Why Pricey Imports Stay That Way

Since the dollar is strong and products are such bargains abroad, why are many imports still so costly at home? That is the puzzler for American shoppers who had hoped that their high-flying currency would provide hometown bargains on luxury products ranging from cashmere sweaters to Dunhill gold cigarette lighters.

According to the economic textbooks, the price of imports should go down when the value of a country's currency goes up. Reason: when the dollar is worth more francs, marks or lira, products originally priced in those currencies should be correspondingly cheaper. In the theoretical world of economists, a British suit that costs (pounds)150 in London should sell in the U.S. for $300, plus a little more for shipping and import duties, when the pound is worth $2. If the value of the pound drops to $1, that same suit should cost $150.

Nice theory, but it is not working. In fact, many pedigreed imports remain as pricey as ever. For example, an Irish-made Waterford crystal decanter typically costs $159 in the U.S., the same price as two years ago when the Irish pound was worth about 25% more. The 18-karat, Swiss-made gold Rolex Presidential watch actually went up in U.S. list price during the past three years, from $7,950 to $8,850, even though the Swiss franc has fallen in value about 19%.

A major reason prices are staying high is that manufacturers and importers of many luxury goods are pocketing extra profits rather than passing on the savings. They feel little pressure to discount the products because their prime clientele, the wealthy and upwardly mobile, tends to care more about brand names than about prices. Moreover, the thriving U.S. economy has kept shoppers in an upbeat mood, especially when it comes to classy imports.

Two West German luxury automakers, BMW and Daimler-Benz, have avoided giving any ground on their U.S. prices. Instead, the car companies claim to have compensated for the dollar's rise by providing American customers with extra features at no additional charge. For example, BMW's 735i model, with a base price of $36,880, this year includes a larger engine and a more advanced braking system. "Normally, a redesigned car model would go up 8%," says Stephen Houston, sales manager at a dealership in Santa Monica, Calif. "But you can buy a 1985 BMW with more features for roughly the same price as a 1984 model."

A few importers, though, are giving customers a break. France's S.T. Dupont recently lowered U.S. prices about 25% on some of its fine writing instruments. Its handmade black lacquer pen went from $160 to $125. By discounting at a time when few other importers are doing so, the company hopes to boost its U.S. market share. Williams-Sonoma, San Francisco's chic pot-and- pan retailer, has marked down its French-made copper cookware 20%.

Some U.S. consumers who are not going abroad have found another way to get strong-dollar bargains: direct-mail or phone orders. Judi Fitzgerald, a Los Angeles advertising copywriter, buys Waterford crystal by telephone from the Dublin department store Brown Thomas. "I figure I save about half this way," she says. "I call them at 4 in the morning, give them my American Express number, and they send me the crystal. It's simple." But not all European merchants will accommodate this end run. Several French luxury-goods companies, including Louis Vuitton and Hermes, turn up their noses at the idea of mailorder trade because it could undermine the prestige and profits of their plush U.S. boutiques.