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"We have always maintained that we have the right to decide the way in which we distribute our products to best serve our customers."
November 20, 2001 9:30 AM   Subscribe

"We have always maintained that we have the right to decide the way in which we distribute our products to best serve our customers." (Especially at a 100% markup.) Levi Strauss celebrates an EU judgement on parallel imports that protects their ability to sell $40 jeans for £50 in the UK. In an era of online storefronts, transatlantic shopping trips, and continental car sales, can these new brand-based tariff barriers really hold up?
posted by holgate (26 comments total)

 
The judgement is an outrage, all right. However, it appears that Tescos are able to import products from within the European Union. Since there are many products cheaper in the EU than in the UK, we can still expect to see lots of cheap imports this Christmas.

Longer term, as internet shopping takes off, more and more people will just order direct from the States. That's all well and good for DVDs and software, but would you really want to do this with clothes? I don't think so. Nike and Levi Strauss don't have to worry on that score.
posted by salmacis at 9:37 AM on November 20, 2001


you also gotta wonder about a black market growing out of this.

(Hey, holgate, know a good warehouse over there I can, uh, store some extra pairs of pants in?)

And in the long run it seems this can only hurt Levi, which has already lost a huge piece of its U.S. market to the Gap and other jeans companies. Though I must say I don't understand how their outlets can stay in business at such prices, so, if in fact they can sustain a profit, I must be missing something.
posted by mattpfeff at 9:44 AM on November 20, 2001


Levis have always been super expensive (and thus hugely popular) in Europe. They're status symbols. Levis doesn't want its gear being sold for super cheap since it'll dilute the brand.
posted by panopticon at 9:56 AM on November 20, 2001


I remember being stunned by the price of Levis "off base" when I was stationed in England in the late '80s. The price (even at a low exchange rate) was double the price of Levis in the BX.

I limited my black market(ish) experience to taking a case of Bud to parties with my Brit friends and them bringing a case of "real" beer. Why they wanted Bud I had no idea, musta been a novelty.
posted by m@ at 10:04 AM on November 20, 2001


Levis have always been super expensive (and thus hugely popular) in Europe. They're status symbols. Levis doesn't want its gear being sold for super cheap since it'll dilute the brand.

The same thing happens in the US. You can't get any lower-end models of cars from "luxury" european carmakers that have spent millions reinforcing themselves as high-end brands.

I'd love to own an Audi S3, but since it would be significantly cheaper than Audi's cheapest current US model (the A4, which starts around $28k), they'll never do it for the same reasons. I remember scandinavian friends saying how everyone in sweden drives a Volvo, and how you can buy cheap versions with vinyl seats, manual transmissions, and plastic dashes. Here in the US, their low end starts around $25k and those cheap features are unheard of.
posted by mathowie at 10:06 AM on November 20, 2001


Ever notice that the 'worlds largest retailer' Walmart does not sell Levis? They would not agree to sell them at the "fixed" price...WTF, I still hear of oil companies and airlines getting in trouble for "price fixing".
posted by Mack Twain at 10:11 AM on November 20, 2001


Since there is no monopoly, and we're really talking about a vanity issue when choosing Levis over other, cheaper brands, there is no real regulatory issue here. The only thing I find offensive is the statement that they're doing this to "best serve our customers."



BTW - wouldn't there be a way around the branding/import control issue by selling Levis as "used"? Buy new Levis in the US, take off the marketing labels, give 'em a wash, and import them as used clothing? Resale rights seem to apply to all consumer goods except software, so why not?
posted by yesster at 10:38 AM on November 20, 2001


The difference between the supermarket prices and the official Levis prices: that's what they call "added value". In other words, the inflated sense of the jeans' worth caused by all that advertising.
posted by tobyslater at 10:55 AM on November 20, 2001


Mack Twain: " They would not agree to sell them at the "fixed" price..."

Why should we be able to tell a company at what price to sell its goods? I'd like to buy your computer for $1, but that wouldn't cover your costs in producing it.

We compain about price fixing when everyone in the market does it. But there are certainly viable alternatives in the blue jean market - we can go down the chain from GAP to Old Navy to the no-name KMart brand. Why shouldn't Levi's be allowed to price descriminate?

If people are willing to pay a higher price, they can sell less but make more $. This strategy = more profit.
posted by mtstover at 11:00 AM on November 20, 2001


well, if people truly are happy paying the extra price for the exclusivity of owning Levis, and that exclusivity is in fact the main reason behind their choice of Levis, then perhaps Levi is right that this is better for their (current) customers.

(It's not like their jeans are notably higher-quality or vital to people's well-being in any way; I'm sure if all you want is a solid pair of jeans you can get one for a reasonable price.)
posted by mattpfeff at 11:02 AM on November 20, 2001


You can't get any lower-end models of cars from "luxury" european carmakers that have spent millions reinforcing themselves as high-end brands.

