Abercrombie and Fitch…the Real Scandal!

Please share!

abercrombie-and-fitch

Abercrombie and Fitch…the Real Scandal!

In 2013, Abercrombie and Fitch became the target of a negative media blitz, plummeting US sales and diminishing perception of this once impressive brand.

CEO, Mike Jeffries, of the clothing chain has been on the receiving end of the media and customer backlash for refusing to offer larger sizes of clothing for their customers and for making incredibly controversial remarks.

Now, the company has been dealing with US sales falling 17% in the first quarter of 2013.  Parents, teenagers, social media bloggers and TV stars have been in an uproar over Abercrombie and Fitches bullying and exclusionary tactics.

“We are exclusionary.” Mike Jefferies stated in an interview.  “Not everyone can wear our clothes…We are for the popular, beautiful, customer.”

Never have I seen such a suicidal display for this significant of a company.  Ironically, the old saying of “any publicity is better than no publicity” doesn’t pan out here.

Since the media fallout, US parents and teenagers have chosen to boycott the infamous store.  Petitions have surfaced around the internet asking for clothing size changes and also for the firing of Mike Jeffries.

Recently, Jeffries has made modest apologies but they haven’t really sunk into the US consumer’s psyche. He said that he “Seriously regrets” that his “choice of words was interpreted in a manner that has caused offense.”  I am not sure if people really believe him.

However, in Poland, it is still one of the most valued clothing lines among teenagers.  The average shirt  Abercrombie and Fitch T-shirt costs almost $100 USD while here in the US, the same shirt goes for $19.50.

In Asia, they are planning on expending their market with additional Hollister stores of the  Abercrombie and Fitch Company.  According to Jeffries, same-store sales of the Hollister stores are positive and the 2 Hong Kong stores are the best-selling stores in the company.

So, while in the US we are struggling with the thought of being betrayed and emotionally slapped in the face by one of our most popular clothing brands, other countries haven’t even noticed what was happening here.  Or, they chose not to make it their battle.

This blip will be forgotten and Hollister and Abercrombie and Fitch will continue to hold high value in various markets for different reasons.  Teenagers are fickle and will return to the store and buy really tight and ragged looking clothes for overly inflated prices just so they will be viewed as the “popular one.”

I will be interested to see how CEO, Jeffries will be perceived in 2 years when all of this has been forgotten.  Did this scandal really just create an opportunity for the company to jump to another higher level of value for the teenager? Let’s just wait and see….

http://www.huffingtonpost.com/2013/05/24/abercrombie-sales-ceo-controversy_n_3332601.html

http://www.bizjournals.com/columbus/news/2013/02/22/abercrombie-fitch-expanding-to.html

Please share!

The Cost of Medication is Killing Me!!!

Please share!

PILLS-_1

Presently, one of the challenges in society, specifically, California, is providing quality medical care for all residents. Everyone from the President of the United States to the clerk at the grocery store have strong opinions as to how the problem should be solved.
Today, we are in the 8th day of a government shut-down; part of the reason for this shut down has to do with funding Obamacare and ensuring that all companies, congress and individuals are offered the same exemption status. Whether you are on the Democrat or Republican side of the debate, everyone care agree that we, as a nation, have an issue of providing affordable health care to the general population of the US.
Everyone understands that we must make some sort of change to address this serious issue. Why is it that medical care and medicine are so expensive? Why, when I have health insurance, do I have to pay $200 at Walgreens for a cream for my son’s diaper rash that I can get in Mexico for less than $3.00? Why when I am working in Canada, does a doctor’s visit and medication cost $58.00 but the same would cost $100 here in the US? Is the medical care that much better? Are the drugs that much safer?
So, my question is why are prescription drugs, even those manufactured by American companies, cost much less in Canada and Mexico than in the United States?
The answer is Price Controls. Price Control is “Government dictated ceiling on the prices of essential consumer goods, to keep cost of living within a manageable range.” – www.businessdictionary.com

