I am all for the free market determining the price of goods. Something is worth what someone else is prepared to pay. I viewed the furore over the Adidas pricing of All Blacks RWC Jerseys as just a storm in a teacup, but decided to look objectively at the issue and not join the wave of hysterical blabber on the topic.
A bit of background.
The All Blacks 2011 RWC Jerseys were selling in New Zealand shops for $220 each. Quite a steep price for something that a lot of New Zealanders would consider a "must have" for their wardrobes. This wasn't such an issue until someone went onto the internet and found that the USA based World Rugby Shop was pricing the Jerseys at US$ $89.95 or around NZ $115. Wait a minute, how can they be selling the NZ national teams rugby jersey for more than $100 less than we can buy it here in NZ. My first thought was "You gouging retailers" I will buy online when I come to buy my jersey. Only I can not now buy online, Adidas have apparently told the World Rugby Shop that they can not ship to New Zealand, so my dream of a cheap jersey is out the window.
When the news organizations got hold of the story and it received some publicity, one of the local resellers, SportsWorld, dropped its price to $125. They said this was to match the US price and they would lose money on every Jersey sold. This made me think that it was the NZ retailers gouging NZ consumers just as they are for almost everything else to do with the Rugby World Cup. Rebel Sports were then all over the news saying they were trying to get Adidas to lower the wholesale price here in New Zealand so they could compete. Rebel Sports said that Adidas wouldn't lower the wholesale price, but they would lower the price of the jersey as well, but only to $170, and even at that price, they would lose money. Two other retailers, Champions of the World and Stirling Sports have also now matched this price.
Who is the villain here.
Well Adidas is being painted as the villain and the poor sporting goods retailers are being portrayed as the hero's for lowering the price even though they will lose money.
Lets look at this a bit closer.
The sports retailers are saying Adidas needs to lower the wholesale price so they can compete, but we have never been told what the wholesale price is. Is this because the wholesale price is high, which is what is being inferred, or because they do not want to lose huge margin on these jerseys as they, like almost every other NZ business, have seen the RWC as the cash cow on which to base the 2011 earnings. Would a retailer really sell items at a loss, if they weren't using them as a loss leader to get people into the store to buy something else. I don't think so, and for sure, they wouldn't be using the RWC jerseys as loss leaders.
Adidas is being caned on two fronts. One for not lowering the wholesale price of the jerseys so the poor NZ retailers can compete, and the second for banning the USA based company from selling Jerseys to NZ customers significantly cheaper than they can buy them at home. As I said earlier, no one is saying what the wholesale price of these jerseys actually is, so we don't know if Adidas is being unreasonable or not. As for them stopping sales over the internet, well that could also be interpreted as Adidas protecting the business of their New Zealand retailers, so not necessarily a bad thing.
I come back to my earlier question, who is the villain here? My answer is, I don't know yet. I am missing the one key piece of information I need before I can make a decision. That piece of information being the wholesale price of the jerseys here in New Zealand. I don't understand why none of the NZ press that I have read or watched, has not asked this very same question. Too stupid, too lazy, or don't want to know because it ruins a good story.
What do I suspect, as in all things, I believe the truth lies somewhere in the middle. Adidas probably looked to make as much money as they could on All Blacks Jerseys in the home market as did the retailers. Can't blame them for that, thats business, thats the free market. As for Adidas stopping the sale of the All Blacks jerseys from the USA online shop, that I completely disagree with. I believe they probably did it to appease their NZ retailers so everyone got to keep making their margins, but this was certainly a PR disaster for them.