invoices. Instead, retailers earn their profits by negotiating with suppliers to obtain rebates and other payments for promotional services. The money works out about the same, but the practice makes international comparisons far more complicated. Different countries also have very different retailing systems, some more efficient than others. High-volume hypermarkets have a strong presence in France and Spain, but Germany has a high proportion of smaller specialty stores. On top of all this are logistical rigidities that are the modern tracings of hundreds or thousands of years of national divisions on the Continent. ''Carrefour can't just say, 'Well, I'll buy all my Coke from Spain because it's cheaper,''' Mr. de Meaux said. ''If you need to supply 130 stores in France, you can't change all your suppliers every time someone offers a lower price.'' Price comparisons can even be difficult on the Internet. Consider the experience of Dell Computer Corp., which sells about $2 million of personal-computer equipment a day in Western Europe over the World Wide Web. When Dell began marketing over the Web in 1996, it equalized prices across boundaries. Nonetheless, consumers were nudged in different directions by means of separate home pages for almost every country. As a result, comparing prices is anything but simple. Customers who log on to the German page find that the basic home computer is a modest machine that costs about 2,895 Deutsche marks, or $1,722. The prices and complexity go up from there. Those who log on to the Spanish page are led to an entirely different series of computers. This list starts with a model that sells at 347,000 pesetas, or $2,424, and from there the prices and complexity go down - ultimately below the cheapest German packages. ~~~~~~~~~~~~ A<>E<>R The only real voyage of discovery consists not in seeking new landscapes but in having new eyes. -Marcel Proust DECLARATION & DISCLAIMER ========== CTRL is a discussion and informational exchange list. Proselyzting propagandic screeds are not allowed. Substance—not soapboxing! These are sordid matters and 'conspiracy theory', with its many half-truths, misdirections and outright frauds is used politically by different groups with major and minor effects spread throughout the spectrum of time and thought. That being said, CTRL gives no endorsement to the validity of posts, and always suggests to readers; be wary of what you read. CTRL gives no credeence to Holocaust denial and nazi's need not apply. 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