The big Mac (and iPad and iPhone) index (Updated)
Research #Market · 94 comments
by Horace Dediu
Apple's products are globally consistent. They sell the same exact[1] product in all countries. An unlocked iPhone is the same everywhere. It makes the products "liquid" in that they can be easily bought and sold across borders.
However, laws do not permit the import and friction-free trading of electronic products. In addition to regulations there are duties levied and there are sales or consumption taxes levied on the purchase.
However, knowing the retail price of an Apple product in a particular location, and knowing the tax and duties levied, can we work out if the price is consistent?
Here is an example:
I illustrated the price of a basket of Apple products in the US online Apple store in blue and the same products in the Finnish online Apple store where the prices were converted to US dollars in yellow. I also calculated what the price in Finland "should" be if the products were sold with the known VAT of 23% added. I called this "Finland (expected)" price and it's shown in green.
I then took the difference between the "expected" and actual prices as a fraction of the expected and called that the "surcharge". The surcharge can be interpreted as "how much more does a buyer in a different country pay over the price in the US (excluding US sales tax) plus VAT and duties."
What the chart shows is that not all Apple products are treated equally by Apple. In this particular case Apple TV and the iPad are "overpriced" significantly. Interestingly, the iPhones are nearly what would be "expected" price.
It gets curiouser when comparing with other countries. In this case I compare the same basket in Brazil.
Here the story is reversed. The iPads are cheaper than one would expect while the iPhones, especially the 4S, are more expensive, though not by as much as the iPads are in Finland.
Why is this?
I don't know. These prices are set by Apple though they may be influenced by operator deals they have locally or other terms. It would require local knowledge of the market to solve this.
What would also be instructive, I believe, is to collect data from many more countries. If you are living in another country, you can help by providing the following data: For each of the products in this list,
iPhone 3GS
iPhone 4
iPhone 4S 16
iPhone 4S 32
iPhone 4S 64
Apple TV
iPod Touch 8
iPad 2 16 Wifi
iPad 2 32 Wifi
iPad 2 64 Wifi
MB Air 11:
MB Pro 13
Mac mini
iMac 21
provide the retail prices (preferably from an online store) and the local VAT or duty that is expected for electronic products (enter data here.) You can provide the prices in local currency. We can then try to put a global picture together and understand what affects price differences across borders[2][3].
Update: You can view and enter data in the spreadsheet here.
Notes:
- There are minor differences like power adapters but they are not materially more expensive to produce.
- See also The Big Mac index.
- Thanks to Paulo Silva for supplying the prices from Brazil and asking the pertinent questions.
94 comments
Halex ·
Horace, computers under certain price tiers are exempted from a few taxes in Brazil. Did you account for that?
Privileged Equity ·
Horace - the differences may in part be due to the relative cost bases of serving different countries beyond just VAT, including but not limited to different corporate tax rates, relative retail costs (rents, employees). It may also partly come down to supply chain costs: it may be significantly cheaper to ship laptops to Brasil...
However I have no doubt that some of the pricing differences will also come down to local marketing decisions.
Jago Silver ·
In the UK online Apple Store
iPhone 3GS £319 iPhone 4 £429 iPhone 4S 16 £499 iPhone 4S 32 £599 iPhone 4S 64 £699 Apple TV £99 iPod Touch 8 £169 iPad 2 16 Wifi £399 iPad 2 32 Wifi £479 iPad 2 64 Wifi £559 MB Air 11: £849 MB Pro 13 £1099 Mac mini £529 iMac 21 £999 All prices include UK VAT Tax at 20%
Davel ·
I believe some products are assembled in Brazil, that could be a factor in the levies applied.
J Sweet ·
I see what you did there, Horace!
Clever not capitalizing the B...
sandro ·
I think the warranty will also play some role in the prices. If I'm correct, the warranty in the US is 90 days. In Germany it's one year full warranty and 2 years limited warranty.