According to www.slate.com, the Canadian government has a review board that orders a price reduction of a drug if the price of that drug exceeds the average price in six European countries plus the United States. And Canada “piggy-backs” on other countries price controls. Many of the European countries already employ price controls in different ways to ensure that the prices of prescription drugs are kept down.
Developing a new drug is a very costly venture and requires tremendous financial investment toward research and development. These pharmaceutical companies recoup their costs for research and development by charging higher prices for the medications in the US than they would in a place like Mexico. This brings in the concept of price discrimination.
Price discrimination is the practice of one retailer, wholesaler, or manufacturer charging different prices for the same items to different customers. – www.wisegeek.com
Drug companies are willing to sell their products to Canada and Mexico for significantly less than they do to the US simply because they can cover their basic production costs for those markets at the same time knowing they will make up for the lack of profit by charging more money in the US to recoup their expenses. So they are selling the same product to Canada, Mexico and the US but the prices for the drugs are different prices in every country.
Recently, Congress has been trying to implement new bills that would stop price discrimination but there is a case of “Why?” is it a good thing too.
By selling drugs at a reduced cost to economically suffering countries, ultimately it will lower the costs of the drugs in the US because the product is moving in the market and the companies are slowly recouping some of their original expense.
So to sum it up, it isn’t that the drugs are safer or of inferior quality, it’s just that the pharmaceutical companies sell to those countries at a reduced price because their economy doesn’t support the higher prices of the drugs. If people do not buy the drug, the product doesn’t move off the shelves and the pharmaceutical companies end up without any possible return on their original investment.
By Robin Follman-Otta

http://www.slate.com/articles/news_and_politics/explainer/2000/05/why_do_drugs_cost_less_in_canada.html

http://www.businessdictionary.com/definition/price-control.html#ixzz2h9YeUbP9

http://www.wisegeek.org/what-is-price-discrimination.htm

Please share!

The Price of Status…Ford Verses Mercedes

Please share!

2007-Mercedes-Benz-E-Class-Wagon
The Mercedes E-Class Wagon

When my first child was born in 2010, I was so excited about every little detail of being a new Mom. My biggest decision besides what type of diapers to use was: was I ready to take on the stereotypical mom minivan image or should I resist this and go for a more hip SUV?
So, my husband and I went to Automax and spent several hours driving every SUV, cross-over and wagon they had on the lot. After several hours, I discovered the Mercedes R350; the clouds parted, the angels started to sing and a direct spotlight brightly focused on this glorious chariot. It took less than 5 minutes for me to make the decision to buy it and two hours to negotiate a better price.
When I drove off that lot, I suddenly thought I was the “hottest” mom on the roadway; my status from exhausted, barely-holding-it-together, new Mommy was immediately replaced with successful, chic and powerful Mama with an attitude. I loved my car with a deep passion and would have slept in it happily if my husband would have let me. Valet attendants treated me so much better in my new car. Other Moms “oohed” and “aahhhed” over my fabulous new car.
How could I know that one year later, my car would be bought back from Mercedes because it was in the shop 14 times for different failures? Rather than issue a recall, Mercedes paid me the complete amount that I paid for the car and we parted company amicably. I cried a little when I dropped my R350 off at Fletcher Jones in Newport Beach….what a sad day.
Looking back (now, I have a mini-van with 2 car seats), I started to think about the car and the luxurious lifestyle it represented and how much value I put in that image. Yes, I am that pathetically shallow…
American’s view the BMW and Mercedes as the ultimate driving machines. The image they create in the USA is one of extreme success, wealth and power. And, we pay more for that image than the actual useful ness of the car itself. In Germany, the BMW and Mercedes are significantly less expensive, they offer many varying levels of these cars and the taxi drivers use the Mercedes as the average “workhorse” car. Not quite the glamorous image that I was willing to spend so much money for here in the USA.
That being said, a hip and exciting import to them is a Ford! Well, I have had Explorers and Expeditions and trust me; they were in the repair shop a lot!
I decided to look up the cost of a 2012 E Class Wagon in Berlin, Germany verses the cost here in the US. I was blown away by the price difference! For a fully-loaded 2012 E Class Wagon in Berlin, I can spend about USD $40,517.00. In the US, I am looking at $57,150-$91,500. Holy cow! The markup for the import and image is shocking.
I expected a small markup due to various import charges, taxes, adjustments to the function and design to meet US auto standards, but I found out that Mercedes sold in the US are built in Alabama! So, I really am just paying for the image!
I think I need to re-evaluate what I deem a responsible financial purchase when it comes to cars and the “image” I want to display. Maybe my next car will be a Ford Focus…then I will really be chic (if I were in Germany driving my import!)
By Robin Follman-Otta

Please share!

From Panhandling to Paris Fashion Week…Levi’s verses Kanye West!!!

Please share!

