Why Aren't American Goods Now Cheaper

[Jingthing]

I have watched the Thai baht move from 42 to the dollar to 35 to the dollar. Logic would tell us that American goods would now be cheaper for Thai merchants to import, and of course, this being a free market, they would pass on these savings to the consumers in Thailand. I don't see this happening. Other than pure greed (my theory) is there any other reason why the prices for American imports aren't going down?

[Farma]

This is only a guess; maybe the warehouses haven’t cleared the goods imported at the high exchange rate. Once these old stocks have gone you may see prices reduce when new stock arrives in the market.

[solo siam]

Don't really see why they should go down, I don't see companies rising the RRP of products when the baht fluctuates the other way against the dollar.

The Baht price of an item in Thailand is its price regardless of exchange rates, I don't see the price of beans in Tescos fluctuating depending on the currency exchange rate. If you're talking about foodstuffs or petrol then I may see your point.

Take a look at somewhere like the UK, Electronics prices haven't come down since the pound got so strong against the dollar.

[Jingthing]

In a free market they should come down. The main advantage of a cheaper currency is that it is more affordable for people in other countries to buy your exports. I am mainly talking about imported food items that I have noticed aren't coming down. For example, a pint of Ben and Jerry's ice cream is 299 baht last time I looked. How long does ice cream stock last, come on ... I don't buy the stuff (too fat already) but the lack of price elasticity smells fishy to me.

Edited February 7, 2007 by Jingthing

[samran]

Depends on what goods you are talking about. Who says it is a free market for those goods? Import taxes, lack of alternative substitutes, a captive (US citizen) market here in Thailand may make the goods you talk about quite unique in the Thai context.

If there is no competition from other Thai retailers selling those goods, then, where is the competitive pressure to lower prices?

You may call it greed, but it is profit maximisation. People will always charge what they can get away with which maximises their profit. Ergo, if some people are willing to pay that price, then why should they lower the price, and hence lower their profits?

[Jingthing]

Yes, I do call it greed. Also stupid in my estimation. The Ben and Jerry's pints are costing them alot less now; if they priced at 200 baht they could move a much bigger volume and probably make even more money. I know they aren't moving much of that good stuff at 299.

Edited February 7, 2007 by Jingthing

[solo siam]

Yes and then when they have to put it back up again everyone would moan about price rises.

Goods and their RRP's aren't set on a daily, weekly or even monthly basis - and to me they are independent of exchange rates, It's the price in that country not a direct translation of the price in another country. In your example of Ben & Jerries, perhaps they are purchasing their ice cream 10% cheaper from the states, but at the same time perhaps they have to undertake an expensive corporate reshuffle to make sure they adhere to the new FBA.

Its swings and roundabouts, no-one wants to change all their RRP pricing, dealer pricing, marketing material, promotions and set a new lower price only to have to increase it a month later when the exchange rate goes back up. They aren't duty bound to change their prices on exchange rates, is your house suddenly worth less here now if it uses US Air-Con, Bricks, Security system, Lighting etc... of course not.

[toptuan]

With the strengthening of the Thai baht, logic would also lead one to believe that international airline fares would be cheaper, too, or at least holding steady.

However, in the last three years, I have seen the average price of a cheaper air ticket to the West Coast of the USA go from 25,000 to 35,000 baht, nearly a 30% jump. Add that to the 17% strengthening of the Thai baht (against the dollar) over the same amount of time, and that totals a 47% difference from three years ago.

Could increased jet fuel prices be responsible for ALL of that 47% increase?

Edited February 7, 2007 by toptuan

[xbusman]

They are coming down. Last year a new Goldwing motorcycle, delivered and titled was retailing for 1.8 million baht. I am bringing them in now for under 1.3 million. Because its such a small market and it turns right away, the pricing is based on current exchange rate. Big retailers sign multiyear contracts for supplies that are usually hedged by the seller. It takes years for things to move in relation to wild currency swings like we have had. What does start happening is that a wider variety of goods start coming in and competing against locally made goods. Say where you used to buy a Thai brand food, all of a sudden an American brand shows up next to it for the same money. That will happen quicker than pricing adjustments in long term supply chains.

[meom]

This is only a guess; maybe the warehouses haven’t cleared the goods imported at the high exchange rate. Once these old stocks have gone you may see prices reduce when new stock arrives in the market.

Another guess could be that the exporters costs for whatever reason have gone up, evening out the higher exchange rate.

[samran]

Another guess could be that the exporters costs for whatever reason have gone up, evening out the higher exchange rate.

Which means this statement

In a free market they should come down.

should read "In a free market they should come down ceterus paribus (all other things being equal)"

[maccaroni man]

i was asking myself the same questions concerning air fares if it is quoted on the net in dollars at say 700 u.s. why is it so much more in thai baht?

