Why is iMac so much more expensive in Europe?

numlock · Dec 21, 2014

roberthallin said:
Because... Well, a lot of reasons.

Depending on which country in Europe you're living in (there's 50 of us...) you have to pay their taxes and social fees, which are generally higher since a lot of them have a lot better social security systems etc in place than the U.S.

In Sweden for instance, since this is what I'm most familiar with, we pay a lot of taxes... On everything. Depending on how much you make you pay up to 60% (normally around 35/40%) of your salary in income tax, and everything that is being sold here has a tax called "moms" on it, which is somewhere around 33%. Meaning for every product that costs 100$, 33$ goes straight to the government. This is comparable to VAT, but it's not entirely the same thing. So businesses needs to charge more for a product than in a country where there's a lower tax, in order to make the same profit.

In return for this there's universal physical and mental healthcare which includes a guarantee that you never pay more than ~200$/year for medicine, free education for everyone (you even get paid for getting a PhD), daycare, state pension, and an endless list of things that the state can do for you if you need them, such as getting help with your rent if you have a low income, getting an apartment, getting (proper) wellfare if you don't have a job etc etc etc. Also, all this is available to every citizen, regardless of how much the individual pays in tax.

However, to those who live and work here the prices aren't expensive in the same way that they are to those who doesn't work and live under the same conditions. For instance, Norway is incredibly expensive for anyone who doesn't live there, but in relation to the average norwegian salary it's not as bad as it might look at first for say.. a Swede

So yeah, basically it depends of on the sort of political system that is in place as well as which country you're living in with all the regional variations that exists. It also depends on wether or not the country you live in is part of the EU.

As for being "ripped off", that's something you might often hear from someone who doesn't understand what socialism is or why it exists, or maybe they don't personally get to use the money they pay in taxes and doesn't take any joy in knowing that the money is helping people less fortunate than themselves, or the country as a whole.

Personally, I love socialism

the VAT in sweden is 25%.

and if 33 SEK out of the 100 SEK go to the government then the VAT rate is 49%

btw are any goods or services sold with 0% VAT in sweden?

obviously higher sales tax or VAT has impact on this comparison. i dont quite agree that adding the sales price of applecare is a fair calculation.

Fester1952 · Dec 21, 2014

macrem said:
iMac with Retina 5K display
+16GB RAM
+512GB SSD

US$3,272 incl. tax in CA

Here in Australia same spec is $3,599 AU
which is $4443 US

Apple has always ripped us off here in Australia, iTunes and App Store is a good example. Australia is 69% more expensive for music while apps prices are 30% higher, but I have read that some counties are even much higher.

toddzrx · Dec 21, 2014

Chippy99 said:
And it's about $200 on the figures quoted by the OP. $200 that Apple are choosing to overcharge by, in order to subsidise less profitable (more competitive) markets.

What's the warranty period on an iMac in Sweden? That could be the AppleCare we'd pay extra for in the States.

I doubt Apple is subsidizing other markets by overcharging yours. Not a good business strategy; that's just not how they operate.

dyn · Dec 21, 2014

Chippy99 said:
Who on earth suggested otherwise?

You said you failed to see why it applied to Apple which would mean that Apple is above the law.

However, if we accept for the sake of argument your position that these unspecified costs of yours are varying constantly and wildly, then even so, that is no justification for prices being constantly and consistently too high.

Some costs are fixed, some are variable and may change over the course of 1 year. Some are variable and do change over the course of 1 year. Currently it is quite worse due to all the budget cutting going on. Governments are struggling to find money and thus changing taxes and such almost every year.

Currencies used to not change very often but currently they are changing a lot. It changes from week to week now. This also affects a lot of other stuff like loans, interest rates and so on.

Mikael H sums it up perfectly, above. And it's about $200 on the figures quoted by the OP. $200 that Apple are choosing to overcharge by, in order to subsidise less profitable (more competitive) markets.

It is a nice sum up yes but too simplistic. It is not how global economics, geopolitics and so on work.

For example: there is a war going on in Ukraine causing airtraffic to divert (after the MH17 tragedy). Planes have to take routes that are longer and thus burn more fuel. Kerosine is very expensive and thus prices for airtransport go up. Then there is this diplomatic war between Russia and the rest of Europe that make companies quite cautious (luckily Russia knows that'll suffer as much as the rest does when they close their airspace so they won't do that). This also causes problems with things like insurance. Insurances and warzones do not mix.