Levis

When you mention the name, Levi’s Jeans, it brings to mind several images: grizzly old men with beards, panning for gold during the California Gold rush era; 1950’s “greasers” with the cuff’s rolled up; Courtney Cox in the “80’s” dancing to Bruce Springsteen’s “Dancing in the Dark” video, etc.
Years after Levi’s were first introduced to the clothing market, these jeans have a certain allure that many people still want to be associated with, 160 years after their first appearance.
In 1991, I was working in Tokyo, Japan. The Japanese culture was obsessed with anything that was “American.” “Knock-off” Levi ‘s 501 jeans were on every street corner and were prized possessions. My British boyfriend at the time repeatedly begged me to have Levis shipped to Japan in a “care package” for him. It was amazing how expensive the legitimate jean versions were and how hard they were to obtain.
When I came back to the United States after being gone a year, I was shocked to find out how the Levi’s 501 Jeans were still “cruising” along in terms of desirability in the US fashion market. I had been under the impression that Levis Jeans were suddenly the hot item based on how important they were to international markets.
Last night, I was reading up on Paris’s Fashion week and was reminded about the Levi’s fashion movement of my junior high years. In Paris, Pop-culture star, Kim Kardashian attended with boyfriend, Kanye West. Recently, Kanye West debuted a new fashion line, A.P.C. Kanye, consisting of 2 shirts and 2 pairs of jeans; all items debuted online and sold out within hours. In the media’s perception, the pricing structure has been considered over inflated: a white t-shirt can go for $120.00 and jeans go for $265.00. While reading about Kanye’s clothing line, I stumbled on an article about the pricing of Levi’s jeans in India.
In 2007, Levi’s was in the process of changing their marketing strategies to incorporate premium, Super premium and Connoisseur purchasing audiences. They were also trying to elevate their presence with their Value Brand – Signature. At this time, they were selling about 10 million units of their Branded Jean and were hoping to capture some of that market for the Value Brand- Signature line. They priced these jeans at a unit price of USD $15-25; this was dependent on if they were being sold in a small town or a big town.
Levi’s competitive market was with local Indian brands who sold their jeans for USD $15-30. These jeans were of good quality but did not have the brand recognition that Levi’s possessed. The potentially biggest growth market was for the Premium and Super premium denim in India; estimates for the market were about 7 million to 3 million. However, Levi’s would have to offer many different styles of fabric washes in order to compete with the current Indian jean manufacturing market.
It seems that the desirability to own Levi’s jean is still extremely valuable and Levi’s continues to modify its image and value to meet market demands. After 160 years, it is easy to see why this company is still holding its own while so many others have suffered from the fickle public’s perception of “what is fashionable?”
Levi’s has found a way to become a part of each of its international market segments and retain value over long periods of time.
I wonder if the pricing structure of Kanye West’s new clothing line’ took into account the economics of markets he was selling to. While his clothing line is considered a “premiere” or elite product line, will it have longevity beyond his present popularity or a few small markets? Whereas, Levi’s, has lasted far beyond the original owner’s design and production and created value in the eyes of the consumers internationally for many generations over.
By Robin Follman-Otta

http://popstyle.ew.com/2013/07/16/kanye-wests-pricey-clothing-line-sells-out-crashes-site/

http://www.denimsandjeans.com/brands/denim-brands-indian/levis-india-changes-marketing-and-pricing-strategies/

APC-KANYE

Please share!

The Big Mac Index and the PPP

Please share!

Big Mac“The Big Mac Index and PPP”

While I was writing my last blog on the varying price based on geographical location of Starbucks’ lattes, I learned about PPP (Purchasing-Power parity).

PPP is “the theory that, in the long run, identical products and services in different countries should cost the same in different countries. This is based on the belief that exchange rates will adjust to eliminate the arbitrage opportunity of buying a product or service in one country and selling it in another.” (www.investorwords.com)

One of the best examples of this theory is what is referred to as the Big Mac Index. “The Big Mac PPP exchange rate between two countries is obtained by dividing the cost of a Big Mac in one country (in its currency) by the cost of a Big Mac in another country (in its currency). This value is then compared with the actual exchange rate; if it is lower, then the first currency is under-valued (according to PPP theory) compared with the second, and conversely, if it is higher, then the first currency is over-valued.”(www.investordictionary.com)

Why is PPP more than just a “piece of meat?

So the idea of the PPP and the Big Mac Index is that if Big Mac had the identical utility to every person on earth, than the prices of the exchange should converge to create identical PPPs for all Big Macs in all countries.

This theory would be perfect if some variances didn’t come up.  For example, taste and preferences can affect the outcome of the formulaic test.  In India, local palates determine the success of the sale of Big Macs, the average Indian person doesn’t consume red meat for religious reasons; thus the demand is lower than it would be otherwise.  And so, the price of the Big Mac would be lower in India than if the religious preference weren’t there.

So again, going back to my last blog, using this thought, all Starbucks lattes are identical therefore should  give to consumers the same utility everywhere on earth.  Keep mind that local markets can vary the outcome in this theory.

SO the poor weather in Seattle encourages people to purchase more coffee increasing the demand for Starbucks lattes and therefore their price.

By Robin Follman-Otta

 

Read more: http://www.investorwords.com/3960/purchasing_power_parity.html#ixzz2fpwtwVET

http://www.investordictionary.com/definition/big-mac-index#sthash.IRFX8VWc.dpuf

Please share!