Ask HN: Why is Apple ripping of European users? 1€ ≠ 1$

https://news.ycombinator.com/item?id=4099587

by ssn • 14 years ago

74 95 14 years ago

news.ycombinator.com

Anybody can explain this strange policy followed by Apple in their stores?

pktm• 14 years ago

If I had to guess (and I guess I don't /have/ to), I'd say it's strictly psychological pricing, and is not intended to reflect some sort of idealized exchange rate or the like.

http://en.wikipedia.org/wiki/Psychological_pricing

AnthonBerg• 14 years ago

Agreed.

I think it's not just that though - there's the sales tax and the extra warranty mentioned elsewhere in thread, plus there's a bit more overhead of doing business in Europe. More languages, different rules, etc.

Adding all of that up, I can totally understand that Apple just slap on the same EUR/USD amount and call it a day.

lamby• 14 years ago

Not forgetting that things are priced by what people will pay for them..

jgrahamc• 14 years ago

I don't think it's that strange. Let's compare the cost of the same MacBook Air in the US and France.

1. MacBook Air 11-inch : 64GB in US is $999.

2. MacBook Air 11-inch : 64GB in France is €1,049

3. $1 = €0.80 at the current time.

So you might think the MacBook Air should be €800 (999 * 0.80). So why it is €249 more? France levies 19.6% TVA (sales tax) on goods and the tax is included in the display price; the US levies sales taxes by state and these are not shown in the displayed prices (sales tax calculated based on destination).

So, what you need to compare is the pre-tax price on both machine. The pre-tax price of the MacBook Air in France is €877. Thus Apple is charging €77 more for the MacBook Air in France than in the US.

The issue is tax rates not Apple.

If you look at the UK you'll find that

4. MacBook Air 11-inch : 64GB is £849

5. $1 = £0.65

So, the £ equivalent of the $999 machine is £650. UK VAT (sales tax) is 20% and thus the pre-tax price of the machine is £707. So Apple is charging £57 more in the UK than in the US.

davidw4• 14 years ago

> US levies sales taxes by state

Or, in the cases of Oregon and New Hampshire, does not levy it at at all.

toyg3• 14 years ago

Although not as massive as it looks in the first place, there is still a discrepancy. The new MBP-Retina top config is 2799 USD -> 1805 GBP. In the UK store, it's 2299 GBP, less 20% vat -> 1916 GBP.

So they're taking more than a 100 quid extra from each UK customer, "just because".

kolinko• 14 years ago

Well, don't forget our lovely European regulations. The costs of hiring employees and handling business in Europe is higher than in US if I'm not mistaken.

Finally, I'd guess that Apple pays its contractors in USD. So if today 1 USD = 0.8 EUR, Apple needs to consider the fact that tomorrow it may be 1 USD = 0.9 EUR, and the price needs to reflect this scenario as well (they cannot change the price every single month to reflect the current USD/EUR conversion ratios).

These are details, but add them together, and you'll arrive at that 10% price difference (I guess)

fulafel• 14 years ago

The euro is doing really poorly vs the dollar now, it was the same difference when 1 eur got you 1.4-1.5 USD.

dagw• 14 years ago

The other thing is that the price they set at launch doesn't change when the exchange rate changes. So Apple doesn't set the price relative to current exchange rates, but relative to whatever rate they're hedging against. So don't look at the current rates, look at the long term futures rates.

al_james• 14 years ago

Yes, its likely the Euro will reduce further against the dollar (given the current situation in Europe), so Apple needs to build in a buffer to account for this.

Isofarro• 14 years ago

Apple garnered £6 billion in sales in the UK in 2010, and paid only £10 million in tax.

http://www.telegraph.co.uk/finance/newsbysector/mediatechnol...

jessriedel2• 14 years ago

That's corporation tax, not VAT. Completely different.

retube• 14 years ago

I have a feeling there might be some costs associated with revenues of $6bn.

sycren• 14 years ago

I believe the UK also has better consumer protection laws than the US like being able to return a product within 28 days of purchase to get a full refund.

http://en.wikipedia.org/wiki/Consumer_protection_in_the_Unit...

rmc5• 14 years ago

Most of those laws are European law, that would apply to all EU countries.

sbuk• 14 years ago

There are various levies and duties, as well as storage and transportation that will go into the price differential too.

aristidesfl• 14 years ago

Apple products sold in Europe have a base warranty of 2 years. In the US, only 1 year.

bdfh42• 14 years ago

Don't forget sales taxes as well. Depending upon where you are you are probably paying something like 20% VAT (TAV or whatever) - quoted in the consumer price.

