“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.