Apple has made it explicitly clear how much more its charging UK consumers for its kit than US-based buyers. The UK online Apple Store now states how much of a gadget's price goes to "VAT, duty and levies". VAT is obvious - it's our sales tax, overseas readers, billed at 17.5 per cent - and duty is the amount the European Union …
Transport and warranty?
Two other obvious variables - a typical warranty in the US is a lot less than here, although on the back of that, they shouldn't be building stuff unreliable enough for a significant proportion of it to fail within warranty.
The other is transport - shipping a container across the Pacific from China probably costs less than shipping that same container from China to Europe.
Re: Transport and warranty?
Fair point, but both will add very little to the cost of each device. Think of the millions of iPods on their way on ships from China and the cost per 'Pod shrinks microscopically.
Especially if the ship steers clear of the Somali coast...
You may be on to something
The warranty issue might actually be worth considering. Unknown to many, the sales of goods act here in the UK gives you a 6 year warranty on the majority of computer gear.
Just last month I got a completely free repair on my company's 4-and-a-half year old (long out of warranty) Quantum DLT S4 tape drive from Quantum themselves. They initially fought me on it, but when I quoted the act and gave them a link to it (search on Google) they gave in and agreed to fix the unit for nothing! As far as I know if this unit had packed up in the states after the same length of time - or even if it died a day past a 1 year warranty - we would have been left with a 3 grand bill for a new drive.
Apple are full aware of the UK sales of goods act, a friend of mine got a free replacement on some old faulty Apple gear after quoting it to the manager of the Regent Street store.
I agree with you that this extra cost could be factored in to the price differences between USA and UK, but I wonder if the number of people taking advantage of the extra protections of the SoGA in the UK is significant enough to trickle through noticably to the pricing like that.
Not disagreeing, just saying :)
The SOGA does NOT give you a 6 year warranty. It sets a maximum of 6 years. Some products are expected to last that long but most probably aren't. Even for those that are the remedy takes wear and tear into consideration so after 6 years don't expect a full refund or brand new replacement.
Goods are only assumed to have been badly manufactured if they fail within the first six months and that depends on the product and nature of the fault. Even /then/ you are only entitled to a full refund if the fault occurred within a short time after purchase. It varies by product but generally it's no more than a couple of weeks. After that you're deemed to have accepted the goods and it becomes a matter of free repair or replacement.
After six months you have to prove that the fault was due to a defect.
In practice most retailers follow the simple '12 month' rule but as a consequence they do sometimes get shirty outside of that period. A TV probably can't be expected to last the full six years but failure after 18 months would probably qualify for a free repair or perhaps 'parts only' charge.
I believe the legal phrase is always "reasonable amount of time".
If I buy an MP3 player, it goes wrong, something like a 3 weeks to a month before I go and complain could be seen as reasonable, before I demand some action, a repair or replacement.
However if I buy some ski's in Spring sale, then find out they are faulty in November, then 6-7 months will still be considered reasonable time because I was unable to use them in the middle of Summer.
The two best company's I have ever dealt with are Amazon who never cause trouble on returns and believe it or not PC World, who simply refunded money on a faulty Archos player...11 months after it was purchased. No questions, no trouble straight refund!
Having said all that I bought an Apple gadget recently and it failed same day. I then spent 5 mins shouting and moaning at an Apple store geek the next day, trying to get a replacement as it was not considered worth replacing and must be inspected and repaired even after less than 12 hours of ownership!! I did get a replacement for it in the end.
It's "Not having to live in the USA tax". Worth every penny ;)
You're also assuming..
Wealth parity. It's erroneous to assume that someone earning £20K here would earn (say) $32K, something which is largely ignored when it comes to these comparisons. The people I know who've gone to work in the states find they are paid "less" than the British equivalent. Obviously tax, NI changes with this, as well as healthcare and amenities - try and get an equivalent phone or broadband contract in the US, you can't.
Directly comparing these Apples with Apples (pun intended) is all well and good, but you're ignoring the rest of the fruit basket. It keeps economists in work.