AO ·
So, the prices in the German Apple store (in Euros, inclusive VAT and "other charges").
iPhone 3GS 369
iPhone 4 519
iPhone 4S 16 629
iPhone 4S 32 739
iPhone 4S 64 849
Apple TV 119
iPod Touch 8 189
iPad 2 16 Wifi 479
iPad 2 32 Wifi 579
iPad 2 64 Wifi 679
MB Air 11: 949
MB Pro 13 1249
Mac mini 599
iMac 21 1149
And the same from the Swiss Apple store (in Swiss Franks, also including VAT etc.)
iPhone 3GS 399
iPhone 4 549
iPhone 4S 16 649
iPhone 4S 32 749
iPhone 4S 64 899
Apple TV 129
iPod Touch 8 209
iPad 2 16 Wifi 499
iPad 2 32 Wifi 599
iPad 2 64 Wifi 699
MB Air 11: 1049
MB Pro 13 1349
Mac mini 649
iMac 21 1299
Would be interesting to see the differences in the prices within the Eurozone and in Europe in general. And to understand why.
Anonymous ·
The discrepancy as you point out can be seen in Apple accounts they use this as a form of transfer pricing where they can adjust prices to suit profits being paid in districts where the tax threshold is lower.
Also you fail to mention differences in storage and distribution costs.
Apple sets the price of the products when they are released and doesn't change them so they have to incorprate projections of currency fluctuations into them. Analysing the price over a period would be more reflective than one point in time.
Also PPP as a concept is notorious for being riddled with inconsistencies so in essence you are asking for an answer that has no reliable answer.
Barry Hurley ·
Prices in Apple's Online store in Ireland:
iPhone 3GS €349 iPhone 4 €499 iPhone 4S 16 €599 iPhone 4S 32 €699 iPhone 4S 64 €799 Apple TV €119 iPod Touch 8 €199 iPad 2 16 Wifi €479 iPad 2 32 Wifi €579 iPad 2 64 Wifi €679 MB Air 11 €979 MB Pro 13 €1199 Mac mini €599 iMac 21 €1149
Prices are inclusive of VAT at 21% currently, but note there is a VAT increase to 23% proposed from next year.
Cristian Tincu ·
Horace is not capitalizing words in titles in the typical Anglo-American fashion. So there was no reason to capitalize “big” anyway.
Chris Chen ·
Apple, like other retailers, often try to simplify pricing and therefore the pricing for their products are not continuous but discrete. e.g. You will never see an iPod Touch for £152.86 ($199 + 20% VAT), they round up or down to the £9 mark. (Ideally £149 but actually £169). Horace, it would be great to see the same analysis but with error bars to take into account this fact.
Thrax ·
From the Czech Republic online Apple store, including 20 % VAT.
iPhone 3GS
8 990 Kč
iPhone 4
11 990 Kč
iPhone 4S 16
14 490 Kč
iPhone 4S 32
16 990 Kč
iPhone 4S 64
19 990 Kč
Apple TV
2 799 Kč
iPod Touch 8
4 790 Kč
iPad 2 16 WIFI
11 490 Kč
iPad 2 32 WIFI
13 490 Kč
iPad 2 64 WIFI
15 490 Kč
MB Air 11
23 490 Kč
MB Pro 13
27 990 Kč
Mac Mini
13 990 Kč
iMac 21
27 990 Kč
Horace Dediu ·
No I did not. That would explain it. Do you have specific details? I used 60% import duty and 18% VAT for all products in the list.
Horace Dediu ·
Writing a headline takes me almost as much time as writing a post.
Horace Dediu ·
That would be an important factor.
Horace Dediu ·
Can you also provide what is the VAT in Germany and in Switzerland?
Horace Dediu ·
The question I asked was: "Why is this?" meaning "Why are there price surcharges varying by product". I would agree that the answer could be unreliable but I don't understand the reference to PPP.
Takashi Hoshino ·
Horace,
To you from Tokyo.
iPhone 3GS Not listed on Apple Online Japan nor Softbank Mobile Online iPhone 440,320 yen for 8GB model (Softbank Mobile Online), the only iPhone4 listed there. iPhone 4S 16 46,080 yen (Softbank Mobile Online)iPhone 4S 32 57,600 yen (Softbank Mobile Online)iPhone 4S 64 67,200 yen (Softbank Mobile Online)Apple TV 8,800 yen (Apple Online Japan)iPod Touch 8 16,800 yen (Apple Online Japan)iPad 2 16 Wifi44,800 yen (Apple Online Japan)iPad 2 32 Wifi52,800 yen (Apple Online Japan)iPad 2 64 Wifi60,800 yen (Apple Online Japan)MB Air 11:84,800 yen (Apple Online Japan) 11-inch 64GB, the cheapest modelMB Pro 13102,800 yen (Apple Online Japan) 13-inch 2.4Ghz, the cheapest modelMac mini52,800 yen (Apple Online Japan) 2.3 Ghz, 500GB, the cheapest modeliMac 21108,800 yen (Apple Online Japan) 21.5-inch, 2.5GHz, the cheapest model
Marco ·
VAT in Switzerland is 8% .
