Why are Czechs being charged more for goods than their European neighbors?
When Tereza Konečná switched off her two mobile phones one Sunday afternoon in July, she felt a sense of satisfaction, pleased to be taking part in a protest against Czech telecoms operators. She always wondered why the prices here are so much higher than in neighboring Austria, where she lived for a year. "The telecommunications transmitters are the same in both countries, and services of the same kind are provided by the same operators, so how is it possible that the 3G coverage is that much better in Austria?" she asks. "Why should I let them treat me like a fool and tolerate overpricing?" It isn’t only mobile phone services that are overpriced here. Shoes, cosmetics and clothes produced by the same manufacturers are much more expensive in the Czech Republic. On top of that, bank fees here are the most expensive in Europe. But why?
Fifteen times more expensive
The answer we hear is always the same: suppliers and manufacturers persistently claim the Czech market isn't big enough and that they can't make as many sales here as they do in larger countries. But if we look at mobile phone operators in Austria and Slovakia, the price differences are enormous, despite the fact that both countries are smaller than the Czech Republic.
Czech consumers have to pay T-Mobile 15 times more for an iPhone than they would with the same firm in Austria. For a two-year contract with a monthly fee of 1,200 crowns, the Czech iPhone user ends up paying 450 euros, while in Germany the cost is just one euro 1, in Austria 29 euros and in Poland 250 euros.
"The Austrian division of T-Mobile is the sole vendor of iPhones, which we aren't here, so we realized we wouldn't be able to sell high volumes and it wouldn't be profitable for us to subsidize it," says T-Mobile CZ spokesperson Martina Kemrová. "We didn't have any figures about potential sales available but we came to this conclusion by reading internet forums," she adds, explains the reasoning behind the high price. "Operators have income from data services but we knew from our experience with the Czech consumer that he would buy an iPhone because it looks good and [use it to] browse through his photos, not because he would like to increase the volume of use." T-Mobile CZ has sold "only" several thousand iPhones, whereas its Austrian counterpart has sold hundreds of thousands. "We know our market very well," says Kemrová. "There is no Applemania."
The July protest against high tariffs was noted by all three of the big Czech mobile operators -- T-Mobile CZ, O2 and Vodafone. "Seven-thousand phones being switched off won't affect the figures at all when you have 5.5 million customers," says Kemrová explaining why operators weren't too worried about the protest.
Robert Chvátal, the head of T-Mobile in Austria, says there is a tougher fight for customers in Austria than in the Czech Republic, where the services provided by all three operators are almost identical. "Four operators in the [Austrian] market offer all kinds of tariffs, which provide free calling, text messages and mobile internet connection," he says. "Naturally, the margins of Austrian firms are much lower than those of Czech operators." Mobile phone market experts agree that Czech consumers would benefit from greater competition. At the moment it appears as if the existing operators have a gentleman's agreement on prices and services. Luckily, a new operator is likely to enter the market next year.
Mystery of the Czech consumer
The daily newspaper Hospodářské noviny recently published the results of a test which revealed that the same supermarket chains sell groceries of a generally lower price and higher quality in Germany than they do in the Czech Republic. Similar tests conducted in the past have shown that branded goods are of a lower quality in former Eastern Bloc countries than in the rest of the European Union. For example, yoghurt produced by the same company is of lower quality in Slovakia and the Czech Republic than it is in Western Europe. This is something that the European Commission has looked into in the past in Bulgaria and Slovakia, only to conclude that it can't force companies to change the ingredients of their products. The EC believes that national markets and consumers should deal with the issue themselves. But how?
The Czech consumer is generally considered to lack self-confidence, hardly ever complaining about bad quality. "It is a mix of excitement about goods and services we haven't had here for 50 years, at a higher living standard that allows us to pay higher prices than in other post-Communist countries and, last but not least, we let [vendors] abuse us," says Patrik Nacher, a financial analyst and founder of the website Bankovnipoplatky.cz. Six years ago, he began a revolt against absurdly high Czech bank fees.
Analyzing the reasons why Czech consumers can't enjoy the same favorable prices available elsewhere in Europe is not on the agenda of the Czech Statistical Office. Consumer agencies, meanwhile, don't have the funds to carry out such surveys, and the Agriculture Ministry doesn't focus on this aspect of the market. So experts point to the reputation of Czechs -- as pushovers who let anyone abuse them, and who are hungry for shiny new goods regardless of their price or quality. The latest Eurobarometer survey indicates that Czech consumers give up claiming refunds on goods far too early. Only one in 10 claims a refund on substandard products and seven in 10 give up if their refund is initially refused. Out of 27 EU member states, the Czech Republic ranks 26th in this regard.
Why do Czech customers give up so easily? "We haven't been able to come to any one conclusion," says Libor Dupal, chairman of the Czech Consumer Association (Sdružení českých spotřebitelů). "Perhaps it's true that we're pushovers to some extent but it could also be taken as a sign that people are annoyed by local shop owners and don't want to deal with them."
Surveys of new products conducted prior to their introduction on the Czech market show that consumers here don't pay too much attention to quality. That explains why a Czech customer will buy ketchup containing only 18-percent tomato, while German consumers demand ketchup that is 80-percent tomato. "It may not be bad will on the part of Czech manufacturers," says Jiří Remr of the market research company Markent. "If the Czech consumer doesn't mind 18-percent ketchup, why would they give him better quality?" So does it mean we have "cheaper" tastes than in Germany? "I can't answer that," says Remr. "This is something businessmen aren't interested in. They follow whatever the customer wants and they give it to him." Nobody monitors the quality of goods, though. Inspectors are concerned only with health and safety issues rather than quality.
Read and don't steal
The only way to increase quality and lower prices is to follow the advice of Czech consumer organizations. They recommend reading product information closely, comparing prices and, if you don't like a brand, not hesitating to switch to another. Middle-class Czechs increasingly travel to Germany to buy clothes and shoes, Czech consumer organizations confirm. Supermarket customers are slowly coming to demand better quality products. "It will surely get better," says Remr of Markent. "Consumers are slowly maturing and shop owners will have to do something about it."
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