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The price conversions are outrageous
- Thread starter mr.bee
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luffytubby
macrumors 6502a
The quality of life is same everywhere?
I never said there was not a good quality of life in America. I said more people fall through the cracks than in Beglium. Smaller country, easier to maintain, easier to create a healthcare state.
edit:
well I did a google search, and it seems I was wrong and OP is right.: http://www.bbc.co.uk/news/magazine-22868787
this is a story about why the new game consoles are more expensive. they seem to point that its just because they can. if so, wauw! I am stunned, and I apologize for being wrong.
Jschultz
macrumors 6502a
550 euros does not sound like a lot.
I see some data that says the average Belgian will earn 3200 euros per month before tax (2011 data.)
I am also seeing some data that shows that around half of all Americans earn less than 3416 per month before taxes.
So about 75% of gross monthly Belgian income will be spent on 15" rMBP (2400 euros)
About 64% of gross monthly US income will be spent on 15" rMBP (1999 + 194 in taxes locally)
So yes, I agree that this is not favorable, but as mentioned in the one article, companies are doing this because they can, and people will pay.
benzslrpee
macrumors 6502
off the top of my head:
1. FX rates. locking in forward rates / swap has a cost. many times the tech companies Treasury group will forecast wrong and they'll take a capital loss due to exchange rates (e.g. Microsoft 3Q13 i think experienced this)
2. real estate leases. land in the US is comparatively cheaper than rest of the world simply because there is more of it. yes you have NY, SF or LA but compare that with London, Beijing, Shanghai or Paris. becomes a fairly high hurdle cost
3. volume sold. majority of sales come from the US and China. either you hit profitability targets with volume or with margin. say you want to establish a presence in a tiny market but has the critical volume of your targeted demographic (e.g. Singapore), can't offer US pricing and expect the same outcome
4. operational / financial risk. use China as an example, operating there includes a very real possibility that your company falls out of favor with the Chinese government (e.g. GlaxoSmithKline for "bribery" when that is pretty much the de facto way of doing business in China) and they'll put you through a tedious and costly negative press campaign and / or trial
5. market price. if enough people are still willing to pay for it at $X, then why should they not continue to sell it at this rate? there is no law requiring what is essentially a luxury good being sold at fair and reasonable prices... otherwise Louis Vuitton, Tiffany's, Ferrari, and 3 star Michelin restaurants might as well go out of business. ironically most people always view this as "well it should be cheaper"... why not the opposite argument "earn more money"? and yes, most tech products are a luxury item as one hardly needs the latest iPhone, Xbox, PS3, 100" HDTV to survive
6. barriers to entry. something the CEO needs to think about. price your products super low or moderately low invites lots of aggressive Asian companies to throw their hat in the ring and fight. by far, Sony / Apple / Microsoft etc. are not used to competing in low margin arenas. Dell and HP's consumer divisions should serve as prime examples of this. i'd like to see at least some American companies still out there making laptops and PCs instead of a 100% Asian market
7. market followers. tech industry moves fast. come out with a product and you're bound to see "inspired" copies to straight out knock-offs within a quarter that will erode the significance of the original. most companies will (and should) try to recoup as much of their initial investment (e.g. money put in manufacturing equipment) as fast as possible. this becomes doubly important if such products or projects were funded with debt or other types of investment capital
local government retail regulations, cost of advertising, region specific overhead costs etc...