Anonymous ·
"It gets curiouser when comparing with other countries. In this case I compare the same basket in Brazil."
What was the purpose of the big Mac index which you are now referencing? To measure PPP between two countries. PPP calculations highlight just how fraught any conclusion you can base on them is.
To your point - varying surcharges by product - again this could be due to marketing spend, local competition, rounding errors, etc.
Whats missing is the impact of grey imports and the black market.
The list can go on and in the end it's why as a barometer the Big Mac index and by extension your analysis above is very rudimentary and provides little actual useful information.
John Anonymous ·
Could be a combination of varying costs of doing business in different countries. Could also be price discrimination (I mean that in the economist use of the phrase -- in this case, perhaps charging more in a rich country than in a poor country).
Abdoradus ·
Regarding the VAT in Germany, it's 19 %.
Graham /Finanstankar ·
Hi! Sweden Apple store in SEK incl VAT:
iPhone 3GS 3495:-
iPhone 4 4795:-
iPhone 4S 16 5795:-
iPhone 4S 32 6795:-
iPhone 4S 64 7795:-
Apple TV 1150:-
iPod Touch 8 1895:-
iPad 2 16 Wifi 4395:-
iPad 2 32 Wifi 5195:-
iPad 2 64 Wifi 5995:-
MB Air 11: 9295:-
MB Pro 13 10995:-
Mac mini 5595:-
iMac 21 10995:-
VAT is 25%, i.e. 20% of the retail prices above. Customs should be the same in all of EU. On iPod touch Apple actually specifies "VAT, customs and taxes" as 425kr, i.e 22.4%. Exchange rate today is 6.83.
Johan Forssell ·
From the Swedish online Apple Store
iPhone 3GS 3495kr iPhone 4 4795kr iPhone 4S 16 5795kr iPhone 4S 32 6795kr iPhone 4S 64 7795kr Apple TV 1150kr iPod Touch 8 1895kr iPad 2 16 Wifi 4395kr iPad 2 32 Wifi 5195kr iPad 2 64 Wifi 5995kr MB Air 11 9295kr MB Pro 13 10995kr Mac mini 5595kr iMac 21 10995kr
All prices include Swedish VAT at 25%
Scvgyn ·
http://www.telegraph.co.uk/finance/newsbysector/mediatechnologyandtelecoms/electronics/8772470/Brazil-opens-first-iPad-factory-outside-China.html
The first factory to make iPads outside China has begun operating in Brazil and is due to start shipping Apple's tablet computers in December.
Animesh Gupta ·
Hi Horace, Prices from the Singapore Store. These include the 7% GST that is levied on all products. There are no duties imposed here.
iPhone 3GS - $548 iPhone 4 - $788 iPhone 4S 16 - $948 iPhone 4S 32 - $1,088 iPhone 4S 64 - $1238 Apple TV - Not Sold Here iPod Touch 8 - $288 iPad 2 16 Wifi - $668 iPad 2 32 Wifi - $798 iPad 2 64 Wifi - $928 MB Air 11 - $1288 MB Pro 13 - $1648 Mac mini - $788 iMac 21 - $1648
Chris Redpath ·
Warranty conditions ought to be the same across the whole EU economic area though, even including non-eurozone countries.
Takashi Hoshino ·
PS: VAT in Japan (Sales Tax) is 5%, and as far as Apple Online store is concerned, I need to pay 5% more than the prices I listed above.
Horace Dediu ·
The reference to Big Mac index was not meant to suggest that the big Mac index does the same thing. It's just where I got the idea for the name. Big Macs are sourced locally and prices are set locally. Macs are imported and priced centrally.
criege ·
Some of the price difference may be explained by Apple having to make hedges against the exchange rate. They probably work with a fixed (for example) USD -> EUR rate. Depending on when the product is released and so on, this rate might differ for different products.
