Euro challenges

Mar 01, 1999 10:30 PM  By

The Jan. 1 debut of the euro-the new official currency of Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal, and Spain-should make international marketing easier for catalogers.

Catalogers that mail into more than one of the 11 countries of the European Monetary Union (EMU) no longer have to worry about converting francs into deutsche marks into guilders, for instance, nor about exchange rate fluctuations among EMU nations. They can now mail to the EMU’s 292 million buyers-a market larger than the U.S.-using one currency.

But along with these benefits, the euro presents creative and operational challenges. First, even though all bills and transactions are payable by the euro, the currency doesn’t yet exist (euro bills and coins won’t start circulating until 2002). Until then, consumers in the EMU will use their national currency for all payments, creating an awkward transition period for catalogers that mail internationally. Second, in terms of pricing, euro conversions do not produce the “preferred” pricing template. And finally, converting to the euro will ultimately force many U.S. marketers to standardize pricing across all EMU nations.

Problem #1: Until 2002, when EMU countries eliminate their national currencies, some mailers will display dual prices in their overseas catalogs-the price in the local currency and in the euro. But displaying two sets of prices can make your pages denser or even increase book size. In fact, a large German client of Javelin Group, a London-based consultancy, opted not to present dual pricing because it didn’t want to change the look or size of its book, says Tony Stockil, Javelin’s managing director. “The dual pricing had a major adverse impact in that the catalog had to add more pages to include the same number of products,” he explains. “They decided to mail the catalog this year in marks only.”

Problem #2: In terms of the marketing impact of the euro, consider that 99.99 deutsche marks, for instance, converts to the odd price of 50.12 euros. Marketers (who have long used the “trick” of ending prices in “.95″ or “.99″) would be loath to price any item this way, says Nigel Woof, general manager of Day-Timers Europe, which sells organizational products. “So do you mark down the price to 49.99 euros? If so, you could be losing a bit of margin,” he says.

Problem #3: Compounding this dilemma is the need for consistency across all of “Euroland.” “We may have had an item price that could be different in our French book than in our German book,” says John Broderick, senior vice president/chief financial officer of software cataloger Programmer’s Paradise, which mails into Italy, the Netherlands, France, and Germany. “But now that everyone is using the same currency, the prices have to be much more consistent country by country. “

And now, the good news Well, nobody said this euro transition would be easy. But at least consumers are not in any rush to switch to the new currency, giving catalogers some breathing room to make their marketing and operational decisions. “I believe consumers will still use local currency because they are not yet forced to use euros,” says John Vesbach, chief operating officer/vice president of finance for apparel title Peruvian Connection, which receives orders from the U.K., Germany, and France.

As for changing internal systems to accept the euro, Vesbach says that setting up accounts with a bank or a credit card order processor is neither costly nor time-consuming. And industry professionals say that the euro will eventually alleviate the challenge catalogers currently have of managing a separate credit card processing account for each currency they accept.

“Switching to one currency simplifies the back-end by merging, say, five currency accounts into one,” says Rodney D. Bell, spokesman for Dallas-based order processor Paymentech. “You’re not managing as many relationships.”