Apple and others know that things change over the course of 1 year and so they'll price their products accordingly. Meaning, it'll have a fixed price with a margin so they can handle the changes. And yes, there might be times where that margin is huge but there can also be times where it is very small or where it is in the red. In case of Apple the pricing seems to be for several years, not just 1 year. We've seen that when necessary they adjust the pricing (but up and down). That way of pricing things makes it easier for us consumers. Imagine if they'd use the pricing model of petrol (which changes every day). Try saving for a new Mac then!

I can imagine that they also have a special legal department for the EU due to all its regulations. That adds to the costs.

---------------------------------------------------

Maybe things become a bit more clear with the following. Focus on the USA for now and put yourself in the position where you are creating a product and putting it on the market. That means you have costs for personnel, buildings and so on but also costs for R&D and certification (FCC, UC, etc.). Now you take all this and think up a price which, for the iMac 5k, is the $3,272 incl. tax (see OP).

Next, you want to sell it in, say, the EU. EU is further away from China than the USA so shipping will cost more. Next, EU regulations also say that the product needs to be certified which adds to the costs (it won't be 1 certification, it'll be several). Oh darn, the EU has different powerplugs, need to manufacturer them separately and add them to the product later on. That means separation of product lines in the factory. Would that be free? Don't count on it!

I can keep going on and on but I think you get the idea. Selling in a different country is not an easy thing. You need to follow their rules and regulations which can drive up the costs. How do you deal with that? You can set 1 price for the entire world. That means that in some countries you have a lot of margin and in others you don't. How does that affect laws concerning profit? What do you do if a currency plummets? Adjust the price for the entire world? What do you do with the other changes? How will customers feel about this? And so on.

roberthallin · Dec 22, 2014

Mikael H said:
I'd say this is oversimplified.
Sweden, like many other countries, has several tax "levels" depending on how much you make. Up to a threshold income, you pay a certain percentage in tax. Above such a threshold, you pay the next higher percentage, but only on the amount that exceeds the threshold value.

Swedish "moms" is what's called VAT in most of the world. The Swedish VAT is 25%, not 33%.

---

To answer the OP:
To get the price you'd pay in a European country, do this:
- Take the US price excluding taxes.
- Add freight from the US to your location.
- Add your country's customs tariff for the kind of gear you've bought (usually between 6 and 12 % for electronics).
- Add your country's VAT to ([the purchase amount] + [the amount paid in customs]).

The price difference, once you've compensated for currency fluctuations, is what you're being "ripped off" for by the seller. The rest is what you pay for living where you live.

Yeah, I didn't go in to a lot of details, since that doesn't matter here. Why don't you explain in great detail, since the exact numbers and specifics are very very important to the question posed in the first post?

Chippy99 · Dec 22, 2014

dyn said:
You said you failed to see why it applied to Apple which would mean that Apple is above the law.

Some costs are fixed, some are variable and may change over the course of 1 year. Some are variable and do change over the course of 1 year. Currently it is quite worse due to all the budget cutting going on. Governments are struggling to find money and thus changing taxes and such almost every year.

Currencies used to not change very often but currently they are changing a lot. It changes from week to week now. This also affects a lot of other stuff like loans, interest rates and so on.

It is a nice sum up yes but too simplistic. It is not how global economics, geopolitics and so on work.

For example: there is a war going on in Ukraine causing airtraffic to divert (after the MH17 tragedy). Planes have to take routes that are longer and thus burn more fuel. Kerosine is very expensive and thus prices for airtransport go up. Then there is this diplomatic war between Russia and the rest of Europe that make companies quite cautious (luckily Russia knows that'll suffer as much as the rest does when they close their airspace so they won't do that). This also causes problems with things like insurance. Insurances and warzones do not mix.

Apple and others know that things change over the course of 1 year and so they'll price their products accordingly. Meaning, it'll have a fixed price with a margin so they can handle the changes. And yes, there might be times where that margin is huge but there can also be times where it is very small or where it is in the red. In case of Apple the pricing seems to be for several years, not just 1 year. We've seen that when necessary they adjust the pricing (but up and down). That way of pricing things makes it easier for us consumers. Imagine if they'd use the pricing model of petrol (which changes every day). Try saving for a new Mac then!

I can imagine that they also have a special legal department for the EU due to all its regulations. That adds to the costs.

---------------------------------------------------

Maybe things become a bit more clear with the following. Focus on the USA for now and put yourself in the position where you are creating a product and putting it on the market. That means you have costs for personnel, buildings and so on but also costs for R&D and certification (FCC, UC, etc.). Now you take all this and think up a price which, for the iMac 5k, is the $3,272 incl. tax (see OP).