There was once a time when Porsche made more money (actually a LOT more) on their USD hedges than by selling actual cars in the US.
odaiwai ·
Yes, they round up or down to round numbers. Also, in Hong Kong, they round to the nearest 88 dollars (http://store.apple.com/hk). They do something similar for China (http://store.apple.com/cn), although it varies between the nearest 68, 88 or 98 RMB.
8 is a lucky number in Chinese numerology, signifying wealth (I think), so generally, 88 is very lucky (doubling a thing intensifies it in Chinese: 'ho' means good, 'ho ho' means very good.)
Depending on the dialect, 38, 68, 98 can sound like 'forever wealthy', or 'always wealthy' or something similar.
Dick Applebaum ·
It's neat what's going on here...
It looks like AsymCo has become the collaborative web site of business analysis.
It will be interesting to see how the compiled charts will be presented... 3D? Interactive?
grantc ·
From Spain (VAT/IVA @ 18%) iPhone 3GS 349€ iPhone 4 499€ iPhone 4S 16 599€ iPhone 4S 32 699€ iPhone 4S 64 799€ Apple TV 119€ iPod Touch 8 189€ iPad 2 16 Wifi 479€ iPad 2 32 Wifi 579€ iPad 2 64 Wifi 679€ MB Air 11 949€ MB Pro 13 1149€ Mac mini 599€ iMac 21 1149€
https://docs.google.com/spreadsheet/pub?hl=en_GB&hl=en_GB&key=0As-MQvdi6eYBdHRzUi11Ni1fRzNocFEwMm4tSjZZNGc&output=html
Greg Battig ·
A correction to AO's Swiss prices above: MBP 13' is CHF 1299, not CHF 1349.
Here's the complete list, with prices without VAT (8%) as well as including VAT.
Worth mentioning is that in Switzerland there is a tax (SUISA, royalties for rights owners) on devices with storage and caple of playing audio and/or video. For iPhones, iPads, and iPods it is between CHF 0.70 per GB (up to 4GB) and CHF 0.30 per GB (above 32GB). For other devices the tax is CHF 0.10 per GB (up to 250GB), above 250GB it is CHF 25 + CHF 0.08 per GB above 250. For devices with more than 32GB Flash or 160GB HD storage, the tax is limited to at most 20% of the manufacturer's recommended retail price.
Apple Online Store Switzerland iPhone 3GS 369.44 399.00 iPhone 4 508.33 549.00 iPhone 4S 16 600.93 649.00 iPhone 4S 32 693.52 749.00 iPhone 4S 64 832.41 899.00 Apple TV 119.44 129.00 iPod Touch 8 193.52 209.00 iPad 2 16 Wifi 462.04 499.00 iPad 2 32 Wifi 554.63 599.00 iPad 2 64 Wifi 647.22 699.00 MB Air 11 971.30 1049.00 MB Pro 13 1202.78 1299.00 Mac mini 647.22 649.00 iMac 21 1202.78 1299.00
Jean Friesewinkel ·
In France (inclusive of VAT at 19.6%):
iPhone 3GS €369 iPhone 4 €519 iPhone 4S 16 €629 iPhone 4S 32 €739 iPhone 4S 64 €849 Apple TV €119 iPod Touch 8 €199 iPad 2 16 Wifi €489 iPad 2 32 Wifi €591 iPad 2 64 Wifi €693 MB Air 11 €949 MB Pro 13 €1149 Mac mini €599 iMac 21 €1149
In Belgium (inclusive of VAT at 21%):
iPhone 3GS €379 iPhone 4 €529 iPhone 4S 16 €649 iPhone 4S 32 €759 iPhone 4S 64 €879 Apple TV €119 iPod Touch 8 €199 iPad 2 16 Wifi €479 iPad 2 32 Wifi €579 iPad 2 64 Wifi €679 MB Air 11 €979 MB Pro 13 €1199 Mac mini €599 iMac 21 €1149
In addition to the storage, distribution, and warranty costs differences mentioned above, one other per-country difference is handset subsidization -- I expect volumes sold at full retail price in France are small as carriers encourage commitments with subsidies; while Belgium does not allow subsidization.
Jean Friesewinkel ·
Indeed ! Horace, why not make a public Google Spreadsheet that we can all contribute to?
