Why are products imported into Albania often sold more expensively than in the country of origin?

Economic logic says that if a country imports goods from a cheaper market, the final price for the consumer should be lower. However, in practice, the opposite often happens and imported products in Albania turn out to be more expensive than in the countries they come from.

According to economic analysis, the main reason is related to the way the final price of a product is built.

The price seen in Italy, Turkey, or Greece is not the real price, because in addition to the import price, transport costs, insurance, customs duties, VAT, as well as the profit margins of the importer and the seller are added.

In an illustrative example for a product that costs 1 euro in Italy and the price paid by the Albanian importer (wholesale) is 0.60 €[1]

Example of price formation (with effective exchange rate EUR/ALL = 96)
· Wholesale price in Italy = 0.60 € (without VAT)
· Transport & insurance = 0.15 € (without VAT)
· Customs & tariffs = 0.10 €
· Importer margin = 20%
· Seller margin = 30%

· VAT = 20%

Step 1 – Real net cost (without VAT)

0.60 + 0.15 + 0.10 = 0.85 €
In lek, this amount is 0.85 × 96 = 81.60 lek

Real net cost = 81.60 lek

Step 2 – Real margins (without VAT)
Importer margin = 20% × 81.60 = 16.32 lek
Seller margin = 30% × 81.60 = 24.48 lek
Net selling price (without VAT) = 81.60 + 16.32 + 24.48 = 122.40 lek

Step 3 – VAT (neutral for business)
VAT on sales = 20% × 122.40 = 24.48 lek
VAT on purchases = 20% × (0.60 + 0.15) € × 96 = 20% × 72 = 14.40 lek
VAT to be paid to the state = 24.48 – 14.40 = 10.08 lek

Final price for the consumer
Net price = 122.40 lek VAT
Shelf price = 122.40 + 24.48 = 146.88 lek (1.53 €)

Attention! From a real economic perspective, the business does not pay VAT out of its own pocket, since VAT on sales is deducted from VAT on purchases. VAT is not a real cost for the business, but a transfer mechanism to the state, where the business simply acts as an intermediary. Consequently, VAT does not justify the price increase beyond accounting mechanics, where:

real price is formed by P(real) = P(wholesale) + T + D + M(imp) + M(seller)

But, if we were to compare it with the price of products if they were produced in Albania, then the situation is as follows:

Product produced in Albania
· Production cost (materials + labor + energy) = 0.60 € (57.6 lek)
· Local transport = 5 lek
· Customs/tariffs = 0 lek
· Producer margin = 20%
· Seller margin = 30%
· VAT = 20%

Step 1 – Real net cost
57.6 + 5 + 0 = 62.6 lek

Step 2 – Margins
Producer margin = 20% × 62.6 = 12.52 lek
Seller margin = 30% × 62.6 ≈ 18.78 lek

Net price without VAT = 62.6 + 12.52 + 18.78 = 93.9 lek

Step 3 – VAT
20% × 93.9 = 18.78 lek
Final price for the consumer is 93.9 + 18.78 = 112.7 lek (1.17 €)

Comparison of Italy – Albania price example

Product	Final price in lek
Imported from Italy	146.88 lek
Produced in Albania	112.7 lek
Difference	34.2 lek (~30% cheaper with local production)

Even using the same base raw material costs, local production turns out to be cheaper for the consumer. The difference mainly comes from international transport, customs, and importers’ margins. Eliminating informal costs and oligopolistic structures would improve import prices and make local production a real alternative for reducing prices.

Why doesn’t currency depreciation show up in price reductions?

In practice, euro depreciation often passes almost unnoticed in the Albanian market. Even when the euro/dollar loses value against the lek, prices of imported products do not automatically fall. The reason is that the final price is not composed only of the exchange rate. Importers and sellers add profit margins, pay transport, insurance, customs, and taxes, and often also calculate a “risk premium” for delays, inflation, or political fluctuations.

Moreover, the market structure does not allow the consumer to easily benefit from exchange rate changes. With few competitors and a small market, prices set on the shelf reflect more oligopolistic power than real euro fluctuations. As a result, even if the euro weakens significantly, its effect is often absorbed by additional costs and control by a few market actors. Fundamentally, euro depreciation affects the importer’s pocket more than the price the consumer pays, which often remains unchanged.