Next, you want to sell it in, say, the EU. EU is further away from China than the USA so shipping will cost more. Next, EU regulations also say that the product needs to be certified which adds to the costs (it won't be 1 certification, it'll be several). Oh darn, the EU has different powerplugs, need to manufacturer them separately and add them to the product later on. That means separation of product lines in the factory. Would that be free? Don't count on it!

I can keep going on and on but I think you get the idea. Selling in a different country is not an easy thing. You need to follow their rules and regulations which can drive up the costs. How do you deal with that? You can set 1 price for the entire world. That means that in some countries you have a lot of margin and in others you don't. How does that affect laws concerning profit? What do you do if a currency plummets? Adjust the price for the entire world? What do you do with the other changes? How will customers feel about this? And so on.

Whatever mate, I can't be bothered arguing with you.

Happy Christmas.

----------

toddzrx said:
What's the warranty period on an iMac in Sweden? That could be the AppleCare we'd pay extra for in the States.

I doubt Apple is subsidizing other markets by overcharging yours. Not a good business strategy; that's just not how they operate.

It's how many businesses operate. For example Honda Civic, basic model UK price £17,000. US price $18,000, i.e. £11,500.

The price differential is not justifiable by any additional taxes or other costs. The manufacturers come out with various lies to try to hide the facts but the bare facts are that the UK (and other European markets) are used to subsidise sales in the US.h

By the way, it would be stupid of them to NOT do this. Businesses sell their products at the highest prices they can get away with, to maximise profits of course. This is normal. If a market can sustain (or "put up with") a higher price, it would be pretty stupid not to charge it. More fool us for putting up with it.

roberthallin · Dec 22, 2014

toddzrx said:
What's the warranty period on an iMac in Sweden? That could be the AppleCare we'd pay extra for in the States.

One year limited warranty from Apple, over three year total that's mandatory for all consumer goods in Sweden.

thundersteele · Dec 22, 2014

Chippy99 said:
By the way, it would be stupid of them to NOT do this. Businesses sell their products at the highest prices they can get away with, to maximise profits of course. This is normal. If a market can sustain (or "put up with") a higher price, it would be pretty stupid not to charge it. More fool us for putting up with it.

Yes, this is the real reason. Companies will choose price points that maximise revenue and/or profit. If those price points are different for different markets, they will adjust accordingly.

Examples:
Gas usually costs more in city centers and on highway stops, and is cheaper on the countryside.
In touristy locations, bottled water is often sold for several dollars, despite the same being available for 50 cents in the supermarket.
Cinemas sell popcorn and sodas at extremely inflated prices...

Chippy99 · Dec 23, 2014

thundersteele said:
Yes, this is the real reason. Companies will choose price points that maximise revenue and/or profit. If those price points are different for different markets, they will adjust accordingly.

Examples:
Gas usually costs more in city centers and on highway stops, and is cheaper on the countryside.
In touristy locations, bottled water is often sold for several dollars, despite the same being available for 50 cents in the supermarket.
Cinemas sell popcorn and sodas at extremely inflated prices...

True.

But if you look at the global manufacturers (automotive for example) they don't make outrageous profits overall. Quite the contrary in fact, and in the case of many automotive companies that struggle to make any profit at all.

So if they are making big profits in some territories, and much smaller profits overall, that necessarily means that in some markets they are making lower than average profit, or perhaps even losses.

So the idea that they are "subsidising" sales in one territory by overcharging in another might sound like an inflammatory way of putting it, and it may or may not be a deliberate strategy to rip some customers off for the good of others... but that is the reality of the situation.

Often segment information is not available in annual reports down at individual country level, or perhaps not even at regional levels, but certainly some multinational make losses in individual territories. You might ask why they don't pull out of those markets then, and the answer is because they need the volume. Only by having high volume can they keep the manufacturing costs low enough to compete overall, so they are happy to break-even in the volume markets in order to make profits in other territories.

dyn · Dec 23, 2014

Chippy99 said:
The price differential is not justifiable by any additional taxes or other costs. The manufacturers come out with various lies to try to hide the facts but the bare facts are that the UK (and other European markets) are used to subsidise sales in the US.

Actually it is and no, it is not the manufacturers who are lying. Any company will try to sell things for a price that is beneficial to them. It is something that you can expect from them. The reason for the huge price differences are usual due to political reasons only. It is all about protecting ones own market. We've seen it happen with solar panels, we've seen it happen with steel and we've seen it happen with a lot of other things. China, USA and EU are well known for protecting their local markets/products. In the EU it is mostly about protecting local heritage, in China and USA it is more about protecting their local economy. A lot of Americans only want to buy something if it is made in USA for example.

