“The head of Apple’s highly successful retail division denies the company is slugging local customers more for its products by failing to pass on the benefits of the strong Australian dollar,” Stephen Hutcheon reports for The Age.
Ron Johnson, the senior vice-president for retail, said that, despite the Australian dollar hitting 25-year highs against the US currency, local prices of its product were ‘really fair’ and ‘within reach of most people. In every quarter, we look at the various exchange rates and try to get the product prices as well as we can,’ he said, speaking on the eve of the opening of Apple’s first wholly owned store in Australia, “Hutcheon reports. “Johnson said that, based on the growth in sales figures he has seen, price is ‘clearly not an issue’ for Apple’s Australia customers.”
Hutcheon reports, “However, CommSec’s chief equities economist Craig James said that, in spite of the appreciating Australian dollar, Apple, like many retailers selling imported goods, had not passed on the ‘full benefits you’d expect’ from the realignment in exchange rates.”
Hutcheon reports, “Despite there being near parity in the $US-$A exchange rates since the start of the year, many Apple products in Australia – including iPods, MacBooks and iMac computers – sell for between 15 and 30-plus per cent more than they do in the US.”
Full article here.
Is Apple ripping off Australians?
Yes.
Are there tariffs and import fees that Apple has to pay the Gov. US/AU that would make these higher margins legit?
I know when I worked for an Apple shop in St. Thomas USVI that when we shipped Apple product in we had to pay import fees…. though we could get around this by shipping by US Mail instead of UPS and Fed Ex. But the reseller (my company, not Apple) paid these fees… not sure how they do things down under.
The Dude abides
Is Apple ripping you off??? Ah ah ah…
It’s gotta be shipping costs! The 15% higher prices are because it’s so much farther from Taiwan to Oz than it is from Taiwan to the USA.
(batting eyelashes vapidly)
Quick answer — yes. Although the difference for some products is quite large, it’s not quite *as* large as the quoted article suggests, as the Australian prices have tax included, while the US prices do not.
Unfortunate, but Apple does the same thing in most places.
They’re also probably ripping off the Europeans.
Despite the increasing strength of the Euro over the last years, Apple’s prices have hardly changed.
As an apple shareholder I prefer the phrase, “making substantial profits”
Yeah, like imported products make it from China and the US to Australia magically by teleportation. Oil prices are at record highs in case anybody down under hasn’t noticed, and that stuff doesn’t get shipped halfway around the world to Australia for free.
Yeah, but most Apple products are made in China. It could easily be argued that purely based on shipping distances, that US prices should be higher than Australia’s. China is a hell of a lot closer to Oz than even the west coast of the US.
You are delusional if you think Apple’s China-made products are shipped to Australia *via* the US. (I suppose by your moronic train of thought, Apple products for the Chinese market are shipped to the US from China and then back to China again, thereby accounting for the markup in China.) Australia is closer. It’s a fact that Apple makes higher profit margins on their overseas sales. Check their quarterly results going back the last two decades.
Apple DOES have to compete with other electronic makers. If Apple charges too much, then buy from the competition.
“Apple rips off everybody.”
That’s the best troll you could think up?
How disappointing.
If shipping cost or the cost of doing business in lower volume/remote location is a factor, Ron Johnson should have used that as an argument.
I wonder what the cost of Apple products are in New Zealand?
“If Apple charges too much, then buy from the competition.”
Self-fulfilling prophecy?
I can tell you from personal knowledge that Australia has one of the highest import costs and charges of any western country. The protectionist import duties, and other taxes are among the highest in the world. At a 15% difference, I would say that Apple is absorbing some of the extra charges. If Aussies do not like the charges, elect a different government. Don’t blame Howard and the liberal party, protectionism was introduced to Australia by a Labour government many years ago.
As for the rip off – well compare other prices. Is anything in Oz the same price as in the US? I doubt it. Back onto Apple, it is only a rip off if you do not get value for money. So if you have bought an Apple product in Oz and are happy with it then you have not been ripped off.
A rippoff is defined by those who don’t purchase the product. Product value is defined by those who do.
The original iPhone was “valued” at $599 when I first purchased it a year ago. Those who didn’t purchase it called it a rippoff. Then when Steve lowered it to $399, those who thought it was a rippoff then called it good value, and those who bought it and got their $100 rebate to purchase more Apple stuff, thought it a Ripoff. Funny how it all works isn’t it?
The Muffin Man: They’re also probably ripping off the Europeans.
Despite the increasing strength of the Euro over the last years, Apple’s prices have hardly changed.
That’s not true any more, at least not in Germany. After $/€ conversion, the addition of 19% VAT, addition of the longer legal warranty over here and a certain markup for localisation there is only a relatively small difference to the US prices.