Apple tax free prices
Interesting article, but as the product has to cross the Atlantic, surely they are allowed extra price to cover transport costs?
At least they are trying to be open about their pricing - the darling US company wants to illustrate that the low tax, minimal state intervention model of the USA is better for Europeans and wants to emphasise just how much tax Europeans are paying.
Just a thought...
Could this be linked to European free trade laws (i.e. if you offer something for sale in an EU country, you have to sell it to anyone in any member state).
That leads manufacturers to adjust base pricing in the various states so that prices come out broadly equal, otherwise everyone would just buy from the state with the lowest VAT (Switzerland, 7.6%). And why do that when you can make extra money?
If you take the ex. VAT price and then add the highest VAT rate in the EU (25%), you end up with a selling price of ~£188, which is suspiciously close to the actual retail price.
You might want to tell the Swiss that they're an EU member. Last I checked they weren't aware of it.
No, they're not in the EU Mr Dawson but I believe they have implemented most of the free trade and flow of workers rules though meaning they can pick the beneficial parts without the shite.
Nice try, no cigar
Switzerland is a member of EFTA and has also adopted or signed up to a lot of EU law. It might not be a member but from an economic and trade point of view it abides by our rules. That means for the purposes of this article it probably can be considered to be a member of the EU. Same as Iceland, Norway and Lichtenstein.
I don't know how this works, but if Apple have e.g. a UK office that actually handles the transactions, do they pay corporation tax on UK profits, and if so how does that compare with rates in the US?
Not trying to defend them (I'm a long distance from being an Apple fanboi!), but wondering if there is a possible reason here that they charge slightly more so they make the same post-tax profit or whatever...
Nothing to see here, move along
a) US company exploits/blames UK/EU/<insert country here> tax system to charge us more for <insert product>.
At least the article acknowledges it's not just Apple that's at it.
As above...move along...
Alternatively - just buy your <insert product here> from local manufacturers. Ie within the UK. Oh wait - we don't have any more. Never mind then - trade deficit and gradual decline to nation bankrupcy it is!
Too many assumptions
The second half of this article makes too many assumptions to push the rip off britain point.
Yes, tax is one reason for the price discrepancy, but there are other differing costs of business - wages, rent, advertising, etc that are different here to there.
Slow news day, is it?
You're conveniently forgetting shipping costs.
The UK is a lot further away by sea from China, Taiwan and Korea than the State of California, and is inconveniently spread out over a bunch of islands in an archipelago off the west coast of Belgium. Granted, most of its population lives on just two of those islands, but my point is that you have make an additional stop, instead of just calling at Rotterdam. Each stop for a container ship can add up to two days to the journey time.
In the US, of course, they have 270 million+ people all living in the same country, with a neighbour that speaks the same language, so need for multiple-language "Quick Start" guides—economies of scale can be applied easily.
Europe has a Babel of languages, so you need to produce separate runs for each set. (E.g. one run for Scandinavians; another for the north-western EU countries, including the UK; a third for eastern European nations... and so on.) Localisation of software, documentation, packaging and other materials costs money.
However, delivering products to mainland EU does allow for some economies of scale: most countries on the mainland have compatible plug sockets, for example. The Eurozone also helps by eliminating most of the forex issues too.
The UK's large, incompatible and somewhat over-engineered standard wall plug design requires either a separate manufacturing run just for the UK and its dependencies, or an adapter included in a generic "European SKU" package. Neither option comes for free, and the latter has knock-on effects on shipping costs because you now have to pack everything into a bigger box, reducing your volume per shipping container. It also adds to the recycling expenses, which the EU (including the UK) requires manufacturers to pay for.
While the costs mentioned above aren't *entirely* responsible for the price differences in different territories, it's nowhere as bad as you imply. And Apple are perfectly entitled to charge a bit extra for bothering to tailor their products to your country in the first place; it's not their fault you don't live in the US.
