Emerging Markets: A Whole New Mall

Emerging Markets: A Whole New Mall

Pricing models and strategies used domestically don’t always work internationally. In emerging markets, pricing can be difficult to manage due to inflation rates, shifting interest costs and volatile currencies.

In many emerging markets, the retail space is dominated by “mom-and-pop stores.” A recent report from Accenture shows that in Asia, “traditional trade—mom-and-pop stores—dominates retail with 84 percent of sales in Indonesia, 72 percent in the Philippines, and 55 percent in Thailand.” Unfortunately, many of these markets operate through a multi-tiered distribution system which can block trade promotions and incentives from reaching smaller retailers, like mom-and-pop stores, and their shoppers.

Often brands struggle to control consumer pricing, particularly in indirect general trade channels. One strategy to deal with this obstacle is setting selling prices (and monitoring them very closely) throughout the supply chain in order to provide consumers with a consistent price experience, regardless of channel.

Pricing is a huge determinant for many shoppers in emerging markets. Consumers often don’t have as much money to spend at once or have different shopping habits due to the frequency of their income. As a result, consideration needs to be given to how products are marketed and packaged with regard to price. Often in these countries, smaller packages work better.

In India, brands like Maybelline New York and MAC Cosmetics have recently started selling smaller versions of their products. These smaller versions can be sold at a lesser price and are extremely effective with their consumers in this market.

In different countries, price can represent different things; in one it might represent quality, while in another it could be prestige. Brand perception needs to be considered when pricing products in emerging markets.

With pricing in emerging markets being so much more volatile, it is important to maintain oversight on pricing. Often, with increasing data it becomes apparent that prices vary across different markets and stores, leading to inconsistent customer experiences. With more granular data, teams in the country can make better and more sound decisions.