When does real economic abuse begin for imported goods?

Real economic abuse begins when an unjustifiable difference is observed between the price of the same product in the country of origin and the Albanian market. A typical scenario is when a product sells for retail price 1.00 euro in Italy and 2.50–3.00 euros in Albania.

In this case, the real justifiable cost for the Albanian market is about 1.50 euro, while the real market price reaches about 2.80 euro. The difference of about 1.30 euro is no longer related to transport, taxes, or VAT, but represents oligopolistic rent, abusive margins, and lack of real competition.

A determining factor in this process is the structure of the Albanian market itself. Albania operates as a small market, with low purchase volumes and limited bargaining power. Albanian importers do not buy in massive quantities, but in relatively small volumes, which deprives them of economies of scale benefits that characterize large markets like Italy or Germany. Consequently, even the “wholesale” price they pay is structurally higher per unit.

This means that even when the Albanian importer buys at wholesale from the distributor or factory, the price difference between the country of origin and Albania does not disappear, but only reduces. Under normal market conditions, only from transport, customs, VAT, and standard margins, the final price in Albania can be about 40–60% higher than the shelf price in the country of origin. This constitutes legitimate structural increase and is economically justified for a small importing economy.

The real problem begins when this structural increase is added to the oligopolistic structure of the import market. In many sectors, only two or three dominant importers operate, who control supply, create entry barriers for new competitors, and often informally coordinate pricing policies. This situation distorts competition and creates artificially high prices even in the absence of tax increases. The phenomenon is especially visible in fuels, basic foods, construction materials, and medicines.

A reinforcing role is also played by the fiscal structure, especially VAT. The rate of 20% is applied to almost all products, including basic foods, energy, and transport. Meanwhile, in many European countries, these categories benefit from much lower or zero rates, making the Albanian fiscal system regressive, as the tax burden falls proportionally more on low-income groups.

Importers also include in the price financial risk, such as exchange rate fluctuations, inflation, payment delays, and political risk. These factors translate into a “risk premium” added on top of the real cost and passed directly to the consumer.

In some sectors, on top of these formal costs, informal costs are added, such as customs-tax-local bribes, regulatory fees, informal tariffs, or additional payments for administrative procedures. These are not reflected in invoices but are included in the price and ultimately paid by the consumer.

A factor often underestimated is the psychology of the Albanian market. The consumer is accustomed to high prices and reacts little collectively through boycotts, public pressure, or organized interest protection mechanisms. This creates low demand elasticity and gives businesses the ability to maintain high prices for long periods.

Thus, there are two clear levels of price increases in Albania:

The first level is legitimate structural increase, about 40–60%, coming from the small market, transport costs, VAT, and normal commercial margins. This level is unavoidable and does not constitute abuse.

The second level is abusive increase, often reaching 120–200%, and is no longer explained by real cost, but by oligopolies, lack of competition, and private market control. This is the real structural problem of the Albanian economy.

From an economic point of view, the real price formula starts from the wholesale price:

P(AL) = (P(wholesale) + T + D) + M(imp) + M(seller)

In this logic, any difference above 80–100% from the price in the country of origin is a clear signal of structural abuse.

In political-economic language, this situation does not represent a functional free market, but a form of “small oligarchic capitalism,” where price power is concentrated in few actors and not in the competition mechanism.

According to the analysis, real price reductions would be possible only if five structural conditions are simultaneously met:

(a) real opening of the import market
(b) real development of competition in domestic markets
(c) application of differentiated VAT for basic foods
(d) effective functioning of the competition authority
(e) public price transparency through comparison platforms Implementing these five measures transforms import into a functional free market mechanism, turning price into a reflection of real competition and not a source of rent for few actors. In the absence of real competition, any fiscal policy, legal reform, or supervisory institution has limited effect and cannot guarantee price reductions for the consumer.

---

[1] the Albanian importer does not buy at retail price in Italy, but at wholesale / ex-factory / distributor price, which is usually 30–60% lower than the shelf price in supermarkets or small retail units.)