Why are prices in EUR for consumer items often the same number as original USD price, but the GBP price applies the actual exchange rate?

Question

Since my store started accepting EUR payments in 2002 I often see the numerically same EUR price as the original USD price.

Many international suppliers, stores, e-shops offer the same items in US and Europe. Price tags are exactly the same, but currencies are different.

For instance, an item sells for $59.99USD in the US but it will be at €59.99EUR in EU.

But in the UK the price will always apply the actual exchange-rate, say (59.99/1.6)=£37.49GBP.

This usually happens with international stores located and registered independently in the US, UK and EU.

So, why $59.99USD = €59.99EUR for EU, but £37.49GBP corresponding to the exchange rate in the UK?!

This usually doesn't work with on-demand currency conversion option where available on websites, because the actual billing currency is the only one based on actual e-shop location (UK:GBP, US:USD). The currency conversion looks just as a helper option in this case, these are not real billing prices.

Answer 1

The simplest answer would be: Because they can. Why charge less for something if people will pay more? One example are Apple products. While there the price number is not exactly the same in EUR and USD, they are so close that, effectively, the EUR product is more expensive.

Many things go into a price. There might be reasons for products in the EU being more expensive to produce or distribute. Or people in the EU might be in general more willing to pay more for a certain product. In that case, a company would forgo profits when they offered it cheaper.

Also, prices are relative. Is the USD price the "correct" one and the exchange rate should dictate what the EUR price is? Or vice versa?

Answer 2

It's mostly VAT (value added tax or sales tax). For example an US IPad is $499 without tax, and a German IPad is EUR 499 including 17% VAT. The base price is actually only EUR 417.

In addition to that, cost of business is a little higher in Europe because of tax structures and because smaller countries cause higher overheads.

Answer 3

In the EU prices on consumer-focussed sites* are quoted inclusive of VAT. In the USA prices are quoted exclusive of sales tax.

Consumer pricing is usually driven at least partly by psychological concerns. Some pricepoints are more appealing to certain types of buyers than others.

The Euro vs dollar exchange rate has fluctuated a bit over the years but it's generally averaged somewhere around 1.2 dollars per Euro over the last decade. VAT has varied around 15%-20% in most cases.

Put these things together and the same headline price points are generally appropriate in both the USA and the Eurozone.

OTOH the Brisith pound has been worth substantially more than the dollar or the Euro. So it makes sense to have a lower headline price in the UK.

* B2B focussed sites often quote prices exclusive of VAT, you need to be aware of this when comparing prices.