In the USA, they have the annoying habit of excluding sales tax (presumably on the grounds that it varies wildly from place to place) and that is only added at the checkout.

virtualritz4• 14 years ago

In Europe you are forced to give your customer 2 years of warranty on certain products. E.g. computer hardware or electronics.

Apple refused to in the past (and still had their crazy EUR prices then). But now, after being dragged to court about it in Italy, and loosing, they at least have a good reason to charge more in Europe. ;)

This is the case for most vendors. E.g. my Panasonic GH2 camera did cost a bit more in Europe than it would have in the US. But I get 24 months of warranty.

See:

http://www.geek.com/articles/apple/apple-increases-product-w... http://www.apple.com/uk/legal/statutory-warranty/

maigret2• 14 years ago

But this 1$ = 1€ rule has been there for much more time. This can't be the main reason. As another poster wrote, I think the reason is rather "because they can". They may have charged a premium back in the 80s or 90s and just kept it because it worked.

virtualritz4• 14 years ago

As I wrote, they did have crazy EUR prices before, compared to USD.

When you ask any sales rep. of any big brand in Europe about this, they always use the "24 months warranty vs 12 months elsewhere" excuse.

I'd never buy anything from Apple, so I don't know what excuse they used, being that they illegally dodged the warranty in the past. All I am saying is that they now have both a good excuse as well as a good reason. Anything mechanical is heaps more likely to fail after 24 months than it is after 12.

m_eiman• 14 years ago

I think it's actually 36 months, at least it is in Sweden.

virtualritz4• 14 years ago

Individual states can have laws that force vendors to give more than 24 months. But 24 months is the legally required minimum warranty timespan for anyone selling tech in the EU.

waxjar• 14 years ago

Apple's warranty policies in Europe are still a disgrace, unfortunately. The warranty on a laptop charger is only one year, instead of two, for example. They aren't cheap to replace either (€80 for a simple cable?!). The warranty on an iPod is useless when there's a crack in the screen: defects that have nothing to do with the screen will only be fixed for a hefty price. The advice is to "just buy a new one".

In the mean time, they do reel in this extra money, for apparently no good reason. It really made me think twice about buying an Apple product again. The products are exquisite, but the service is just terrible.

The warranty policies in the US however seem to be exquisite as well (or were a while ago at least).

icebraining3• 14 years ago

The warranty on a laptop charger is only one year, instead of two, for example.

They might claim that, but it isn't, and a small claims court or equivalent will prove it to them. All new non-perishable products have two years of warranty, period.

jadyoyster• 14 years ago

Always threaten with small claims court, and if they still won't honour the warranty just sue.

Those judges will usually rule in your favour and Apple might not even send a representative.

rmc5• 14 years ago

Many shops will claim that their warrenty is such-and-such, or that store policy says such-and-such. Sometimes this does not match Law. In this case the Law wins.

matthewowen• 14 years ago

I had my laptop charger replaced four years after purchase. The Sale of Goods act trumps Apple's policies. The power cable is a vital component of the overall product.

microtonal2• 14 years ago

In Europe you are forced to give your customer 2 years of warranty on certain products. E.g. computer hardware or electronics.

To be honest, one would hope that a warranty term of 2 years would force manufacturers to make their products more reliable, rather than keeping the quality constant and increasing the price.

But, in an industry where it is normal to deprecate products in two years now (hi, iPad 1), I guess that's too much to ask.

I am sorry for our planet.

wisty• 14 years ago

In Australia, it's called "The Australia Tax".

