Friday, 19 November 2010

Testing Purchasing Power Parity with Golf Equipment

The idea of purchasing power parity says one should be able to buy the same thing for the same price in different countries. I've previously compared prices of personal computers to see where the cheapest prices are to be found, with exchange rates factored in. From the 2007 comparison where the USA was the cheapest and Canada the most expensive, to the March 2010 comparison there was a big shift, as the UK became the cheapest, Canada fell in the middle and the USA went from least to most expensive. PPP wasn't much in evidence. There was huge spread in the price of Dell PCs - 16% in 2010 and 33% in 2007.

Golf is another passing interest of mine (ok, it's really become more of an obsession) and I have recently been in the market for a new set of irons so I've done more international online comparison shopping. This time it seems the pricing of individual equipment makers and online stores may be more important than exchange rates. My mini survey (using exchange rates found on Google Finance):

TaylorMade R9 (steel, 8 clubs, with delivery and taxes)
Mizuno JPX800 Pro (steel, 8 clubs, with delivery and taxes)
Golf Balls - Srixon AD333 (1 doz)
Canada is cheapest for one set and most expensive for the other, while the balls are all within tiny fractions of the same price. The price spread between lowest and highest for the golf equipment is under 10%, much less than what I found for the Dell PCs. The golf business may be managing foreign exchange better in equalizing prices than the computer industry, or than Dell does at least. Or maybe it's just that the movement of CAD versus USD has tightened considerably during all of 2010 and for CAD vs GBP, since March.

Moral of the story - right now, special deals, services and promotions make more of a difference. For instance, in the UK Mizuno has free custom-fitting test centres in various locations (with no obligation or pressure to buy and as it turned out, lots of friendly golf chat) and a number of linked vendors that will order at no extra cost the spec clubs from the factory.

However, if exchange rates go volatile again, or more likely when they do, and CAD has a big upswing against the USD that could well present cross-border buying opportunities.

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