[steveromagnino]

Another guess could be that the exporters costs for whatever reason have gone up, evening out the higher exchange rate.

Which means this statement

In a free market they should come down.

should read "In a free market they should come down ceterus paribus (all other things being equal)"

major point is also that Americans don't make that many things from scratch; the packaging is from CHina, the customer service line is in India, the fuel is from Saudi and so on.

When the dollar dips, the cost of the items and getting it here may increase.

Hence those lovely American brand IPODs don't drop in price, because cet. par. the cost price of the unit has increased as the dollar has decreased against the input currencies of manufacturing; of course this ignores the terms of FOREX and forward contracts/hedging and whatever, but you get the picture.

As for Villa market and whatever, well they are on possibly the flip side of the forward contract, or alternatively, they now see that they can make a little more. Why anyone would want to but American brand food out here is beyond me and my guess is there is not a massive group that do. Lousy cheese, lousy ice cream, lousy cereals, lousy meats - all the great stuff from the states like bagels and so on isn't available that I have seen, but.........also more expensive for the most part than Aussie equivalents. Bring on the vegemite :-)

hmmm......... bagels. Yeah, I would be up for some of that.

Bagels + vegemite. gigity gigity gigity allllllllllllllright.

[PhilHarries]

To me this issue of the cost of western goods in foreign lands is one of the sucker punches of being an expat. If you are hooked on a particular product and no other will do then the store is free to charge whatever you will pay for that item. If that charge is excessive to the point that you won't pay then the store is faced with a choice. Reduce the cost or cease offering the product. Of course most stores, intelligent ones at least, will reduce the price to attract the trade as very few of us go into a store and buy one item only.

For me there are no UK products that I can either not find a local alternate for or do without. The ones I do without just provide a little sweetener for my R&R returns to UK and a winter R&R break needs all the sweeteners I can get.

[Jingthing]

I guess I see the point that niche luxury items like American ice cream would be different than a bulk shipment of American wheat, for example. However, I haven't noticed bread prices going down here either. I don't know what percent of the wheat in Thai bread is American though, but probably alot of it.

Ben and Jerry's lousy ice cream?????

Those are FIGHTING words!

Your visa to VERMONT is hereby revoked.

Thats a pretty good idea to import good bagels. I have seen frozen Australian bagels here (scary looking) but there really might be a demand for frozen real New York bagels as they do freeze pretty well. You can't really replicate a New York or Montreal bagel anywhere else because as they say "its the water" and the weather.

Edited February 8, 2007 by Jingthing

[ricklev]

I'm fairly certain that there is only one major importer/distributor of imported foodstuffs. All of the supermarkets purchase from this single importer/distributor. No competition means no price elasticity in imported foodstuffs.

[steveromagnino]

Ben and Jerry's lousy ice cream?????

Those are FIGHTING words!

Your visa to VERMONT is hereby revoked.

Thats a pretty good idea to import good bagels. I have seen frozen Australian bagels here (scary looking) but there really might be a demand for frozen real New York bagels as they do freeze pretty well. You can't really replicate a New York or Montreal bagel anywhere else because as they say "its the water" and the weather.

The bagel thing; apparently someone here used to make them importing American flour, but was only doing it on the side; and when their real business started improving, they stopped.

If you can figure out how to get them here, there is money to be made. Better still, go and find someone good at SCM (supply chain management) for food like Central Food Retail, and you might be able to persuade them to do an import via airplane on a daily delivery; I have tried an H&H bagel delivered in such a manner, and that changed my mind on what a bagel is (i.e. everything prior to that was junk). LIke you say, it must be something to do with the conditions there.

As for icecream; well Ben and Jerry is ok, the rest of American icecream is not so hot. Give me a dose of Tip Top anyday :-) Mind you, I have to watch my weight, so ice cream is not my highest priority.

Salt water taffy and bagels. And vegemite. Oh be-have!

[samran]

Ben and Jerry's lousy ice cream?????

Those are FIGHTING words!

Your visa to VERMONT is hereby revoked.

Salt water taffy and bagels. And vegemite. Oh be-have!

Forget about visa's to Vermont! Steve has bigger problems. By the sounds of it, he has an identity crisis and that his NZ passport needs to be revoked. I mean - vegemite, Steve. An Australian product. Your standards are slipping mate.

[fxm88]

Ben and Jerry's lousy ice cream?????

Those are FIGHTING words!

It's lousy in Thailand -- let it melt and refreeze a couple of times, then charge yourself $10 a pint for it and you'll see what I mean.

[steveromagnino]

Ben and Jerry's lousy ice cream?????

Those are FIGHTING words!