Partly, selling into another country is a bit of a headache. That's one reason why US businesses can do so well - they only need to succeed in a single jurisdiction and they'll make a lot of money. Yes, there's different state laws, but pretty much all countries have annoying state laws, and not all countries are as lucrative a market as California alone.

maigret2• 14 years ago

This is why there is the Euro also ;) Still missing a big manufacturer in there tho.

netcan• 14 years ago

Theoretically, but setting up a business in Greece doesn't get you the same degree of market access to the EU as setting up a business in New Mexico gets you to the US.

You still have to deal with a lot of very different sovereign states, languages and mentalities. A Swedish customer is not going to feel much different about dealing with Greek business than dealing with a Russian one.

Imagine you want to start a business selling your own brand of briefcases. In the US, you can set yourself up to supply to the whole US (almost) as easily as you can to deal with your local state. Try organizing shipping, sales taxes, customer service etc. for all Europe and you'll probably decide to start with one or two countries.

doug363• 14 years ago

I get the impression that state laws are significantly more uniform in Australia than the US... IMHO, it's more that distributors are "used to" a lower AUD, have exclusivity/best price guarantees, and so can prevent anyone importing goods (at retail scale) that undercuts them. They've got their business model worked out on the basis of higher prices, their customers are used to higher prices, and they make arguments like "hey, well, we ran a bit of an advertising campaign and submitted your product for regulatory approval". Perhaps true, but not necessarily worth the extra "tax". See the story about how the digital price for Australian buyers of The Witcher 2 got increased because the Australian distributor made a fuss: http://www.kotaku.com.au/2011/05/why-does-the-witcher-2-cost...

jeza• 14 years ago

There's certainly that factor, but then it even happens with the app store. Though what I think happened is that the distributors kicked up a fuss when the iTunes store was made available in Australia, so the record companies made the prices higher. Apple learnt from this experience that they could make the prices higher, so they've replicated it across the board. I guess there's also the possibility that some larger app store developers have been able to convince Apple to make the price differential higher for Australia as well.

Nomon• 14 years ago

The new retina display MBP US starting price 2199$ == 1757€. The new retina display MBP FI starting price 2349€ == 2938$

Difference of 739$ or 590€ feels quite substantial.

ksec• 14 years ago

Apart from Tax, there is also the problem with fluctuation of exchange rate. Then there are operating cost and other sorts of things.

There is still quite a margin, but same type of Electronics devices would have cost more in UK compare to US even without the tax difference. So it is not really a Apple thing at all.

sgift2• 14 years ago

To make it short: Because they can. As others have pointed out there are taxes, regulations and so on, but the main reason (in my opinion) is that they still make a very good profit in Europe, so why should they reduce prices? Apple is a business and businesses will do almost anything to make more profit (that's the reason they exist, nothing wrong here).

p.s.: Steam has a similar policy and one could note that Steam and Apple share a common trait: No real alternative.

Kudos• 14 years ago

That is not a Steam policy, that is a policy of publishers who distribute via Steam.

If you look at Valve's own game pricing, you will see the euro and dollar are almost on parity when you account for sales tax.

sgift2• 14 years ago

If I remember correctly you could buy with dollars at Steam as an European customer until one year ago, since then this isn't possible anymore. Was this change forced by the publishers?

Anyway, thanks for the hint. Pricing of Valve games is indeed near parity, so you are probably correct regarding publishers/Steam.

patio11• 14 years ago

Europe is ripping off Apple customers, for values of "ripping off" which mean "more or less listening to their expressed preferences that certain favored goods cost nothing at the margin and everything else costs a lot more."

greyman• 14 years ago

It's because of two years warranty, higher taxes, toll, and for more expensive items, smaller number of sold items.

It's not fair you singled-out Apple, since this is true for several gadgets I bought, software, or for example more expensive Canon lenses. It's not Apple specific thing.

Terretta• 14 years ago

My friend from the UK comes to the US to buy sports cars. His wife comes with him to buy clothes. While here, they also pick up iPhones. Not see what makes this a particularly Apple issue.

clneagu• 14 years ago

It's simpler than that. They do it because they can.

Apple could charge allot less for everything they sell but they don't just because they can get away with it.