any combination of these reasons can easily cause a significant price differential across the world. as such, the old $USD:$whatever world currency + VAT is a very stupid and myopic way of pricing a product. probably the most "stable" priced product is the Big Mac offered by McDonald's... so much that economists even have something termed the "Big Mac Index". but the fast food industry evolves at a wayyyyy slower pace than tech
1. FX rates. locking in forward rates / swap has a cost. many times the tech companies Treasury group will forecast wrong and they'll take a capital loss due to exchange rates (e.g. Microsoft 3Q13 i think experienced this)
2. real estate leases. land in the US is comparatively cheaper than rest of the world simply because there is more of it. yes you have NY, SF or LA but compare that with London, Beijing, Shanghai or Paris. becomes a fairly high hurdle cost
3. volume sold. majority of sales come from the US and China. either you hit profitability targets with volume or with margin. say you want to establish a presence in a tiny market but has the critical volume of your targeted demographic (e.g. Singapore), can't offer US pricing and expect the same outcome
4. operational / financial risk. use China as an example, operating there includes a very real possibility that your company falls out of favor with the Chinese government (e.g. GlaxoSmithKline for "bribery" when that is pretty much the de facto way of doing business in China) and they'll put you through a tedious and costly negative press campaign and / or trial
5. market price. if enough people are still willing to pay for it at $X, then why should they not continue to sell it at this rate? there is no law requiring what is essentially a luxury good being sold at fair and reasonable prices... otherwise Louis Vuitton, Tiffany's, Ferrari, and 3 star Michelin restaurants might as well go out of business. ironically most people always view this as "well it should be cheaper"... why not the opposite argument "earn more money"? and yes, most tech products are a luxury item as one hardly needs the latest iPhone, Xbox, PS3, 100" HDTV to survive
6. barriers to entry. something the CEO needs to think about. price your products super low or moderately low invites lots of aggressive Asian companies to throw their hat in the ring and fight. by far, Sony / Apple / Microsoft etc. are not used to competing in low margin arenas. Dell and HP's consumer divisions should serve as prime examples of this. i'd like to see at least some American companies still out there making laptops and PCs instead of a 100% Asian market
7. market followers. tech industry moves fast. come out with a product and you're bound to see "inspired" copies to straight out knock-offs within a quarter that will erode the significance of the original. most companies will (and should) try to recoup as much of their initial investment (e.g. money put in manufacturing equipment) as fast as possible. this becomes doubly important if such products or projects were funded with debt or other types of investment capital
local government retail regulations, cost of advertising, region specific overhead costs etc...
any combination of these reasons can easily cause a significant price differential across the world. as such, the old $USD:$whatever world currency + VAT is a very stupid and myopic way of pricing a product. probably the most "stable" priced product is the Big Mac offered by McDonald's... so much that economists even have something termed the "Big Mac Index". but the fast food industry evolves at a wayyyyy slower pace than tech
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Jschultz
macrumors 6502a
^^ Good post.
The more I think about it, the more I can see how pricing is such a hyper-local variable. All of the things you mentioned above as well as any nuance in many of the economies around the world make for different price structures.
While a product such as a Macbook Pro is set for a (somewhat single) price across the United States, I can think of some other things that are not. Heck, there is a disparity in most things (housing, gasoline, food, clothing) as you move from region to region in the United States.
The more I think about it, the more I can see how pricing is such a hyper-local variable. All of the things you mentioned above as well as any nuance in many of the economies around the world make for different price structures.
While a product such as a Macbook Pro is set for a (somewhat single) price across the United States, I can think of some other things that are not. Heck, there is a disparity in most things (housing, gasoline, food, clothing) as you move from region to region in the United States.
ioannis2005gr
macrumors 6502
People are strange!
This is very bizarre...the brainwashing of poorer countries slurping the dreams of their hungry children...
ioannis2005gr
macrumors 6502
In your opinion, why APPLE products are more expensive in your country? ...is there any connection with the "healthcare" state? or high average salary? ...
PS: Do you believe people in China buy APPLE products at lower prices?
A few points:
1. The US prices are without VAT. For European pricing, the VAT accounts for more than half of the price difference
2. There are additional costs for selling goods abroad. Exchange rate fluctuations, money transfer, localization costs (guess what the UK keyboard is different), adjusting to local regulations.
