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Importers Drop Pricing as the Euro Plummets

Published July 6, 2010

BY MATT WIEBE

VICENZA, Italy—As the euro tumbles against the U.S. dollar, importers of European brands are closely watching exchange rates. While some companies minimize exchange rate fluctuations in their pricing, others are adjusting price sheets accordingly.

“The euro will definitely impact our new pricing that came out on June 1. North American pricing came down 12 percent due to the strengthening of the U.S. dollar,” said Tom Kattus, North America general manager for Campagnolo, which manufactures in Italy and Romania.

Greece’s financial crisis and economic difficulties in other euro zone countries like Ireland, Italy, Portugal and Spain, drove the euro to four-year lows in early June. From a peak value of $1.60 in July 2008, it fell below $1.20 last month. And at a time of year when many companies are finalizing pricing, the euro’s fall in value will have an immediate effect.

Mavic expects its revised pricing to drop an average of 10 percent, said Mark Leydecker, Mavic’s managing director. Mavic makes wheels and components in France and Romania, and although Romania is outside the euro zone, Mavic prices Romanian manufactured goods in euros.
But Leydecker points out that as part of a global company with vendors around the world, Mavic factors many variables into pricing.

“Remember we are owned by Amer Sports, a Finnish company outside the euro zone,” Leydecker said.

“They own many companies doing business in most world markets. Managing their business they set the exchange rates all of us use with our vendors and with each other over our budget year,” he added.

Additionally the retail market sets its own price irrespective of exchange rate fluctuations. Leydecker points to the sub-$1,000 price of the Mavic Ksyrium SL that has remained stable though the euro has varied more than 20 percent in value.

Sigma USA’s managing director Brian Orloff agreed that in the competitive computer market products either hit a price point or they do not sell. Sometimes Sigma’s margin is razor thin and other times it gets a few more points, but that retail price cannot move no matter what the exchange rate is.

Although Sigma’s computers are made in Asia, Sigma USA imports many directly from its German headquarters, which affects pricing. “We ship computers in bulk from China but with our 100 percent quality check, each computer is hand-checked, in Germany or here, before it gets its packaging. So the value of the euro has a big impact on my business,” Orloff said.

SKS still makes most of its products in Germany, but like other European companies it works to keep retail pricing stable rather than allow pricing to reflect variable short-term exchange rate.

“If you think in inventory turns, we only turn a few times a year. There is really no way a one-month or two-month change in the exchange rate can impact pricing,” said Crystal Trout, SKS’ sales manager.

“If the euro stays low until the fall shows I think retailers can expect to see pricing adjusted to reflect that. But what it does over a few months has little impact,” she added.

Lower priced European goods will allow U.S. retailers to reduce their upfront spending and offer better prices to consumers.

Tony Leongini, manager of Bicycle Pro Shop in Washington, D.C., sells a ton of 11-speed Campy and high-end European frames from the likes of Time, Look and DeRosa. Leongini said the leveling of the euro-to-dollar exchange rate has already improved his pricing on European products, which he has passed onto customers. “It’s made a big difference,” he said.

On the other hand, retailers will be forced to compete more heavily with European mail-order companies. Internet giants in the UK can now deliver parts purchased when the euro was strong for less than U.S. wholesale pricing.

“A lot of European Internet retailers will pick up lots of business. Consumers can buy parts for less money than a distributor pays. And we hear about it,” said Sigma’s Orloff.

“It’s something all of us hate but it’s almost impossible to control. While I control Internet pricing here, Sigma Germany is not focusing on what Americans are able to buy from European Web sites,” he added.

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