Some of that's just market sensitivity, because Americans simply don't buy the small cars that dominate the European market. So Ford doesn't sell the Ka or the Puma in the US; VW doesn't sell the Polo or the new Lupo; Audi doesn't sell the extremely funky A2. But yes, with many marques in the US, it's a matter of branding. (And across Europe as well: my uncle in Bavaria drives a 5-series BMW. It's the "local" car maker. Even the 3-series is considered a luxury car in the UK.)

But what's interesting, I think, is the way that the global reach of the internet exposes these branding exercises as just that. And I can't help wondering how long that's going to last: people are now getting pretty creative in getting around both "luxury" cordons, and technological restrictions such as DVD regional encoding. Heh, it's not that expensive to import a car from across the Atlantic: certainly, if you were to buy a new MINI in Germany and ship it across to the east coast, it'd probably be cheaper than the $6,000 markup on the cars arriving in the US this coming spring.

you also gotta wonder about a black market growing out of this.

Well, it's already there, on a person-to-person level ;)
posted by holgate at 11:10 AM on November 20, 2001


But what's interesting, I think, is the way that the global reach of the internet exposes these branding exercises as just that.

Agreed. Score another one for "the internet levels the playing field among your competitors."

In the past, I would have only known about the cars if I travelled to Europe, or saw tiny pics in a US car magazine. These days I can see 20 full size images of the Polo and Lupo at the most recent car show and I can scan the product pages at european car maker websites.

Although building cars is a big deal, the internet causes an expansion of audience and allows for more niche demand to develop. Here in San Francisco, minis, A2s, and Mercedes A-class cars would fly off the lots, but the rest of the US would scoff at the tiny car designs. Perhaps importing is the answer.

Levis are a lot easier to sell and ship, and I bet the budget concious EU shopper will start looking online more often.
posted by mathowie at 11:20 AM on November 20, 2001


sell $40 jeans for £50 in the UK

But they're £50 jeans in the UK!
posted by kindall at 11:23 AM on November 20, 2001


Live Rates as of 2001.11.20 19:59:38 GMT.
50.00 GBP United Kingdom Pounds =
70.9565 USD United States Dollars
1 GBP = 1.41913 USD 1 USD = 0.704657 GBP
posted by m@ at 12:00 PM on November 20, 2001


Perhaps importing is the answer.

Completely: certain economies of scale don't matter as much when you've got a clued-up community of sellers and buyers. If you have a few dozen people on the west coast who'll lay down the money for a shipment of Audi A2s, you can run a business on it, without the overheads of having a car showroom or shiny-suited salesdroids. The net makes it much easier to buy a car from the continent, fly over and drive it back to the UK. It makes it easier to acquire contacts in countries who'll send or bring across "care packages" of hard-to-obtain items. But more importantly, as mathowie says, simply knowing the prices that people pay abroad, even if you can't buy the damn things, bursts the "luxury markup" bubble, so that Levis and Nike and CD manufacturers are exposed as opportunists. And in a time of economic squeeze, it's easier to cry "bullshit" and give consumers the clout to make the sellers think twice.
posted by holgate at 2:24 PM on November 20, 2001


(A piece on the Lupo: "The 3L refers not to engine size but to the fact that it is designed to use just three liters of fuel per 100 kilometers - about 78 miles per gallon. No production car in the
USA gets close. . . VW markets a variety of Lupos, none intended for the USA because of their tiny size and lack of power. " Sigh.)
posted by holgate at 2:30 PM on November 20, 2001


I haven't lived in Europe for a few years, but it appears that rip-off pricing continues. Is it still true that prices are 30-60% greater in, Paris for appliances and things you can compare trans-Atlantic? For example, what's the entry level prix in Paris for an iMac? A Big Mac?
posted by ParisParamus at 2:38 PM on November 20, 2001


For example, what's the entry level prix in Paris for an iMac?

Voilà. C'est trop chèr. (And the same applies in the UK for computer pricing: dollar for pound, so 1.4 times more expensive. Many of my friends buy their laptops in the US, and cope with the funky £-less keyboards.)
posted by holgate at 2:54 PM on November 20, 2001


Many of my friends buy their laptops in the US, and cope with the funky £-less keyboards.

Fear not. When the Euro is totally implemented on 1/1/02 and crashes and burns soon thereafter, they'll be room on the clavier for a £.
posted by ParisParamus at 3:22 PM on November 20, 2001


It's fair enough talking about supply and demand, the free market economy and all that, as long as we can purchase things at the lowest price they're available for. But companies like Levis are subverting those rules of capitalism by forcing stores to buy items at a higher price than they're available for.