3. Don't forget that there is a 2 year mandatory warranty in the EU, that is another cost factor for Apple
Of course that is only part of the story, Apple will also adjust to what the average customer is willing to pay, and to the prices of the competition. Overall however I doubt that Apples margin on the MBPs in Europe is significantly larger than in the US.
Finally, those complaining about the taxes in Europe: Go to the US and ask for health insurance, or for college education for your kids, and then compare the costs.
1. The US prices are without VAT. For European pricing, the VAT accounts for more than half of the price difference
2. There are additional costs for selling goods abroad. Exchange rate fluctuations, money transfer, localization costs (guess what the UK keyboard is different), adjusting to local regulations.
3. Don't forget that there is a 2 year mandatory warranty in the EU, that is another cost factor for Apple
Of course that is only part of the story, Apple will also adjust to what the average customer is willing to pay, and to the prices of the competition. Overall however I doubt that Apples margin on the MBPs in Europe is significantly larger than in the US.
Finally, those complaining about the taxes in Europe: Go to the US and ask for health insurance, or for college education for your kids, and then compare the costs.
luffytubby
macrumors 6502a
Yeah. I was just in hong kong this summer. I would say a imac and mbps where 20-40% cheaper than in Europe.
ioannis2005gr
macrumors 6502
I won't disagree...but do you think your government collects money for a better "healthcare" state by selling you a more expensive i.e. rMBP?....do you really believe that?
...or because APPLE retailers in your country want to make a huge profit since they know that your average salary is much higher in Europe? (roaches and mice...)
In a previous post, there is a statement that in your country, people average income is around 3200-3400 euros, is that correct? (!!!)
Have you ever heard of "global financial depression"? maybe not? ...🙄
Jschultz
macrumors 6502a
Are you directing your question towards the correct person? I do not know if luffytubby is from Belgium - I was responding more to the people who stated that they were from there.
I'm trying to post the source I got it from, but I cannot remember at this point. However, the Economy of Belgium Wiki is saying that it's 3133 euros monthly (2012) .. you can find the source in the footnote.
I am not sure what you're really asking, though. It is no surprise that that the European healthcare model is different from that of the United States. As an American, I can see this in Canada, which is closer to a European mode.
What does the global financial depression have to do with anything, anyways?
i'm from the uk and bought a maxed out 15" rmbp haswell (2.6ghz, 16gb ram, 1td ssd) in nyc on friday, paid $3450 after taxes and my friend's student discount, that included applecare too
that's roughly 2140 GBP. which is LOWER than the cost of the base rmbp with the 750m in the uk, without applecare!!!!
I worked it out quickly on the day and it was a saving of around 800gbp
😎
that's roughly 2140 GBP. which is LOWER than the cost of the base rmbp with the 750m in the uk, without applecare!!!!
I worked it out quickly on the day and it was a saving of around 800gbp
😎
Jschultz
macrumors 6502a
That worked out very well for you that you happened to be in NYC and that you get a lot of bang for your GBP. I've only been able to work out a stronger US dollar in central american countries, which isn't nearly as useful.
ioannis2005gr
macrumors 6502
My statement:
Talking about Belgium where average monthly income runs around 3133 euros in 2012 (under global financial depression sounds very high), APPLE retailers make a fortune by selling APPLE products 20%-30% more expensive than in the USA.
The question: is this situation normal? In my opinion, yes! ...why? listen...
Usually, all these "roaches and mice" (APPLE retailers)...smell where big money goes and run after it! Under these conditions, they think it's easy to sell APPLE products 20%-30% more expensive than in the USA (also, people, there, have never complained).
In addition, APPLE retailers make contracts and import APPLE products using the exchange rate: 1 USD / 1 EURO, making an additional profit over 35%.
However, some people in Europe may believe that their government collects money for a better "healthcare" state by selling imported products more expensive (i.e. rMBP in our topic) due to higher VAT%.
This is not 100% correct!
