Net tightens gray-market retail vise (or how multinationals are scrambling to justify international pricing differentials )

Another example of how the Internet is affecting global trade. Companies used to be able to exploit inefficiencies in the international distribution system by adapting local prices to local market conditions, such as supply-demand, presence of local competitors etc. No more. Thanks to search engines and comparative shopping, consumers in price-premium countries will often bypass local distributors in favor of lower prices. This has multinationals scrambling:

"The Internet is where the gray-market problem really exploded," said Marla Briscoe, a member of HP's brand protection team and vice president of AGMA. "With the Internet, we virtually created a borderless distribution system that makes it a lot easier for unauthorized dealers to advertise products, to buy and resell, and makes it more difficult for manufacturers to track down who exactly is selling these products. This is a worldwide issue."

A "borderless distribution system": that's precisely what the Internet is about.  Granted, gray market can indeed be a serious threat to brands and consumers alike, as many unscrupulous exporters or importers can profit at the expenses of unaware consumers by shipping products with no warranty, no local support, or even no compliance to local standards. However, the trend toward price equality is definitely a positive one for consumers around the globe, and a great opportunity for companies able to deal with the new rules of the market. Eventually, price differentials across countries should only reflect the different costs of supplying and supporting products in that country.

6:52:47 PM    

The World According to eBay
(subscription to Business 2.0 required)

Really interesting article from the January issue of Business 2.0. Several valuable lessons on international expansion for US Internet companies, including the following one:

"And eBay doesn't always triumph. In Japan, eBay was aced out by a joint venture between Yahoo and Softbank. Yahoo had only a five-month head start, but it took control of the field and never let go. Yahoo now sees more than $5 billion in transactions a year in Japan. eBay gave up on the country entirely in 2002. Whitman says the main lesson from that experience was to "go early and go fast." ".

Another interesting tidbit: "As it happens, only 12 percent of eBay's total gross merchandise sales are cross-border transactions. Each country is a self-contained battlefield that must be won by slugging it out with rivals. ". This seemingly minor detail can mean that the company has barely scratched the surface on their biggest opportunity yet: facilitating international trading for small/medium enterprises around the globe.

 

5:14:53 PM