Thomas McQuillan ·
Product Price MVA Price - MVA iPhone 3GS 2890 722,5 2167,5 iPhone 4 3990 997,5 2992,5 iPhone 4S 16 4890 1222,5 3667,5 iPhone 4S 32 5790 1447,5 4342,5 iPhone 4S 64 6690 1672,5 5017,5 Apple TV 849 212,25 636,75 iPod Touch 8 1490 372,5 1117,5 iPad 2 16 Wifi 3890 972,5 2917,5 iPad 2 32 Wifi 4690 1172,5 3517,5 iPad 2 64 Wifi 5490 1372,5 4117,5 MB Air 11 7890 1972,5 5917,5 MB Pro 13 10290 2572,5 7717,5 Mac mini 4790 1197,5 3592,5 iMac 21 9490 2372,5 7117,5
Moseley ·
From the Australian online Apple Store - iPhone 3GS: $449 iPhone 4: $679 iPhone 4S 16: $799 iPhone 4S 32: $899 iPhone 4S 64: $999 Apple TV: $129 iPod Touch 8: $219 iPad 2 16 Wifi: $579 iPad 2 32 Wifi: $689 iPad 2 64 Wifi: $799 MB Air 11: $1099 MB Pro 13: $1399 Mac mini: $699 iMac 21: $1399All in $AUD and inclusive of the 10% GST.
Moseley ·
Oops, don't know what happened with the formatting there...
Amit Kottur ·
Horace,
Price of Apple products in India (including tax): iPhone 3GS - Rs. 20,900 iPhone 4 - Rs. 37,900 iPhone 4S 16 - Rs. 44,500 iPhone 4S 32 - Rs. 50,900 iPhone 4S 64 - Rs. 57,500 Apple TV - Not Sold iPod Touch 8 - Rs. 13,500 iPad 2 16 Wifi - Rs. 29,500 iPad 2 32 Wifi - Rs. 34,500 iPad 2 64 Wifi - Rs. 39,500 MB Air 11 - Rs. 56,900 MB Pro 13 - Rs. 69,900 Mac mini - Rs. 33,900 iMac 21 - Rs. 64,900
Exchange rate - 1 USD ~ 52.89 INR
Lifeisjoy ·
What about import duties? These need to be considered to make the comparison real. Looking at import duties may explain why the difference in prices in a given country compared to prices in the US are not consistent across product groups.
Thanks for the thoughtful analyses.
Paul
Benjamin Meyer ·
Don't forget that countries have all sorts of different wacky local taxes. For example the Apple Tv might fall under some sort of "Tv device" that could might make tariffs apply.
Horace Dediu ·
I try to include import duties. That's what the Brazil data includes. Once we have all the source data we can dig up the specific duties.
Anonymous ·
You may want to check whether the Economist is happy with you using the term The big Max Index.
Horace Dediu ·
"Big Mac" is a trademark of McDonalds. I don't see any attribution to that trademark in the Big Mac Index. If McDonalds is happy with the Economist using "Big Mac Index" for more than two decades then I assume they'll be ok with me using the "big Mac Index" in a blog post. Mac, by the way, is a trademark of Apple so maybe McDonalds and Apple will have to fight over who has rights to the phrase "big Mac". http://www.economist.com/blogs/dailychart/2011/07/big-mac-index
Anonymous ·
In Germany there is a pre-tax Copyright fee of €17 on computers, €15 on the iPad with 64GB (but not the models with lower storage) and €36 for smartphones included in the price.
Anonymous ·
Oh, I forgot, the Air would also be on the reduced €15 level, since it doesn't contain a cd/dvd burner.
Ricardo Costa ·
In Brazil that´s what they do. Their price is adjusted only twice per year.
AO ·
VAT in Germany is 19%.
Wessel Kosterman ·
The fluctuations of the euro against the dollar could be a factor in the price differences between the iPads and other products. To check this we should use the exchange rate at or a little before the launch of the products.
The relatively more expensive iPhone in Brazil might be explained by the same thing as the real has depreciated in value in recent months.
Wessel Kosterman ·
It seems logical apple is willing to reduce its profit margin slightly in Brazil to attract more customers since the effect of a price cut is multiplied by the import tax. For the iPhone this does not hold since it is supply constrained.