APPLE customers need to wake up and start complaining to their local retailers about this ridiculous situation and use all the lawful means to reduce prices.
BUT, if they don't care and don't act collectively, retailers will be very happy and will never reduce the prices....In this case, People in Europe shouldn't "blame America" for that...
(NOW, do you understand me?) 😎
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benzslrpee
macrumors 6502
that is one way of looking at it. here's an alternative...
a company that operates internationally has to follow various transfer cost rules as determined by GAAP / IFRS. as a result, most product / service selling companies set up their operations in foreign territory as quasi-independent retail entity with master resell rights. i'm not too familiar with accounting guidelines or corporate law details but i assume this type of structure is done for various operating, legal, and tax privileges.
the main takeaway is products are transferred into operating regions at a set transfer price. the Apple stores in each region then assigns the appropriate target margin and sells to the end consumer. however, if a region does not have any Apple stores (as you are pointing out) then Apple has to sell through their retail partners.
so roughly speaking, retail partners will receive an Apple product at "transfer cost + whole sale margin", they will then sell to consumer at "transfer cost + whole sale margin + retail margin + applicable taxes". most people then automatically jump to "well get rid of the whole sale margin then you greedy b**tard!!" it is important to note that whole sale margin is unavoidable in most countries due to legal reasons. taking a product at transfer cost can only be done if you're Apple's (or Louis Vuitton, Coach, BMW, etc) own retail store... if a retail partner takes a product at transfer cost, it could be legally inferred that they are "Apple" which then means taxation, liabilities, employees, store leases etc. can be up for debate... and no one really wants to go down that route.
problem is, if a region is very small, with very few people demanding Apple products then it does not make a lot of sense for a retailer to strike a partnership with Apple unless they can recoup their initial cost and retail overhead. this usually ends up in comparatively more expensive retail price.
i'm fairly certain that there's only so much margin a retail partner can bake into the price before it becomes easier for the consumer to just go to another country where the price is more advantageous. for instance, the "shopping tours" that China has become so well known for, or the affluent Asians / Mexicans / Latin Americans traveling into the closest border state with an Apple store.
one last thing, from a currency perspective if a Euro retailer imports at 1 USD :: 1 Euro the retailers actually lose money right off the bat. even banks will give a better exchange rate. however, i suppose a Euro retailer can go to bank and take on a USD denominated credit facility (funded with Euros) and pay Apple to minimize that loss... in theory at least.
i do not know how sophisticated Apple's treasury group is, but my company provides quarterly (sometimes monthly) updates on FX rates we're required to use. i assume Apple would have a similar setup. it would seem like a nuisance to use an arbitrary 1:1 rate to sell a product, allocate cost of sales in different predetermined rate, and finally net out to gross margin... not to mention it would be a pain to pinpoint margin variations later on.
a company that operates internationally has to follow various transfer cost rules as determined by GAAP / IFRS. as a result, most product / service selling companies set up their operations in foreign territory as quasi-independent retail entity with master resell rights. i'm not too familiar with accounting guidelines or corporate law details but i assume this type of structure is done for various operating, legal, and tax privileges.
the main takeaway is products are transferred into operating regions at a set transfer price. the Apple stores in each region then assigns the appropriate target margin and sells to the end consumer. however, if a region does not have any Apple stores (as you are pointing out) then Apple has to sell through their retail partners.
so roughly speaking, retail partners will receive an Apple product at "transfer cost + whole sale margin", they will then sell to consumer at "transfer cost + whole sale margin + retail margin + applicable taxes". most people then automatically jump to "well get rid of the whole sale margin then you greedy b**tard!!" it is important to note that whole sale margin is unavoidable in most countries due to legal reasons. taking a product at transfer cost can only be done if you're Apple's (or Louis Vuitton, Coach, BMW, etc) own retail store... if a retail partner takes a product at transfer cost, it could be legally inferred that they are "Apple" which then means taxation, liabilities, employees, store leases etc. can be up for debate... and no one really wants to go down that route.