I'm reminded of a conversation with a rep of a certain external HDD enclosure manuracturer, let's call the product the Hobo storage robot.
When asking them why they were charging exorbitantly more money for the product in the UK compared to buying it in the US, paying their taxes, shipping it to the UK *and* paying the various import duties, I got the following sterling response:
"Would you begrudge a company from making up the costs of development of a product in markets that would bear a higher price?"
I told them "Yes, I would. Consider this a lost sale." and vowed to never buy a Hobo for my computer in the future.
Also, while I'll grant you the point about power adapters in the UK, when was the last time you got anything other than the device and a USB cable in the packaging for an ipod/iphone? For me, it was 2003/2004. Apple has slowly removed pretty much everything from the box of their PMP's while keeping the price static, I remember getting a dock, a case, a power brick and cables with my first ipod in 2003 (the first gen to support windows). By the time I bought a replacement for it in 2005 (first gen video ipod) that was all gone save for a cloth sock to put it in.
travel distances not a factor
Taking some quick measurements on Google Earth, it's about 18000km from Shanghai to UK via Suez Canal and about 19000km from Shanghai to NYC via Panama Canal. so distances can't be a factor.
Living in Australia where we're often blatantly ripped off (although to be fair it's not as bad as it used to be), it's pretty clear distances have no bearing.
At the end of the day pricing is a demand side as much as a supply side decision - they charge more because they can.
@cphi RE:travel distances not a factor
I dont know a better way to say this than to be blunt: You sir are an idiot.
Please explain to me the logic behind your argument, because i'm at a loss trying to understand it myself. Why in the world would a shipper, whom in delivering products to the US from china deliver these items to NYC, which is on the opposite side of the $&#*ing country and require a trip thru the panama canal, adding an additional 8000km on to the trip not to mention an untold amount of time just for the addition distance, not to mention the agonizingly slow passage thru the canal, when said shipper can simply drop his load in Los Angles and call it good. A trek which is only 11000km versus your 19000km going to NYC. On top of that, passage thru the panama canal isnt free. it costs a couple hundred thousand dollars to pass the canal.
You brits have a (mostly*) valid argument, however you're focusing your attention at the wrong part of the industry. Its not Apple or Dell or any other hardware manufacturer you should be pissed at, instead you should focus your attention at the industry segment that really deserves it, the software industry. They're the ones fucking you, the only parallel mentioned above that applies to software is localization due to language, otherwise its the same shit, you dont need different power plugs and so on, and whats more, software in the UK and all of Europe should be cheaper, you people put the kibosh on software patents in your lands, so developers dont have to worry about getting sued for hundreds of millions of dollars at a pop. But yet it seems to me that US software houses are making the lost revenue at your expense...
So, you have a good fight, you're just picking the wrong targets...
*Did you seriously throw down the argument about a $13 dollar price difference on a $1300 laptop? for those that suck at math, thats a 1% price difference, 2 to 3x that amount can easily be lost in varying tax rates, or fluctuating exchange rates. At best that argument is a bit weak. its sounding a tad petty and bitter on this side of the pond. Seriously Tony?
16% of asian shipping is to Atlantic ports
in 2003 about 16% of asian shipping was to Atlantic ports (and rising). so it is price competitive. I guess the point is a shipper can't just drop it off in LA and 'call it good'. It's about another 2400 miles to the north east cities (which I chose as a neat point of comparison with the UK). It is cheaper to ship to LA and rail overland but not so much as to make the apples vs apples comparison of the sea routes invalid.
No power brick?
The iPhone has always come with a 3 pin UK adaptor in the box. Not sure but I think you're right about the iPods, though.
The best argument I ever saw *for* this otherwise blatant over-charging was that in reality, we have stronger consumer laws in Europe than the USA. Ultimately, guess who pays for the protection?
A case in point is the PS3 - When Sony disabled OtherOS functionality, here people were entitled to refunds & compensation if they could sensibly argue they bought their device to run Linux.