To make things a little more political, we should ask ourselves what level of profit is acceptable in the goods we buy. 50%? 100%? 400%? And what about the people who are making these goods (no longer our fathers/mothers/brothers in our own countries but usually young children in Asia)? How much of the cost price should they be paid? 0.05%? 0.01%? Because surely with all that excess profit, while they're making dozens of pairs of jeans a day, we could at least pay them the price of one pair of Levis a week? Let's see what that would do to the global economy.
posted by skylar at 3:26 PM on November 20, 2001


What skylar and (of course) holgate said. While I consider myself a member of the anti-WTO, anti-globalisation crowd, I actually just dislike the particular flavor of globalisation being sold, the "emperor's new clothes" globalisation.

Levi et al seem to think when it comes to pitting the labor force against itself to get the cheapest labor on the planet, there should be no restrictions or regulations against this. However, now that the exact same forces of globalisation allows consumers to get the same goods cheaper, industry folk cry like small children for protectionism, and have the gall to say they do it to "benefit the consumer".
posted by hincandenza at 4:57 PM on November 20, 2001


we should ask ourselves what level of profit is acceptable in the goods we buy

Personally, I'm concerned with what I pay, not how much profit the seller is making. If someone can make 1000% profit and still sell it on the free market, more power to him.
posted by mw at 7:46 PM on November 20, 2001


skylar: I think there's often a quasi-ethical equation that can be made in transactions, which the global supply chain tends to muddy. It's easier not to resent markups when they're part of a tangible service -- that's to say, you'll willingly pay the "luxury tax" on a tailor-made suit, or a great meal at a great restaurant. If you like, it's the continuation of the old guild mentality, even though guilds were the first great price-gougers. What I like about the net is that it contextualises the conditions of production (to dip into the oh-so-passé Marxist vocab) in the sense that you get a sense of where the markups are being added, and the amount that circulates back to the workers. Of course, the impossible ideal is the omniscient consumer, aware of all the costs and all the divvies of each transaction, but at least I feel much less ignorant about knowing that I gets what I pay for -- and that the relevant people gets what I pay -- whenever I make a serious purchase. Ten years ago, no-one would have made a fuss about the price of Levis in the UK, as compared to the US: that's another country (and besides, the wench is dead.) But when you can call up the JCPenny site, and see what Mr and Mrs American are paying for their so-called "luxury" items, you expose the myth of the free market, burst the bubble created by the marketing campaigns, and start to appreciate how much of that markup goes to coked-up creatives called Nathan in EC1. And that can't be bad.
posted by holgate at 8:39 PM on November 20, 2001


you expose the myth of the free market

I side more with mw's comment immediately above.

I mean, isn't the market for Levi's in the UK free? The retailer prices its product at a level it thinks the market will bear (and seeks to maximize its profits), and the consumers are free to purchase those items they think are worth their price.

It's not like anyone is forced in any way (by societal pressure, by necessity, or by law) to buy Levi's. Even if jeans were some sort of necessity, there are still alternatives, at more affordable prices. What sustains Levi's pricing policy is demand from the market.

There is the question of whether Levi is artificially propping up the price by restricting the supply in the UK. But I'm not sure if this is an issue of whether or not the market is "free", or whether you agree with their business practices. High-end automobile manufacturers do this -- producing limited quantities of certain models -- and it is not especially questioned.

Is the global marketplace "free"? No. But it's not a single market; it's more like a composite of a mulititude of markets, with exchanges between them being very inefficient. The discrepancies we see are symptoms of those inefficiencies, and of businesses' (natural) desire to take advantage of them as best they can, while they can -- and there's nothing deceptive about it, in principle.

(I in no way mean to argue against the view presented here that the Internet and other means of unifying different markets on the globe will eventually put an end to this, of course -- quite the opposite, I strongly agree. And the EU's decision is regrettable for delaying that; but Levi isn't at fault, I don't think.)
posted by mattpfeff at 9:24 PM on November 20, 2001


I guess the reason it's not questioned with high-end automobile manufacturers is that few people can afford a high-end car, whereas a pair of Levis is a far more likely and popular aspirational consumer good. I bet a good percentage of the UK population has owned at least one pair of Levis.

I'm with hincandenza: IF the retailer could price the clothes at the levels they see fit, IF the supermarkets could source from the global market the cheapest jeans, then I wouldn't have much of a complaint. The stores would be using globalisation for the benefit of the consumer. Instead we have a situation whereby the manufacturers are employing the cheapest labour and stitching up the market with legal tactics to protect the enormous profit margin. Levis took the action because they don't want to give customers the idea that their jeans are 'worth' less than £50. The price of the jeans is being set not by the free market but by the courts.
posted by skylar at 1:29 AM on November 21, 2001


isn't wal-mart not selling levi's because they're buying up brands for repurposing within their own stores? (they've done this with discarded 'trusted' brands from other companies for things like toilet paper.) i'm sure they're looking for some clothing label to slap on their in-house stuff, or maybe they have done so already.
posted by maura at 5:11 AM on November 21, 2001


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