Ipod UK-US price discrepancy

[isi333]

Apple prices the 'new' 80GB ipod at $349. According to xe.com, that translates as just over £185 (GBP). However, at the apple UK store, £185 wouldn't even buy you a 30GB ipod, as these cost £189. The price for an 80GB version is £259, roughly $488.

I'm sure I'm not the only UK-er here who finds these massive contrasts frustrating and upsetting. As I remember it (although I've never really compared prices this carefully before), we in the UK have always paid more. I remember once, when I was thinking about buying a pack of ipod socks, I noticed that the socks were priced at a HIGHER number of pounds at the UK store than dollars at the US counterpart. I'm not talking equivalent, converted values here. I mean actual numerical figures. (Remember: $1 = £0.53).

So, has the difference in prices always been this bad, and it's just a case of me sleepwalking, or has it got worse recently? Has this ever been discussed on ilounge before? Am I the only person really, really bothered by this?:confused:

Hmm....

[sUPERdUCKY]

No you are not the only one who is annoyed I am annoyed for many reasons mostly:

iPod Video: We are expected to shell out on this even though nearly a full year has passed since it came out and the US got TV Shows now they have movies but yet we dont even have TV Shows never mind movies ! - why should we pay MORE for a piece of equiptment and not get the same use. Will we even see TV Shows and Movies when the 6G is released ?

...and then as you said there is the very large price difference .... BUT we accept it and that's how they get away with it - I really hope this thread has a lot of UK users so we can see what others think :)

[jhollington]

I've grown very tired of hearing this argument, since in reality it's actually not true, but rather an illusion based on the fact that international exchange rates do not reflect the pricing of consumer goods (nor wage parity), but rather are a reflection of the gross national product of the relevant nations.

The problem here is that the iPod only seems more expensive in the UK, but in reality it works out to the same price due to differences in the economy.

There is no direct equivalency between cost of consumer goods and exchange rates because the wages and cost of living is dramatically different. Product pricing is based on the earning power of the citizens of a country, not raw dollars.

To put it in simpler terms, general minimum wage in Ontario, Canada for an adult is $7.75/hr CAD. The minimum wage in the U.S. varies from state to state, but in California (which I'm using as an example since it's where Apple's corporate headquarters is located), it is $6.75/hr USD.

The National minimum wage in the U.K. for a working adult £5.35/hr (it's a bit more complex in the U.K., but that's the closest equivalent).

Now, the current CAD-GBP exchange rate is approximately 2.1, so that amount equates to $11.24/hr CAD (or $9.91/hr USD). Already see that we have a discrepancy in terms of actual money earned (in short, people in the U.K. make almost 50% more money per hour than people in Canada).

Now, the price of an 80Gb iPod in the U.K. is £259, in Canada is $399 CAD, and in the U.S. is $349 USD.

This means that to afford the same 80Gb iPod, a minimum wage worker in Canada would need to work for 51.5 hours and a minimum wage worker in California would need to work for 52 hours.

On the other hand, in the UK, a person making minimum wage would only need to work for 48 hours to afford the same iPod.

Therefore, an 80Gb iPod is actually slightly more expensive in Canada and the U.S. than in the U.K., and you don't hear us complaining..... :)

[isi333]

But surely if you were going down that route, you'd need to look at average wage, not minimum wage.

[jhollington]

Minimum wage is generally a reflection of average wage. More importantly, it's a reflection of base cost of living, since the minimum wage is what the Government supposes people can eke out a basic living on.

It is the base cost of living and the GDP (gross domestic product) that generally determines the cost of consumer goods.

Further, working on the basis of average wage can skew things even further, since average wage is controlled by a number of other factors, such as the number of extremely wealthy people versus the number of poor people, and of course the cross-section of industry and types of jobs and professions that are available.

However, you'll find the differences between average wage in the developed nations are the same as the differences in minimum wage, since the base economy works the same. The only places where average wages are more skewed is in developing nations (most of whom don't have a minimum wage, mind you.... )

[Bob]

Oh yes it has been discussed before. When the first iPods appeared I shelled out £349 for mine - the cost to a US buyer then was $399.