I'm sure nobody here really believes that the difference in price between countries has anything to do with keeping the profit margin the same everywhere :)

nodata• 14 years ago

If the difference was high enough, people would import.

jakeonthemove4• 14 years ago

Most people don't want to deal with the extra waiting time and warranty issues to save $100-200, though...

ricardobeat2• 14 years ago

I feel obliged to repost this. Updated prices in Brazil:

    Air 11": R$2699 -> R$3699 (1849 USD)
    MBP 13": R$3599 -> R$3999 (2000 USD)
    New MBP: R$9999 (4500 USD - WHAT??)
    New MBP maxed out: R$15973 (~8000 USD...)

Import tax is 60% for individuals, around 40%, maybe less for importers. $2199 * 1.4 * 2.06 (today's USD, predicted to go < 1.90) = R$6340. How 2199 turns into 9999 (4.5x), or 2799 into 16000 (5.71x) is a mystery.

Now, what were you saying about being ripped off?

[edit] just for kicks I maxed out a Mac Pro: R$ 48.959,00, or 1/4 of a nice brand-new apartment.

swah4• 14 years ago

Could also compare to car prices or average monthly income...

At least if we could buy the used ones that will appear on eBay...

We do have AWS in Brazil now, though.

personlurking2• 14 years ago

If, for some reason, you are using AWS as shorthand for Amazon's general site, they haven't landed here yet, but I'm very interested to see their entrance into the market and how they perform against Ponto Frio, Submarino, MercadoLivre, etc.

Brazil really needs centralized sites (Amazon, CL, etc) because having to check dozens of sites and services just to maybe find something similar to what you need, it can get tedious...and I'm sure I'm not the only one. At least there's Estante Virtual for used books. That's a great service.

As long as we're on the subject, it'd be really nice if there was a way for non-Brazilians to buy things online here. This would be solved if PayPal upped their marketing and really made themselves known on the Brazilian market.

sjwright• 14 years ago

How do other brands compare? For example, how much would a similar Dell or Lenovo laptop cost?

swah4• 14 years ago

You pretty much can't buy Lenovo in Brazil (I mean the Thinkpads).

Dell is established, affordable, good customer service. Competes here with Acer, HP, Toshiba and even cheaper brands probably assembled in Brazil (like Positivo). Sony Vaios are normally a little bit higher priced, closer to Apple.

The lower end Dells start around R$ 1700 (820 USD): Core i5, 4GB Ram and 1 TB HD. The higher end (gaming or slim) ones, my guess would probably be around R$ 3500 (1700 USD).

jonhendry• 14 years ago

A friend of mine who has family in Brazil would buy electronics like game consoles in the US and take them down on the plane, because it was significantly cheaper that way.

personlurking2• 14 years ago

I came here to post on Brazilian prices, too. Luckily, it's not like buying a(n imported) car, in which case I would basically never buy one. To the point that I'm leaning on the side of buying an MBA here, it's not the end of the world if I have to pay 500US more (entry-level MBA here is actually R$3000/US$1500, according to Apple's Brazil site). It sucks...but everyone travels with their own computers these days so getting someone to bring one for me from the States is not likely.

astrodust• 14 years ago

Isn't Apple working on manufacturing iPads in Brazil to avoid import taxes?

ricardobeat2• 14 years ago

The iPad 3 is still priced at R$1599, iPad 2 R$1299, which is not that bad. Apparently they are already producing iPhones over there, but the price hasn't been affected.

mkup2• 14 years ago

It's not Apple ripping off users, it's a price of state-sponsored healthcare and education. There is no such thing as a free lunch.

icebraining3• 14 years ago

As opposed to the $769 Billion the US Federal government spends on Medicare, Medicaid, and CHIP ($2500 per capita, way more than e.g. France). And of course, the US doesn't have state-sponsored education, it's all private, right?

rmc5• 14 years ago

I cannot see how governments spending money on education and hospitals means that Apple prices are higher?!

