1. What factors have led to higher prices in Europe than in the United States for Hilfiger merchandise? What problems might Hilfiger encounter by having higher prices in Europe than in the United States?
The European and American market definitely has a major clash, for it was stated in the case that their demands are opposite from each other. Well, the European market seems to be more demanding in terms of product selection, variety, material and collection. As mentioned, there have been special adjustments made for the European market such as using wool, having jeans made into slimmer shape, and tapping on a more luxurious image -- the use of leather and cashmere for some of its product lines. Thus, this created a higher price variant for the European market compared to the United States.
Moreover, in the initial expansion to Europe, Tommy Hilfiger took the sales orientation in their marketing strategy. This then changed as they saw the response of the European market to their products meant for the United States. They took on a marketing orientation of a more customer-oriented marketing strategy and segmented it by country. The changes in design and quality of materials being used, affected the high cost production for the European segment.
Although this caters to the customer needs of the Europeans, this marketing strategy changes the image of the clothing company. As stated at the end part of the case, Tommy Hilfiger CEO has been contemplating on having a harmony in its collections. Hence, this battle between two different markets can distract and vere away Tommy Hilfiger’s brand positioning.
In addition to that, by segmenting by country, it’s difficult to gain popularity in economies due to standardization of the brand. The issues of high prices in Europe, but low prices in America also makes Tommy Hilfiger vulnerable to risk due to the gray market, which also creates a whole different European Tommy Hilfiger from the American Tommy Hilfiger. The result would be a confusion for its consumers specially for travelers, who go back and forth the Europe and the United States. Having inconsistency for a retail brand is just a big NO.
2. Hilfiger’s CEO would like to harmonize the European and U.S. collections by having Hilfiger move more upmarket in the United States. What problems might the company face in doing this? What might it do to make this strategy successful?
Tommy Hilfiger was created in order to be an alternative to more expensive brands like Ralph Lauren, Calvin Klein and DKNY. It is popular in the U.S. because of their affordable prices for the products produced of high-quality. Moreover, American consumers patronize Tommy Hilfiger for its casual, yet stylish approach, and what makes them satisfied upon purchasing a Tommy Hilfiger Product -- it’s pocket-friendly.
Thus, completely changing the face of Tommy Hilfiger in the U.S. to target the upmarket may be a big risk to the company. First, the wholesale distribution in the United States might cut-off their relationship with the company because of price increase, sudden shift, and even customer evaluation. As mentioned in the case, Tommy Hilfiger distributes to more than 1,800 department stores and wholesalers in the U.S., so it would be tough to miss out on most of them. Second, the American culture is very sensitive; once they sense that sudden shift of Tommy Hilfiger’s upscale move, they will take in a bad way. To think there are so many brands showing up a good image in the market now, and the American market can easily shift to other brands that are more affordable, fashion-forward and consistent.
Though, come to think of it, having an imbalance harmony for retail and fashion brands is acceptable. A good example would be Zara and Uniqlo. Zara, as we all know is established in Spain and has been one of the strongest fashion companies in Europe because of its affordability and fashion-forward approach in...
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