[isi333]

Ouch re the £349.

Come to think of it, I paid £299.99 for my 4g 40GB.

And sorry for the old topic. I just hadn't seen it around in all the time I've been reading these boards, so I decided to post it.

[Almahadeus]

This is nothing to do with how much you earn. It is all to do with the infamous complacency of the British consumer. I don't think any customer in the world would take this sort of c**p from the big sharks like Apple without making a stand.

We pay around 10p/min on the phone to speak to a customer service representative in the UK for godness sake and pay almost one pound for a litre of petrol...................... something people in the US wouldn't do even if they were all millionaires.

[CrouchingDonkey]

I think you have a very valid point isi333. I've always felt how you do about UK pricing. But when you look at the bigger picture, then jhollington is right.

Personally, I think it's a mixture of both. High UK taxes and higher minimum wage/GDP.

I'm a UK citizen, so I'm familiar with UK taxation/benefits. I've recently moved to Hong Kong (to teach English). Now, the cost of living here is extremely cheap by UK standards. There's no sales tax, and income tax is approx 17% (there's no national insurance here) But, there is also no minimum wage either, and average salaries are much lower than the UK, with longer working hours, and less annual leave. This means there's not much of any kind of benefit; no state pension when you retire, no National Health Service, no state education (except for the extremely poor), and no income support/unemployment benefit.

The 80GB iPod costs HK$2,780 (£190), which is £1 more than the UK price of the 30GB. It may seem like a bargain to UK people, and people here with a reasonable to high income, but to the average office worker let's say (non managerial), it's probably equivalent to the UK £259 or more.

I'm still in the habit of converting prices back to UK£, which is quite dangerous when I've just been paid. Everything seems like a bargain, and I end up spending too much!

If it makes you feel any better the quoted US price of $349, doesn't include the sales tax, which can vary between states.

[Coutinho]

For all americans and English people complaining about their iPod prices and minimun wage:

The minimum wage here in Brazil is around R$400/month, that is R$2.4/hour. Converting it to US Dollars we have U$1.1/hour.

We don't have an Apple Store or an iTMS, so the best we can get is an iPod at FNAC or another big department store. A 60G Video iPod at those stores costs R$2,200.00, or U$950. So a brazilian adult man, earning minimum wage, would take around 865 hours or 5.4 months to be able to buy the high end model iPod. Nice, huh?

[segura]

so I guess I will bring some ipods to France when I am there in two weeks . . .

[isi333]

Yes, but, since when have prices ever been decided on what people can afford? Never. Nobody has ever decided that all prices must be equivalent in terms of the proportion of a minimum or average salary they represent. Otherwise we'd all hop over to Africa and buy £4 ipods. That's not how a market economy works.

Let's not pretend Apple have made any attempt to make prices even in terms of what people can afford. Look at couthino's post for further proof of that. Apple rips us off because they know they can, as do car manufacturers, who have made us right-wheel drive in a left-wheel drive world, and DVD manufacturers, who made us a different 'region' to North America, and petrol producers, etc, etc, etc.......

[jhollington]

Well, like any manufacturer of consumer goods (particularly luxury consumer goods, which is what the iPod technically is), they are going to sell it for the pricing that the market will bear.

So yes, in a way you are correct.... Apple is selling iPods in the UK at the price at which people will buy them, and ditto for North America. However, at the same time if they were actually selling iPods at the exchange-rate equivalent, that would be quite unfair to the North American consumer base, who now has to pay more for their iPods than UK buyers do. The bottom line is that the parity in purchase price of consumer goods is still based on the earning power of the citizens.

It's a fairly simple formula.... Time/Effort/Skill becomes money, which is exchanged for consumer goods. Obviously, there are a number of other factors here, such as taxes, and other base cost of living expenses (health care, employment costs, transit costs, etc), but all in all, the concept is the same.

I know it feels like a rip-off that the iPod has a higher price tag in the UK, but again, most people in the UK are making more money than their equivalent counterparts in the U.S.

