Insight: why “Chinese retail price × exchange rate” misprices the market
Duty, VAT, channel markup and logistics set the shelf price; direct conversion usually underestimates by 30% or more.
The problem
Many companies multiply the domestic retail price by the exchange rate as a reference. The result is either too low for channel economics or too high to compete.
The right reverse sequence
- Set the target shelf price from competitor and purchasing-power evidence;
- Deduct retail margin;
- Deduct distributor margin;
- Deduct duty, VAT and clearance;
- Deduct international and domestic freight;
- Arrive at a workable ex-works (FOB) price.
Common error sources
- Ignoring that the VAT base includes duty;
- Using full-container freight to model small trial orders;
- Omitting returns and after-sales cost;
- Ignoring how promotional discounts erode channel margin.
Recommendation
Build a per-SKU landed cost sheet before pricing, with every layer explicit. That sheet determines sustainability more directly than any market report.
Related
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