If your iPod stops working before a 'reasonable' amount of time has passed - i.e. 11 months from now, you get a 'free' repair/replacement in the UK with the supplier (not the manufacturer) being liable. I don't think that's the case in the US, as I understand it.
My final example is where I saw this whole argument in the first place: There was an issue with a particular laptop suffering from dodgy lid hinges after 6 months of use. In the UK, the supplier would be liable for getting these hinges fixed with items of merchentable quality - Much to the surprise of US buyers of the same laptop, who I believe were landed with the cost of replacement.
£104/$161 vs US price of $149 is not unreasonable at all. Nor the other examples cited in the article.
The effect of taxes on cost of goods is not a simple one-time addition but a complex compounding. Those who sell Apple products in the UK have to pay UK taxes on everything they buy, so they expect to be paid more just to maintain a similar standard of living. The difference between $161 and $149 pays the taxes on stuff that was needed to bring the product to the UK market.
Why is $1.44 conservative?
For a large chunk of May and a smaller chunk of June the pound traded in this range. It spent much of the first few months of 2009 in the range too, and has fluctuated sharply on several occasions this year.
It seems pretty natural for a company to price at the low end of the spectrum. Given Apple's products and business model are all about simplicity, I don't see them wanting to update prices weekly or monthly.
At the end of the day, it's just greed
I assume you're talking about the VAT, taxes, and levies?
In my opinion every receipt should have VAT and taxes clearly separated -- a good example would be for fuel at the pump -- but then no British/European government is going to sanction mandating the spelling out of their indirect taxes to consumers.
No, it's mainly taxes, and it may be argued (with some justification) that many of them aren't particularly fair. Aside from one of the two of life's certainties, distribution of these items is expensive, with overland logistics being cheaper than over sea or air distribution. I doubt very much that the manufactured shipment goes to Cupertino first, delivery will be handled by the contracted manufacturer. There is warehousing at pretty much ever step of the manufacturing process to consider too, which is a huge expense. Distribution is going to cost more in different territories too; the fuel costs in Europe are significantly higher than in the US for instance. Finally, there is the point-of-sale (PoS) costs; floor space in terms of square footage (square meterage in the EU!) ain't cheap, and labour cost (sales force etc.) are higher in Europe than in the US. All that adds up, not forgetting the other afore mentioned duties and monetary fluctuation. So no. Not Greed. Not racing to the bottom for market share either; just ask Michael Dell if that's a sensible option...
Not just apple...
I'm usually fine with the odd bit of apple bashing, but I have to say that it's not just apple that does this. A couple of months ago i was looking at the nice Logitech wireless headsets and the average price in the US is $99, and the UK price was £99. They've come down recently, but a quick look around at the prices show the US version is now $55 and the UK version £65. I haven't taken tax etc into account but still
I think you'll find
that the air fare is so much more than the money you would save. Useful if you are travelling anyway, but not worth the trip otherwise.
Adobe is a far worse offender.
At the pound's peak of almost $2=1GBP a couple of years ago, Adobe were still selling Photoshop in the UK for 600 quid, while it was $640 or thereabouts in the US.
Quite a stunning mark up for basically a shiny disk. Makes Apple look fair in comparison.
Especially when most of their wares/warez can just be downloaded.
Same old, same old
They can't even claim it's the cost of shipping, as it's probably cheaper to ship a container full of cheap Chinese manufactured tat to the UK, as it is to the US.
It's not just Apple, as you rightly state, so I'm not bashing them (iBoyz please note..)
Interesting article. I suppose SOME of the extra cost might be shipping to our pokey island? Hmm, maybe not that much though. I was mildly surprised to see how similar UK and US prices were on the Sony and Dell products though. I'd have suspected deeper gouging from them.
For what it's Worth
Rip-off Britain is down to people being willing to pay rip-off prices.
If you don't think its worth the money, don't buy it.
Nowhere near as bad as before
Have people already forgotten the days when pricing was generally set on a $1 = £1 basis? Things are much, much better than they used to be, and the margin here seems reasonable given the fluctuations in the GBP over the past couple of years.