When the $ was still in the process of falling the disparity was substantial at times, but they have mostly equalized it a while ago.
Compare Apples to Apples.
First add in the import duty – say it’s 12.5%, which is probably low. Now add GST at 10% because for the consumer that is their sales tax.
So a AUD 100 Apple product (pre-duty) would be 112.5 when the duty is added and then 123.75 after GST is added onto that.
Now that same item moved to US$ would be about $96 pre duty & GST. But we pay sales tax, which close to 9% here so we would pay 104.64. or about 109.00 AUD. That puts the Aussies paying more – about 13% more with a 12.5% duty rate, but the difference goes to the Australian government, not Apple.
There is nothing that says Apple has to set a price to match their US retail prices… If they want the product, they will pay the price. If not, then they won’t.
You are not very well informed.
According to the Australian Customs website, computers (ref #8471, see http://www.customs.gov.au/site/page.cfm?u=4273) do not have a import tariff. For Australia to be engaging in protectionist activities in this regard, they would need a computer-making industry to protect. Australia has tariffs on some other things, mostly ranging from 3-10%, but computer products are not one of them.
This does not inspire one to take much heed to your “personal knowledge”.
You also need to consider the cost of labor. On a recent visit to Australia, I was told that the minimum wage is $15/hour, considerably more than the US.
Also we purchased a bottle of Australian wine in a store in Melbourne, Australia that was nearly twice as expensive as the same bottle of wine in a store in Montana.
I suspect that variations in exchange rates is only one of a number of varying costs of doing business in countries around the world.
As Fenman says, Australlian import duties are excessive, especially on luxury goods. Ever spec’ed a Porsche 911 in Australia? Don’t bother, you can’t afford one. The British are also ripped off very badly on most imported items.
Cars have high import taxes in Australia, due to the fragility of the local car manufacturing environment. Computers do not. (And there is no “luxury computer tax”, while there IS a luxury car tax.)
I don’t understand how economists can use only exchange rates to determine whether a company takes advantage of its consumers or not. There are many factors in setting a price for goods. While exchange rates is one of them, others such as paying salaries, rents, taxes, etc. according to local area are also important.
Now, I don’t know the average salary, taxes and real estate values in Australia. Apple may very well not pass the benefits to the consumers. That ought to be determined using comprehensive criteria. Using only exchange rates is too simplistic and FUD-dy. Even a non-economist like me knows that much.
@The Other Steve. “I wonder what the cost of Apple products are in New Zealand?”
Reasonably high, but the point is that they’re high in relation to the competition. A 20″ iMac is NZ$1,900. A “similar” Dell system is around NZ$1,300, setting aside whether we think Windoze Viscous is “competition”, and without too much nitpicking over the specs.
So, it’s not transport costs, since they’re both made in Taiwan/China, or transaction costs, such as GST (Goods and Services Tax), which they both pay. However, I hesitate to suggest that Apple is ripping off Aussies and Kiwis, as there are economy of scale issues to consider between PC and Mac imports, which I would guess run at a ratio of around 20:1.
Other posters above have pointed out other issues, such as labour costs, although again, they should apply to both PCs and Macs.
The issue of Mac costs in NZ was thrashed around among Kiwi MDN posters a year or so ago. The price of Macs here dropped $100 shortly thereafter for no apparent reason. Coincidence, no doubt.
For my part, I’m happy to pay the difference between a Dull and a Mac. Many others are too, as Mac sales are on a roll down under. It would be nice to see some ads on mainstream TV though.
Australia is FAR more urbanised and coast-based than either the US or Europe so transport costs are minimal once the product come off the ship. Other computer manufacturers seem to sell in Australia at much reduced rates.
The issue seems to be not why is Apple so expensive in Oz/Europe/etc, but why are Apple products so inexpensive in the US – more than volume and taxes would reflect.
I’m not trying to interject politics into the discussion, but US gas prices, as ridiculously low as they are by Western standards, are higher than necessary because of US tariffs on imported ethanol.
I have no way of knowing for sure, but I’d bet there isn’t any country that doesn’t have some goods or industry that its citizens aren’t overpaying for to “protect” them from other countries’ cheaper prices, or because it’s a good way to get more TAX money.
As it would be in the US as well, do you really think any Australian politician would fight on behalf of potential Porsche buyers to keep taxes down?
2 words:
a) supply
b) demand
Deal with it…
That’s the other part of it…
fenman
My personal knowledge is based on living there between ’76 and ’84 and doing business there when GST was introduced. I don’t know current duties, but do know that GST is still in effect. To get the comparison simply take the Aussie price/11*10*current exchange rate and compare it to the US cost plus your local sales tax rate.. Also assume a miracle and guess a small improvement in the horrid US$.