(Unless you're talking about higher sales tax/VAT?)

mkup2• 14 years ago

Yes, it's exactly what I'm saying: retail prices in Europe include VAT and it's about 20-25%, same as difference between the value of one dollar and one euro. And, in general, taxes are higher in Europe because of higher government spendings.

jwildeboer• 14 years ago

In Europe Apple must give 2 years of warranty. There was a recent court decision on that in Italy. That is additional cost that reflects also in the price.

Argorak• 14 years ago

The court decision was about Apple not mentioning this in the prospectus of their support plans. They always followed the two years warranty rule.

http://www.theregister.co.uk/2012/03/23/apple_italy/

dante_dev• 14 years ago

yes, but prices are raised from years, also when apple offered 1 year of warranty.

icegreentea• 14 years ago

Just to echo the sentiments here, it's certainly partly just because they can. If you want a hilarious example, look at Canada. I'm going to use Lenovo here as an example (but applies equally to other retailers). Baseline T420 on the US site? $1365.00. Baseline T420 in Canada? $1520.00. The exchange rate? Been within 5% of parity (either direction) for the last several years. Taxes? Canadian sale prices must be shown pre-tax (just like in the US). Supply chain? Practically the same thing. I ordered a T400 several years ago, and watched it get shipped from China to Alaska to their depot in Kentucky, and then trucked up to Toronto.

I guess there might be some problems with the Made in China part (doesn't completely fall under NAFTA), but I honestly can't figure out the tarrif /import duty laws.

But the point is that US prices almost always seem lower =/

jakeonthemove4• 14 years ago

IT IS lower! I've been buying stuff from the US for years now - even accounting for VAT, certain IT products are cheaper, not to mention there are a lot of products you can only find in the US or online...

cientifico• 14 years ago

Because they can!

The good price is the maximum price the client will pay for the service/product.

As long as the users buy, they are going to continue this way.

gm• 14 years ago

I support this argument. Not sure why the downvotes, but it's the most truthful answer in this set of comments.

Cheers to you sir, just because people don't like the truth does not make it any less truthful.

swah4• 14 years ago

Will folks that like to use external monitors buy the MBP Retina?

Semaphor• 14 years ago

Have you looked at the prices for the Aeron Chair? Amazon.com: around $700 Amazon.de: the cheapest offer is 1.298,99€ (that's around 1,624.16)

That's some markup there…

auberonx• 14 years ago

The first post by jgrahamc sums it all up nicely. On the additional 77 EUR Apple charges in Europe, one may have to consider strikter recycling laws. As far as I know, the cost of recycling is already charged at the time of purchase of an electronic product in Europe. That may, at least in part, explain the 77 EUR margin.

jakeonthemove4• 14 years ago

Yeah, pretty much because they can. The average buyer doesn't compare USD to EURO - they just see the price in EURO and it seems normal. Keep in mind that the salaries are also similar in both countries USD=EURO (so technically US workers are paid less if you convert).

Running a company in the EU is also harder than the US, at least for smaller businesses and startups - that may account for something...

mjwalshe2• 14 years ago

Not in the UK from it tech and engineeing jobs our pay is much lower compared to SV and housing costs a lot more. The only advatage we have is only paying 12% for NHS etc instead of 20%+ just for health insurance.

jakeonthemove4• 14 years ago

I was talking more about the mainland - Germany, Netherlands and Belgium to be more specific... But you can't really compare anything with the Silicon Valley directly - IT and engineering jobs are present all over the US, and they pay less than SV companies and startups, too...

mlitwiniuk• 14 years ago

Summing it up - EU prices have VAT included and exchange rate is best possible for Apple in long term perspective. But correct me if I'm wrong - if you buy Macbook in Apple store in US their adding some kind of local tax, right?

Also - if you're running a company in EU you can refund overpaid VAT, right? So the only difference is, that currency exchange rate is worst possible.

phamilton• 14 years ago

Why is McDonalds ripping off European customers? In my somewhat limited experience (3 years in Belgium and 2 in Sweden), the only good that has anything to do with the exchange rate is the dollar itself. For everything else, $1 ~= 1 euro ~= 10 SEK ~= 1 pound. Look at the cost of a cheese burger at McDonalds.

Ask HN: Why is Apple ripping of European users? 1€ ≠ 1$

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