Apple took down their Russian online store due to the Rubble plummeting. They brought it back online with high prices. The reason for that is quite simple: market protection. If the hadn't changed the pricing people would have bought the devices elsewhere and sold it in their own country. That's like free money for the sellers. This can cause a disruption of the local market and there are many countries that have laws in place that forbid these practices.

There is not much a manufacturer like Apple can do about this. They just want to do business. Politicians, however, will favour their local businesses. If you want things like this to change than contact your local politicians.

Chippy99 said:
You might ask why they don't pull out of those markets then, and the answer is because they need the volume. Only by having high volume can they keep the manufacturing costs low enough to compete overall, so they are happy to break-even in the volume markets in order to make profits in other territories.

Not only that, it's also about marketing. Lexus designed a new car called the LFA. They only made 500 of those cars at a certain price. That price and number of cars is not going to be enough to cover the costs. The only reason why the LFA exists is marketing. Lexus created the car to show what they are capable of, to build and strengthen their brand. It's not always about making profit on a certain product or covering costs.

So all in all, it is really way too simplistic to say, in this case, that Apple is knowingly and willingly ripping off people in the EU.

Malte. · Dec 23, 2014

numlock said:
the VAT in sweden is 25%.

and if 33 SEK out of the 100 SEK go to the government then the VAT rate is 49%

btw are any goods or services sold with 0% VAT in sweden?

obviously higher sales tax or VAT has impact on this comparison. i dont quite agree that adding the sales price of applecare is a fair calculation.

That is correct, VAT is 25% here(12 or 6% on some things).
And yes, there are things that has zero VAT.. Medical & Dental care, Education, banking & insurance services are a few examples.

Income tax is around 32-33% for most people. If you have over a certain level of income, 20% more is added, or 20+5% if you have above another level.

But we also have "Work tax deduction", so we are not really paying the levels described above.

Sorry for the off topic.

Chippy99 · Dec 23, 2014

dyn said:
Actually it is and no, it is not the manufacturers who are lying. Any company will try to sell things for a price that is beneficial to them. It is something that you can expect from them. The reason for the huge price differences are usual due to political reasons only. It is all about protecting ones own market. We've seen it happen with solar panels, we've seen it happen with steel and we've seen it happen with a lot of other things. China, USA and EU are well known for protecting their local markets/products. In the EU it is mostly about protecting local heritage, in China and USA it is more about protecting their local economy. A lot of Americans only want to buy something if it is made in USA for example.

Apple took down their Russian online store due to the Rubble plummeting. They brought it back online with high prices. The reason for that is quite simple: market protection. If the hadn't changed the pricing people would have bought the devices elsewhere and sold it in their own country. That's like free money for the sellers. This can cause a disruption of the local market and there are many countries that have laws in place that forbid these practices.

There is not much a manufacturer like Apple can do about this. They just want to do business. Politicians, however, will favour their local businesses. If you want things like this to change than contact your local politicians.

Not only that, it's also about marketing. Lexus designed a new car called the LFA. They only made 500 of those cars at a certain price. That price and number of cars is not going to be enough to cover the costs. The only reason why the LFA exists is marketing. Lexus created the car to show what they are capable of, to build and strengthen their brand. It's not always about making profit on a certain product or covering costs.

So all in all, it is really way too simplistic to say, in this case, that Apple is knowingly and willingly ripping off people in the EU.

Your post is full of complete nonsense. I honestly can't be bothered debating it line by line, but suffice to say I totally disagree.

Over and out from me.

tkwolf · Dec 23, 2014

MacGurl111 said:
My friend told me in the Philippines, the iPhone is like 2 or 3 times the cost her in the US.

A week or less after the launch in October, I saw posts that prices in China, Philippines and other countries went as far as $2000. People were outraged online, and the stores simply defended by saying they're the "introductory price". Lol

Georgio · Dec 23, 2014

Prices are high in the rest of the World so that Apple can keep prices low in the US, so effectively subsidising the market.
Supposedly it's because of the huge US market, but in reality the EC is a greater market so collectively we 'should' also be offered $199 iPhones instead of the same model costing us effectively $900 in the UK....

janitor3 · Dec 23, 2014

I don't like how Apple just change the $ sign for £ sign in the UK.

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Why is iMac so much more expensive in Europe?

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