@ fenman
Protectionism was introduced, supported and expanded by both Labor and Liberal Governments up until the latter part of the 20th Century.
It was Labor Governments, specifically under the Prime Ministers Bob Hawke and Paul Keating, which dismantled our protectionist policies and reduce or removed import tariffs, floated the Australian Dollar and deregulated the labour market. It was Labor who modernised the Australian Economy, not the Tories.
We can blame Howard and the Liberals (conservatives aka Tories) for failing to invest in infrastructure of any kind whilst they presided over one of the longest periods of economic expansion this country has seen. Consequently, we have a national rail network which is basically falling apart and grossly inefficient.
The only thing Howard did was to exact revenge on everyone and everything he hated – workers, unions, public education and public health, gays and lesbians, indigenous Australians, academics, etc.
That’s the legacy of Howard.
And yes, Australia does have a higher minimum wage than the US and the UK. It is called the living wage so people can exist above subsistence level. Australia is a more equitable society because of it.
Yes we are being ripped off. Just go to the respective Apple Stores online. Mac Airbook US RRP $1799. A$1890 versus A$2499 on the Australian site. To be fair aussies should take off the Goods and Services Tax of 10%. Apple has nil control over that. So A$2249. Still a A$360 difference. Transportation costs aside, that’s a ripoff.
The do the same thing here in canada (well except for the iphone)
If Aussies don’t like the price, go buy a Microsoft turd product. The price is what it is. Live with it.
Err what about Aussie Duty & Tariffs?
Aren’t Duty free shops popular with Australians? Don’t Just add VAT…
Australian companies have no problems charging Aussies more for!
Hardiclad sells a 2×4 sheet in australia for Au$64 while I pay US$24 for a similar James Hardi Product (called Hardipanel here) made in Australia and made in the US..
Bonaire Durango Coolers sell for US$399 yet they retail in Australia for Au$750 and this is even worse in that these units come from Australia, yep we pay less despite shipping… go figure
Go check prices online… Mwave sells a Nikon SLR D200 (body) for $1951.80 while Amazon sells the same thing in Australia for US$1,189.99…
So quit pointing the finger at Apple like a whinging Pom
Correction!!!!
I said “Amazon sells the same thing Australia”… when I meant Amazon sells the same thing in the US for..
Sorry… but you get my drift
Billabong towels and beach ware were more expensive in the factory outlet stores in Melbourne, AU than they were in Target in the US.
I think it is very difficult to judge that a particular manufacturer’s price is a rip off if you do not know what the cost of doing business there is.
We have a free trade agreement with USA so there are no import duties.
The only tax payable is 10% GST.
Duty-free shops have just about gone out of business since GST was introduced.
Since the free trade agreement about two years ago any purchases I have made from the US haven’t had any additional costs (just the postage). This makes buying hard-drives and RAM from a certain Oregon based Apple re-seller very affordable.
I suppose if we aussies really wanted a bargain we would buy online from the US, pay for shipping and enjoy the savings. But make sure you buy apple care so that you get a worldwide warranty (at least for portables).
Whoever said Australia is protectionist has no idea. Australia is much more open than even the US. Tariffs and quotas don’t apply to the vast majority of industries and certainly does not apply to computers.
What drives up costs is supply and demand, transport costs and the good and services tax.
EVERYTHING in the US is cheap to buy compared to Australia. Even cars built in Australia and shipped to the US sell for less there than they do here! I just bought new tires (manufactured in Germany) for my car – price in Australia $490 per tire, price in US $175 per tire. At close to currency parity, that’s a hell of a difference. I like Nikon cameras, prices in the US are around half the price for the same product in Oz. My new TomTom GPS navigator was half the price in the US than the price in Oz – it was cheaper to buy from the US, ship to Australia, then buy and install the Australian maps than it was to buy it over the counter here. (As a result I also had maps of North America and Europe pre-installed as well).
Apple’s not doing to badly with it’s prices when you look around at price differences between Oz/US in other product categories.
Hmm writes: “Yeah, like imported products make it from China and the US to Australia magically by teleportation. Oil prices are at record highs in case anybody down under hasn’t noticed, and that stuff doesn’t get shipped halfway around the world to Australia for free”
Mate – you are the very definition of a “know it all, yet actually know nothing” Yank (as us “down under” HAVE noticed)! Not all of you of course, but for some reason, the more ignnorant people are in America, the louder and more in your face they get for some strange reason?!
Get an Atlas, or a children’s globe of the world, and look at the distance between China and Australia, vs. China and the US.