For example, in my particular consulting field, I can bill out at the same rate in the UK as I can in Canada - not the same rate by exchange, but the same number. This means that I make twice as much money when doing business in the UK. I have a number of international law firms as clients who do exactly the same (CAD $500/hr in Canada, £500/hr in the UK).

In fact, the very nation that an U.S.-priced iPod seems so cheap by comparison to the UK pricing proves that fact, but if you were to come to North America, and take an equivalent job to whatever you're doing in the U.K., you'd probably find that the same iPod doesn't seem so cheap anymore if you actually had to purchase it with earned dollars.

Does Apple make more money off of iPods they sell in the U.K. (considering they're manufactured in California at U.S. costs)? Quite possibly, but since they also have a business presence in the U.K., their cost of doing business in the U.K. is higher, and that has to be accounted for.

If Apple was simply shipping iPods into the UK at inflated prices and had no form of retail or corporate presence there, then you might have a point about price gouging.

I think it's reasonable to say that Apple has balanced out prices in the countries in which they have a physical presence. Right now this is only the US, the UK, Canada and Japan. The only one that really seems to have cheaper iPods is Japan, at ¥42,800 for an 80Gb. While equivalent to the US/Canadian price by exchange rate, it's actually sounds like a huge bargain when you consider that salaries in Tokyo are easily two to three times higher than they are in North America. However, I suspect that Apple is also competing with a very strong local technology market in Asia.

Coutinho's post concerns Brazil, in which Apple does not set any kind of pricing. Apple is not selling iPods in Brazilian currency, but rather the Brazilian market is selling U.S.-priced iPods at whatever they can get for them... Apple would be selling the iPods to Brazilian distributors and/or retailers in USD at the normal price, and then I'm quite sure that the Brazilian retailers are marking them up because they can. Further, Brazil is a mid-range developing nation, so economic factors there are going to be dramatically different and therefore cannot be used as a viable comparison to developed countries such as the U.S., Canada, the UK, western Europe and Japan.

[AM_Dragon]

So why buy an iPod? Are the iRiver and iAudio devices marked up as well? If there is an alterative that is more affordable just buy that insted. Is the markup unusually high? What if you wanted to buy say a Dell computer, or an Xbox 360 is the markup very high for those as well?

[Manotauro]

Apple would be selling the iPods to Brazilian distributors and/or retailers in USD at the normal price, and then I'm quite sure that the Brazilian retailers are marking them up because they can. Further, Brazil is a mid-range developing nation, so economic factors there are going to be dramatically different and therefore cannot be used as a viable comparison to developed countries such as the U.S., Canada, the UK, western Europe and Japan.

Doesn't Apple have sites for those countries? You can find the same situation in Poland, for instance, or in Spain (western Europe). What viable comparison should be used then?

[jhollington]

No, if you go to the Apple international sites for countries like Brazil, and then select the "Store" page, you are actually redirected to a list of authorized resellers in that country, and other (non-Apple) online retailers who ship to those countries.

In countries that Apple does not have any kind of retail presence (brick & mortar or online), they are not going to be setting iPod prices, but rather just selling them to other retailers in those countries.

Right now the only countries in which Apple seems to have any kind of meaningful presence is the EU countries, the US, Canada, Japan, the UK and Australia (there may be others, but the point is that the online store is not available everywhere).

The fair price comparison would be based on what the Apple Online and/or Retail stores are selling the units for. I'm not suggesting that the prices are going to be economically equivalent everywhere, but they seem to be in the major countries where Apple is doing business.

[Manotauro]

Yet, Spain and Poland have online stores. The prices are more or less the same for France (new 4gb Nanos=209€) than for Spain (199€), however, the minimum wage in France doubles Spanish one, and if I am not mistaken, the minimun wage in France is almost 4 times Polish one. Even so, prices are still higher in Poland than in France and Spain.

I am not saying that you are wrong, nor do I want to create controversy, but I do not see any sense in the way prices are applied to Apple products around the world.

[AM_Dragon]

...but I do not see any sense in the way prices are applied to Apple products around the world.

You could look up the import tax and terrifs laws and any other fees associtated with importing products into a given country. I would guess that each countries governments have as much to do with the price as Apple does.

