Can consumers possibly change the behaviour of multinationals charging their Kiwi customers more than those in other geographies?
Slingshot’s newly launched website FrontUp.co.nz is about to test that. The company hopes consumers will take to task companies charging more for the same products in New Zealand or local companies selling products at prices above those seen overseas.
Why are Kiwis paying $1.70 per litre (Fonterra’s Dairy Dale) while a litre of milk costs only the equivalent of $1.20 in the US, and 86 cents in Britain, Slingshot wants consumers to ask.
Slingshot’s investigations also show that Kiwis pay $161 more than US consumers for iPhone 5S, and $100 more for their Sony Playstation 4 than the US.
The New Zealand Productivity Commission in a bid to answer the question of why New Zealand prices are higher compared to international prices, had commissioned Professor Norman Gemmell, the Victoria University of Wellington Chair in Public Finance, to further investigate.
Using data from the World Bank’s International Comparison Programme, Prof Gemmell found that Kiwis are indeed paying higher prices across some goods but not others.
Prof Gemmell’s research showed that Kiwis are indeed paying higher prices for goods and services in the non-tradeable sector (e.g. rail freight transport) as well as tradeable goods such electronics.
“Most prominently, goods and services associated with investment in general, and property, construction and utilities (water, gas, electricity) in particular, appear to be
relatively expensive in NZ.
“Secondly, passenger transport (excluding private motor vehicles), and alcohol & tobacco, prices are high relative to other countries. The former involve transport industries – such as air and rail transport – that are subject to domestic and international regulation, or have some quasi-monopoly power within the NZ economy. In some cases, lack of economies of scale may also be relevant due to the limited size of the domestic NZ market,” according to an abstract of his paper.
The high price of alcohol and tobacco are partly related to the relatively high excise levels in NZ, though this is balanced to some extent by relatively low VAT/GST rates, his paper says.
But the prices of beef, veal, lamb, fish, and dairy products such as butter are cheap by international standards due to our comparative advantage in such goods. However other tradable products such as pork, poultry and fresh milk are expensive by international standards, according to his research.
Slingshot hopes consumers can push for more answers from big companies using the Front Up website.
“It is easy for big companies to ignore these issues. What we want is for them to give Kiwis a fair go,” says Slingshot general manager, Taryn Hamilton.
He adds: “There might be a good reason for the high price, but I’m picking most of the time there won’t be. We might be a small country tucked down in the far corner of the world but that doesn’t mean we should be taken advantage of and asked to pay excessive prices for things like Nikes or even basics such as bread and milk.”
The quest for answers began in the office, around a conversation on why most people are buying their running shoes online – it is always cheaper compared to going to a local shop, Hamilton says.
Taking on the role of a price fighter, Slingshot decided to make it a crusade, mirroring the rebellious role it took when it offered Global Mode to Slingshot customers, offering Kiwis a chance to circumvent blocks placed on them when they try to access US video streaming sits such as Netflix.
For Slingshot, this crusade isn’t likely to turn in big sales numbers but Hamilton says the project is consistent with the company’s ethos as a price fighter in the local marketplace.
When Samsung was asked to Front Up with its reasoning for its Galaxy S5 costing $150 more than in the US, it responded by saying while the company’s New Zealand wholesale prices are comparable with those in other markets, local retailers need to factor in other costs, according to Slingshot.
Samsung cited import duties, goods and services taxes, as well as installation and service policies, marketing promotions, competitiveness, retail channels and logistics as possible factors for the price difference.
Consumers can have their say about whether the company’s pricing argument stands up by clicking “Yeah” or “Nah”, and then comment via Facebook and Twitter about the cost and quality of the product.
A measure of the website’s success, Hamilton says, would be the number of consumers getting behind the website, pushing for answers and creating pressure on companies to explain themselves to the public.