Nike is a global sportswear giant, but like many international brands, it faces unique challenges when operating in developing markets such as Pakistan. This article delves into the pricing issues Nike encounters in Pakistan’s retail market and explores potential strategies to address them.
This Article is based on interview of a Nike franchise owner in Pakistan. In interview he revealed how Nike set its prices for local markets. And how much they have control over pricing strategy during crisis, currency fluctuation and recessions.
NIKE ‘Just Do It’
It’s an US multinational brand engaged in designing, manufacturing, marketing and selling of footwear, apparel, accessories and services for sportsperson.
The region of Islamabad, Rawalpindi and Peshawar is owned by this retailer. All Nike branches in this area are controlled by his son. So, I have conducted an interview with him. As he is the decision maker for all pricing strategies in this specified area.
The Interview
He said our target market is sportsperson. We have three branches in Islamabad and two in Rawalpindi. And we cover almost 9.5 % of overall footwear market in this region. In his interview he mentioned the following pricing points.
Pricing Strategy
- Standardised Premium pricing strategies are implemented here. Local retailers can’t change it. Nike prices varies from product to product according to their models and trends.
- Prices are quoted on each order.
- Yes, currency fluctuations impact our pricing strategies. But only on new imports, otherwise no variation will be implemented on existing older modules.
- Hardly, prices are increased by 2.5% per year. Price changes occur only after each year, not before it.
- Currency fluctuation does not impact on existing quoted orders. Like if a product price is 10,000 rupees quoted and in three weeks’ dollar price devalues from 106 to 100 Pakistani rupees. It will not impact on existing product prices.
- But according to regional situation and culture, we are authorised to offer discounts in case of dollar devaluation.
- Government tax rate is fixed 17% of profit. But in case of change in government policies or raise in tax rate we have the authority to raise prices.
- On purchasing via online store, there is 2% increase in prices. It is due to delivery and transportation expenses. Which is always mentioned in delivery order before delivering the products.
- He also said, tax rates are increased by 1% from 17 to 18% due to sudden change of government of Nawaz Sharif. But this situation occurs once in my 7 years of experience. Due to which we raised Nike product prices. But it was our responsibility to inform customers about the situation and why we suddenly increase the prices of Nike products.
Challenges in Nike’s Pricing Strategy in Pakistan
1. High Import Duties
Pakistan imposes substantial import duties on international brands, making Nike products significantly more expensive than local alternatives.
2. Currency Fluctuations
Frequent changes in the value of the Pakistani rupee add unpredictability to pricing strategies, impacting both retailers and consumers.
3. Competition with Counterfeit Products
The availability of counterfeit Nike products at much lower prices undermines the brand’s value and affects consumer perception.
4. Limited Purchasing Power
The average consumer in Pakistan has limited disposable income, making premium-priced Nike products unaffordable for the majority.
5. Distribution Challenges
A lack of efficient supply chain infrastructure increases costs and delays, further affecting product pricing and availability.
Potential Solutions for Nike’s Pricing Challenges
1. Local Manufacturing
By setting up manufacturing units in Pakistan, Nike could reduce import duties and production costs, making its products more affordable.
2. Tiered Pricing Strategy
Introducing a range of products at different price points could cater to a broader audience without diluting the brand’s premium image.
3. Partnerships with Local Retailers
Collaborating with established local retailers could improve distribution efficiency and reduce operational costs.
4. Anti-Counterfeit Measures
Implementing strict measures against counterfeit products, such as using QR codes for product verification, could help maintain brand integrity.
5. Targeted Marketing Campaigns
Customized marketing campaigns that emphasize value for money and quality could resonate with the local audience.
FAQs
What are the main factors driving up Nike’s prices in Pakistan?
High import duties, currency fluctuations, and supply chain inefficiencies significantly contribute to higher prices.
How does counterfeit competition affect Nike’s market presence in Pakistan?
Counterfeit products, often sold at much lower prices, undermine Nike’s brand value and confuse consumers about product authenticity.
Can local manufacturing help reduce Nike’s pricing issues?
Yes, setting up local production facilities could eliminate import duties and reduce costs, making Nike products more affordable.
How does limited purchasing power impact Nike’s sales in Pakistan?
Many consumers cannot afford premium-priced products, restricting Nike’s market to a small segment of affluent buyers.
What role do local retailers play in addressing Nike’s pricing challenges?
Partnering with local retailers can improve distribution efficiency and reduce overall costs, making products more accessible.
Why is a tiered pricing strategy essential for Nike in Pakistan?
A tiered pricing strategy allows Nike to cater to a diverse audience without compromising its premium brand positioning.
What steps can Nike take to combat counterfeit products?
Nike can implement measures like QR code verification and consumer education campaigns to distinguish genuine products.
How do currency fluctuations affect Nike’s pricing strategy?
Frequent changes in the Pakistani rupee’s value make it challenging to maintain stable pricing, impacting both retailers and customers.
Are there successful examples of international brands adapting to the Pakistani market?
Brands like Unilever and Nestle have successfully localized production and pricing strategies to thrive in Pakistan.
How can marketing campaigns improve Nike’s market share in Pakistan?
Targeted campaigns focusing on quality, value for money, and brand authenticity can resonate with local consumers and boost sales.