Apple is company that wants to sell products and make money. I doubt they are sitting around in a board room talking about how they can stick it to the Polish people that want to buy thier product.

[Manotauro]

Apple is company that wants to sell products and make money.

That is exactly my point. I don't think that they care that much about prices in some countries, either, or that they take into account minimun wages. I cannot assure you about import taxes and fees of imported products into different countries, but Spain, France, Poland, etc all belong to the European Union, so those differences may not be so huge. But as I just said, I cannot assure this, just guessing.

[jhollington]

However, Poland may not be the best example, as it is still a nation going through economic recovery from years of communism.

Having recently visited Poland on a cultural visit, my wife can attest to the fact that Poland is still a country where most people are going to be more concerned with earning a living wage than buying iPods, and in Poland, regardless of price, the iPod would still be very much a high-end luxury item.

The very fact that Spain and France are pricing the iPod in Euros, whereas the Polish store has them priced in Zlotys (local Polish currency) is probably another indication of the fact that there really isn't much of a market for iPods in Poland (also, the newer models are not available on the Polish Apple online store).

Spain and France should likely be closer to the UK from an economic point of view, although even there consumer demand is going to factor into the equation, which will also affect pricing.

I honestly don't think that Apple is overly concerned with average wages or other economic factors, but at the same time the price of an iPod is going to reflect Apple's cost of doing business in those countries. My initial point is that they're not price-gouging in the UK, but that since they do have a UK presence, it costs them more to do business over there, and they have to recover those costs somehow. I'm sure if we compared the salary/wage of an Apple retail store employee in the UK with the salary/wage of an Apple retail store employee in the US, you would probably see a very similar discrepancy in wage as you do in the selling price of the iPod.

Apple does not at this time have retail stores in the rest of the EU countries, but there are still costs involved with shipping iPods into those countries and otherwise doing business there.

[Mr. E.]

That is exactly my point. I don't think that they care that much about prices in some countries, either, or that they take into account minimun wages. I cannot assure you about import taxes and fees of imported products into different countries, but Spain, France, Poland, etc all belong to the European Union, so those differences may not be so huge. But as I just said, I cannot assure this, just guessing.

I don't think it's a matter of Apple caring or not caring about pricing and minimum wage, it's just how economics works when you're dealing with comparable economies. Apple isn't trying to rip off one country any more than any other. Apple wants to rip us all off equally:D . It's not a strict matter of exchange rates. It's a mathematical equation where they try and find the price that enables them to sell the highest number of iPods at the highest price. In the UK, that price is higher than in the US due to the issues that jhollington has already pointed out. Also it seems possible that you could buy these from U.S. sellers, couldn't you? I imagine that figures into their pricing, too. They probably price it as high as they can without pricing it high enough to make it worth your while to buy from overseas.

And for a little comparison to show that general economics is at play, rather than Apple just trying to squeeze the UK for some extra bucks, I bought an iVak for my iPod which came from England. I had to pay $29.95 US, or about 16 pounds at the current exchange rate. I just went back to the site and selected the same product, this time telling it I was in Great Britain. The price I was quoted was 24.50 pounds, or about $46.00 US. Even though the company has a London address, I paid less for it in the US, not because the Vakadoo is trying to rip off their own countrymen, but because that's how it works out economically. The exchange rate is not the whole story.

[maddMorten]

I have to work about 35 hours to afford an 80GB iPod, or approx. a week. Yet here in Denmark the price of an iPod is about 500$ and I'm basically a clerk in a local supermarket. No special education or anything. Which means that it is the exactly reverse to the OP's theory. That I have to pay 1,43 times more but work only 0,70 times of what an American would to get an iPod.

[ragingSPAM]

if you want the lower price than dont go to the UK apple website and buy one have a guy here in the US get one pay him the cash and bam u saved urself some money

[Manotauro]

jhollington, I agree completely with you now :) I just didn't think that it was something having to do basically with minimun wage. I think Mr.E. also hit the nail. Thanks to both of you, I see it clearer now :). On the other hand, and as jhollington had already said, competence must play a very important role in it in some countries like Japan. I had it bought there and thanks to it I saved around €120. :D

Thanks again.