Anyone can see that the distance from China/Taiwan (where Apple MAKES ALL their products – they are only DESIGNED in California, USA) to even the Southern most eastern mainlaind city of Australia of Melbourne is LESS distance than China/Taiwan to the West coast cities of San Fran and Los Angeles.
If it was Oil prices buddy, then Apple products in New York should be TWICE the price as those in Sydney or Melbourne!
As an FYI – most of the USA is basically “half way around the world” from China/Taiwan!!! Again a globe or atlas would show you this quite easily and clearly.
This is a long standing problem with Apple products in Australia, though it has improved. A few years back there was multiple IT news articles hoswing the stupid price differences between the US and Australia, despite our currency improving in value against the greenback.
I posted a comparison that showed that for a top of the range Powerbook (this was just before the move to Intel), the price in Australis was DOUBLE that in the US, and as such, you could fly from Sydney to LA, buy the Powerbook retail in the US, and spend 4 days/nights at Disneyland, and get change compared to what you’d pay for the same item in Australia.
It was soon after this run of articles etc that prices in Australia started to improve RAPIDLY to where they are now – not perfect, but a damn sight better!
The idea that uptake shows they aren’t priced too high is bogus, uptake would be even better if they were priced at close to parity.
This has nothing to do with taxes etc, we have a 10% GST (similar to your state taxes) and after factoring that in, you still get the 15-30% price difference.
I am glad this has come up again, as last time it happened prices “suddenly” got better from Apple in Australia.
Hopefully we will see a slight improvement.
I should say I am a realist, I don’t expect FULL parity in all honesty. Australia is a small market in terms of population size (but high % of tech use per capita), so certain fixed support costs have to be amortised over a smaller user base, so a slight premium is likely and reasonable. But 30% differences are just taking the piss (as we say here down under).
my 2 cents,
Luke
opps let me correct some awful gramatical errors (I was obviously editing my thoughts as I typed):
“A few years back there was multiple IT news articles hoswing”
Should be:
“A few years back there were multiple IT news articles showing”
“Australis” should be “Australia” (fat fingers)
Regarding the posts that a lot of companies do this in Australia – this is a very valid point.
Apple is not the only one.
But doesn’t mean we shouldn’t shake the sabers once in a while and see if we get some better pricing as a result!
These price differences are why sites like eBay are so big in Australia. A lot of people use the “buy it now” feature from a online retailer, get their international warranty and even after shipping are better off.
My only objection was the “ignorance” of Oil prices being the reason and the smart arse attitude that us Aussies should know things aren’t “magically teleported” “half way around the world from China to Australia” (even though China to the US is actually further!)
@ MDN Reader
It is not just Billabong where that is the case: you can buy Penfolds wines in Switzerland cheaper than you can in Australia, so why should it be aby different for Apple products?
Given that most of us Aussies are descendants of sheep thieves and pickpockets, isn’t there a delicious irony that it is now our turn to be ripped off?
@ Alexo:
Of course cars built in Australia are cheaper in in the USA – the free trade agreement works both ways (in fact probably favours the USA), but in Australia there is a luxury car tax…
LukeInOz,
I saw plenty of loud and in your face people in Sydney and in New Zealand (Auckland) when I visited six years ago…I really could not tell how ignorant they were, but the fact that they were in a fancy hotel lobby fighting over whether the TVs should be showing the World Cup (in Asia at that time) or some rugby games leads me to think that they weren’t very intelligent human beings.
Point is, that it seems to me that the loud and in your face phenomena isn’t restricted to the “know it all, yet know nothing” Yanks and it certainly does not exclude the good folks “down under.”
Fact is, the exchange rate made a big move, the price of Apple stuff didn’t. Either someone lost a bundle in hedging or the cost of the Sydney store blew out or whatever, the price should’ve moved down a tad. Then there’s the Goods and Services Tax….
Quoting the article:
Ron Johnson, the senior vice-president for retail said that, based on the growth in sales figures he has seen, price is “clearly not an issue” for Apple’s Australia customers.
“I’ve been working for Apple since 2000 and I have never once – and I receive hundreds of emails a day from customers – had one email [complaining] about our pricing.”
Okay! So he’s implicitly admitting the excessive pricing is Apple’s doing but since he’s not hearing first hand customer’s complaints (probably because some schmuck filters out all those complaints before they get to him), it’s a non-issue and Apple will keep charging whatever they like.
So, does anyone know his email address? So us Aussies with an issue can drop him a line.
MDN MW: call. How prophetic! As in, let’s all call him and tell him what we think of Apple not matching the improving exchange rate to its hardware prices in Australia.