Your visa to VERMONT is hereby revoked.

Salt water taffy and bagels. And vegemite. Oh be-have!

Forget about visa's to Vermont! Steve has bigger problems. By the sounds of it, he has an identity crisis and that his NZ passport needs to be revoked. I mean - vegemite, Steve. An Australian product. Your standards are slipping mate.

mate, you aussies may be a bunch of c&*ts but even c&*ts like you can produce a few decent products. Vegemite is one of them.

and of course, I am talking about colts. or cants. or curts. Yes, curts, australians are a bunch of curts.

Why do Aussies like vegemite? Because it drowns out the taste of their pi$$ poor beer.

[samran]

Why do Aussies like vegemite? Because it drowns out the taste of their pi$$ poor beer.

Whut is the uverage cost of a sex puck of bir un Niew Zuland, Stuve? Culd uven be butter value thun Aussie bir as wull.

(cipiying my wifes uccent here).

[steveromagnino]

Why do Aussies like vegemite? Because it drowns out the taste of their pi$$ poor beer.

Whut is the uverage cost of a sex puck of bir un Niew Zuland, Stuve? Culd uven be butter value thun Aussie bir as wull.

(cipiying my wifes uccent here).

dunno oi huve not luved in nuw Zulund for sux yurs, oi thunk ut us about tun dollurs now, for uny beer thut usn't complete weasel puss.

oi lie, vee bue us ok, ut us fostas thut us rurlly bad aye.

[lingyai]

I have watched the Thai baht move from 42 to the dollar to 35 to the dollar. Logic would tell us that American goods would now be cheaper for Thai merchants to import, and of course, this being a free market, they would pass on these savings to the consumers in Thailand. I don't see this happening. Other than pure greed (my theory) is there any other reason why the prices for American imports aren't going down?

I dont think you understand the concept of the free market. Just because their cost becomes lower doesn't mean savings need to be passed on. They will charge what the market will bare. If they can get away with 299 then they will do it. Could it be more profitable to lower the price and sell more, maybe or maybe not (of course that depends on if the additional sales make more that the amount the margin has been reduced). So they are making a higher profit margin now so this equals "pure greed" as opposed to the margin before???

Stop buying it at 299 and the price my come down!

[somtaamgaiyang]

To me this issue of the cost of western goods in foreign lands is one of the sucker punches of being an expat. If you are hooked on a particular product and no other will do then the store is free to charge whatever you will pay for that item. If that charge is excessive to the point that you won't pay then the store is faced with a choice. Reduce the cost or cease offering the product. Of course most stores, intelligent ones at least, will reduce the price to attract the trade as very few of us go into a store and buy one item only.

For me there are no UK products that I can either not find a local alternate for or do without. The ones I do without just provide a little sweetener for my R&R returns to UK and a winter R&R break needs all the sweeteners I can get.

All other things being equal, the cost comes down. That has absolutely nothing to do with the price that a seller wishes to charge. Try running a company purely on a cost plus basis and see what trouble you can get into.

Do you really think a Rolex costs 3000 USD to produce. There are a gazillion other factors contributing to the cost than just the product itself, and anyway, where did you read that Thailand was a free market?

[Jingthing]

Ben and Jerry's lousy ice cream?????

Those are FIGHTING words!

It's lousy in Thailand -- let it melt and refreeze a couple of times, then charge yourself $10 a pint for it and you'll see what I mean.

I'll take your word for it. I am too cheap to pay 299 baht a pint for any ice cream. I'd rather have chilled durian.

Edited February 8, 2007 by Jingthing

[britmaveric]

Prices won't go down, means more profit.

[thaigene2]

....for the same reason that gas isn't cheaper.

Thai rules:

when business is slow, don't drop prices to attract new customers. Raise them to recover the losses from your existing customers.

[Losangels]

....for the same reason that gas isn't cheaper.

Thai rules:

when business is slow, don't drop prices to attract new customers. Raise them to recover the losses from your existing customers.

Yeah they learned that in Thai schools

[thaigene2]

....for the same reason that gas isn't cheaper.

Thai rules:

when business is slow, don't drop prices to attract new customers. Raise them to recover the losses from your existing customers.

Yeah they learned that in Thai schools

...Or Chinese Medicine School

[steveromagnino]

....for the same reason that gas isn't cheaper.

Thai rules:

when business is slow, don't drop prices to attract new customers. Raise them to recover the losses from your existing customers.

Yeah they learned that in Thai schools

probably from some foreign teacher earning 30k a month and spending most of it at NEP.

I am curious..... when business is slow, perhaps some genius can justify to me WHY you should necessarily drop the price. It is Monday, I could do with a good laugh from the next Modigliani :-)