The launch of the American fashion brand, Forever 21, in Israel last week was accompanied by much excitement. The chain, known for its low prices, opened its first store in the Azrieli Mall in Tel Aviv with a promise of prices similar to those in the rest of the world. The company said its pricing policy in Israel was based on a simple calculation - the dollar price in the United States, before taxes, plus $1.50, and all that multiplied by four, based on an exchange rate of NIS 4 per dollar.
Many foreign chains have come to Israel and presented price differences of tens of percent more than in the United States, claiming high shipping and importation costs are responsible. But Forever 21 painted things in a slightly different way; after all, everything comes from China. It is true that there are many additional costs and considerations such as market size and wages in each country, but in the end it depends in the profit margin you want, Lawrence (Larry ) Meyer, CFO and senior vice president, told TheMarker last week in an interview. He said the chains must take into account that consumers are paying much more attention to the price over the past three years than in the past.
The price of Forever 21 high-heel pumps in Israel is about 5% higher than in New York and 16% higher than in Britain. But the differences in wages between the countries makes the purchasing-power gaps much bigger. While the minimum wage in Israel is about NIS 22 per hour, women in New York earning the minimum wage make NIS 27 per hour and about NIS 36 per hour in Britain. Israelis must work almost an hour more than their counterparts overseas to show off their high heels.
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