problem is, if a region is very small, with very few people demanding Apple products then it does not make a lot of sense for a retailer to strike a partnership with Apple unless they can recoup their initial cost and retail overhead. this usually ends up in comparatively more expensive retail price.
i'm fairly certain that there's only so much margin a retail partner can bake into the price before it becomes easier for the consumer to just go to another country where the price is more advantageous. for instance, the "shopping tours" that China has become so well known for, or the affluent Asians / Mexicans / Latin Americans traveling into the closest border state with an Apple store.
one last thing, from a currency perspective if a Euro retailer imports at 1 USD :: 1 Euro the retailers actually lose money right off the bat. even banks will give a better exchange rate. however, i suppose a Euro retailer can go to bank and take on a USD denominated credit facility (funded with Euros) and pay Apple to minimize that loss... in theory at least.
i do not know how sophisticated Apple's treasury group is, but my company provides quarterly (sometimes monthly) updates on FX rates we're required to use. i assume Apple would have a similar setup. it would seem like a nuisance to use an arbitrary 1:1 rate to sell a product, allocate cost of sales in different predetermined rate, and finally net out to gross margin... not to mention it would be a pain to pinpoint margin variations later on.
ioannis2005gr
macrumors 6502
let me understand better. Do you own an electronics market/store in Europe? where? do you accept this situation?
You have explained us very well how the "rodents" make legally money by introducing contributions and taxes...BUT whose "pocket", do you think, is getting heavier? the pocket of....government? retailers? APPLE? others?... because, as you may realize, people in Europe pay much more (around 30-40% more than in the USA) to buy the same product.
Everybody knows that this is ridiculous in a free market competition! 😎
You have explained us very well how the "rodents" make legally money by introducing contributions and taxes...BUT whose "pocket", do you think, is getting heavier? the pocket of....government? retailers? APPLE? others?... because, as you may realize, people in Europe pay much more (around 30-40% more than in the USA) to buy the same product.
Everybody knows that this is ridiculous in a free market competition! 😎
It's not just with electronics, but almost everything. We pay a lot more for cars, for electronics, for clothing (when compared to identical products in the USA) for food, for gasoline and a lot of other things in Germany.
dusk007
macrumors 68040
Gross is not exactly disposable income.
From what I found on comparing prices in US vs EU is that a lot of the smaller daily stuff is much cheaper in the US but the big expenses like insurance, educatoin, houses are often cheaper in the EU if you compare similar quality. Land is cheaper but the kind of houses US citizens often can only afford to build on that land does even qualify for a proper house in Austria. Bank taxes are insane in the US. ATM fees and such. In the US more often there is a charge on small things but the amount is often usually lower.
Still US citizens have on average way more disposable income. Yet lower prices. The companies just exploit the local price range and get what they can. Those that think there are so many extra taxes, should maybe read up. On computers there is no import duty. There is only a higher VAT. Multinationals like Apple pay actually very little taxes and due to some fancy tax evasion strategies I think less in the EU than the US. Also corporate taxes even in normal countries are usually at 25% which is lower than the US. Amazon does just fine on delivering tonnes of stuff to EU citizens. Legal fees are everywhere but afaik higher in the US with its lawyer armies.
I doubt that selling their products in the EU costs them in anyway significantly more than it does in the US. They can ask for the price so they do it and are happy about the exchange rates developing ever more into their favour.
I think once in the last couple of years the exchange rate dropped to its lowest and only then the prices just got close to equal (accounting for VAT).
No, it's just you not doing simple calculations or misunderstanding sales tax.
In Europe we have VAT. VAT can be as high as 25% in some European countries. The European prices are displayed *including* VAT. If you remove the 25% VAT, then the price is only slightly higher than that in the US.
In the US, prices are displayed *excluding* sales tax. When you added your MBP to the cart, state and local sales tax is added during the cart process. This can be 10% or more.
