Price tag problems: what happens if the NZ dollar reaches parity with the Australian dollar?

  • News
  • April 22, 2015
  • Elly Strang
Price tag problems: what happens if the NZ dollar reaches parity with the Australian dollar?

Price plays a crucial part in customers’ decisions on whether to buy or discard something, so it makes sense the accompanying price tag shouldn’t put them off.

A reader wrote to us expressing his frustration at retailers in New Zealand displaying the price in multiple currencies on the price tag.

He says he even finds it a deterrent in purchase.

The practice is commonplace with Australian retailers operating in New Zealand, such as Cotton On, Seed Heritage, Witchery and Country Road.

So why do retailers do it?

General manager of public affairs at Retail NZ Greg Harford says the practice is fairly common for overseas retailers.

“Labelling is often put on in a warehouse, not in-store,” Harford says.

“Where a store’s supply chain covers more than one country, it makes sense for the retailer to have different currencies on the one label.  This avoids items being double-handled and helps keeps costs down.”

Chief executive officer of Consumer NZ Sue Chetwin echoes this and says it’s probably because the practice is “cost efficient.”

“They produce one tag with all the prices of all the countries they sell in,” Chetwin says.

She says if other currencies’ prices seem considerably different, it may be because the other currencies don’t include local taxes.

In New Zealand, the price has to include GST or state otherwise on the tag.

However, the Australian and New Zealand price comparison on tags may soon become a point of contention with customers.

Economists are forecasting the New Zealand dollar will soon reach parity with the Australian dollar.

The Kiwi dollar has already come close – it recently touched 99.78 Australian cents, its highest amount since being allowed to trade freely in 1984.

Chetwin says it’s hard to say whether reaching parity will affect the accuracy of price tags.

“It’s still hard to make comparisons because the companies would probably have paid in US dollars for the products to be made in China,” Chetwin says.

“However, over time you would expect if the NZ dollar stayed high, for the prices to become the same.”

This may be something retailers will have to consider in the near future, as global financial services company UBS forecasts show the New Zealand dollar reaching parity with the Australian dollar by June and staying above A$1 for at least a year.

Chetwin says if retailers in New Zealand were choosing to keep prices higher than in other countries, customers could hold retailers to account by publicly pointing this out and refuse to shop there.

Otherwise, consumer laws don’t cover it.

Other trends in tags

One innovation that has been on the horizon for a while but not quite caught on is digital price tags.

UK supermarket Sainsbury’s has recently been trialling digital displays to its shelves that can be colour-coded for specials and instantly updated.

US department store chain Kohls has also been doing it for a while.

Retailers say on the plus side, digital price tags reduce pricing errors and are far more accurate.

On the downside, however, they worry it will make their sales drop and the technology is still expensive.

Other trends include companies being transparent about pricing by revealing the variable costs of production for each of their products. 

Though it may seem taboo for retailers to be that up front, research suggests customers are drawn to the “intimate disclosure” of where a business’ costs stack up.

A research paper called ‘Lifting the veil: the benefits of cost transparency’ found that when a company selling apparel, like T-shirts, itemizes what it spends on each stage of product (cotton, cutting, sewing, dyeing, finishing, and transportation) consumers are attracted to the brand and more likely to buy the product.

Some online retailers are already doing this. Everlane reveals the costs of production for its product, as well as descriptions of the factories where products are made.

Honest By sums up a price calculation for each aspect of the product and manufacturing details.

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