Once you add this state/sales tax, the prices are surprisingly close. In the UK, a specced up 15" MBP is approx £1800 without VAT. In the US, the same specced up 15" MBP is approx £1800 when local/state sales tax is added.
How is that "disgusting"?
Giuly
macrumors 68040
The EU price is with sales tax, the US prices are without sales tax (which doesn't matter as you can buy it from another state and don't pay it altogether, while you can't buy one from i.e. Czechoslovakia and save the sales tax in Europe). And yes, even the price before taxes is higher in the EU.
Secondly, <insert basic economics stuff here>. When the US market is saturated, the prices may or may not get aligned to stoke sales up a notch. Or whatever.
Lastly, have fun at the airport. And calc it out first.
jondunford
macrumors 6502
americans don't like non americans because they are not american and american people are better than non american people
this is why us non americans are charged stupid prices for just about everything
this is why us non americans are charged stupid prices for just about everything
benzslrpee
macrumors 6502
actually i'm in Texas 😀 about as far from Europe as one can get in terms of location and culture. however i work for a global firm headquartered in Europe hence my semi-familiarity with the need of transfer and FX related costing.
like i said, the pricing economics likely have much more to do with market size and risk (which i mentioned earlier) as opposed to "lining someone's pockets". take the country that was used as an example a couple of posts back, Belgium. about 11M people live there (assuming Google is correct) compared with 26M in Texas or 8.3M in NYC or 314M in the USA... for an company of Apple's size, their retail simply does not scale down to serve a nation of 11M people very easily. and the pricing more or less reflects that.
my company is built to service large cap companies... we do extremely well in deals that are upwards of $100M but anything less than that, our difficulties grow on a logarithmic curve as the deal size drop. on the flip side, a company built to take on small-mid market sized corporations would have a hard time doing deals with big conglomerates as they can not efficiently scale up to meet those needs 😱
if the pricing is too extreme, people like mr. bee will fly to NYC to buy instead. or as i've observed in Texas / California, plenty of Mexicans / Chinese / Japanese / Koreans make specific trips to the US to buy their target goods... whatever those may be. is this not free market competition? you do not like the price in one place, you are free to choose a substitutable good or buy somewhere else...
like i said, the pricing economics likely have much more to do with market size and risk (which i mentioned earlier) as opposed to "lining someone's pockets". take the country that was used as an example a couple of posts back, Belgium. about 11M people live there (assuming Google is correct) compared with 26M in Texas or 8.3M in NYC or 314M in the USA... for an company of Apple's size, their retail simply does not scale down to serve a nation of 11M people very easily. and the pricing more or less reflects that.
my company is built to service large cap companies... we do extremely well in deals that are upwards of $100M but anything less than that, our difficulties grow on a logarithmic curve as the deal size drop. on the flip side, a company built to take on small-mid market sized corporations would have a hard time doing deals with big conglomerates as they can not efficiently scale up to meet those needs 😱
if the pricing is too extreme, people like mr. bee will fly to NYC to buy instead. or as i've observed in Texas / California, plenty of Mexicans / Chinese / Japanese / Koreans make specific trips to the US to buy their target goods... whatever those may be. is this not free market competition? you do not like the price in one place, you are free to choose a substitutable good or buy somewhere else...
drsox
macrumors 68000
Nope. Market prices are set by competitive and product family reference not by exchange rates. Ask any Product Manager. Exchange rates just get in the way (unless there's a margin problem). It's not a commodity that Apple sells, if it was then exchange rates would assist folks to arbitrage. As it is, buying in the US and selling elsewhere is the best that can be done to arbitrage. Similarly, buying in HK and selling in China.
----------
Just a question for the forum members who have posted in this thread.
Have any of you ever had any experience in being a Product Manager in this sort of industry ?
Anyone ever set international product and transfer prices for real ?