Luca Nalin ·
Prices in Italy (VAT 21% included):
iPhone 3GS 399€ iPhone 4 549€ iPhone 4S 16 659€ iPhone 4S 32 779€ iPhone 4S 64 899€ Apple TV 120€ iPod Touch 8 199€ iPad 2 16 Wifi 484€ iPad 2 32 Wifi 584€ iPad 2 64 Wifi 685€ MB Air 11 957€ MB Pro 13 1149€ Mac mini 604€ iMac 21 1158€
In Italy there's a Tax called "Compenso per copia privata" on each device (VAT excluded):
iPhone 3GS 0,90€ iPhone 4 0,90€ iPhone 4S 16 0,90€ iPhone 4S 32 0,90€ iPhone 4S 64 0,90€ Apple TV 0€ iPod Touch 8 4,51€ iPad 2 16 Wifi 1,90€ iPad 2 32 Wifi 1,90€ iPad 2 64 Wifi 1,90€ MB Air 11 1,90€ MB Pro 13 2,40€ Mac mini 1,90€ iMac 21 2,40€
Smacg ·
From New Zealand - Goods and Services Tax = 15%:
iPhone 3GS $599 (US 461.14)iPhone 4 $899 (US 692.12)iPhone 4S 16 $1049 (US 807.60)iPhone 4S 32 $1199 (US 884.73)iPhone 4S 64 $1349 (US 1038.73)Apple TV $170 (US 130.89)iPod Touch 8 $289 (US 222.51)iPad 2 16 Wifi $799 (US 615.18)iPad 2 32 Wifi $949 (US 730.51)iPad 2 64 Wifi $1099 (US 845.98)MB Air 11: $1549 (64gb) (US 1192.37)MB Pro 13 $1999 (128gb) (US 1538.77)Mac mini $949 (2gb ram) (US 730.51)iMac 21 $1999 (2.5ghz) (US 1538.77)
Anonymous ·
What we hear here in Brazil from various news sources is that, as of now, only iPhone 4 8Gb units are under production. Suposedly there would be 'made in Brazil' iPads right now this december, but due to lack of local investors Foxconn postponed iPad manufacturing. Maybe in late 2012.
Anonymous ·
When did you collate your iPad prices for Brazil? Is the paradoxical pricing of iPads due to their being manufactured in Brazil now and therefore free of the huge import duties Brazil levies?
Anonymous ·
I suppose you are being facetious as you well know the Mcdonalds and Apple operate in different markets and that their trademarks are for different products. You can add MAC cosmetics to the list.
However the big Mac Index is free riding off the work done by the economist.
I have read that post and you dont need to go further than the first sentence.
THE Economist’s Big Mac index is a fun guide to whether currencies are at their “correct” level.
Any works deriving from this really are a fun guide also.
Anonymous ·
There is no tax in Malaysia and so prices are broadly, but not wholly in line with US store prices. Until recently prices here were artificially hiked to include a wholly unwarranted premium, or profiteering by another name.
Anonymous ·
The prices in the US store are priced at your typical price points $199, $299, etc. How are the prices in the Finnish store? Is the pricing oddness at all related to massaging the prices to typical price points?
Anonymous ·
Unlike America, where tourists cannot recover Sales taxes, in countries like the UK, you can recover most of the 20% VAT if you are leaving within 3 months for a non-EU destination. btw, the so-called Duty-Free stores in the UK are totally dishonest now. They charge you a price between the full-price and the tax-free price even though they do not account for any VAT on these sales. It is an outright scam sanctioned by the desperate Government.
Anonymous ·
ho ho also means very funny. ho ho ho on the other hand is the IP of Santa Claus Inc.
Miguel ·
Here are the prices at the Apple Store Portugal, including 23% tax:
iPhone 3GS 369€ iPhone 4 519€ iPhone 4S 16 629€ iPhone 4S 32 739€ iPhone 4S 64 849€ Apple TV - 119€ iPod Touch 8 199€ iPad 2 16 Wifi 479€ iPad 2 32 Wifi 579€ iPad 2 64 Wifi 679€ MB Air 11 979€ MB Pro 13 1199€ Mac mini 599€ iMac 21 1179€
Horace Dediu ·
You can see all the local prices here: https://docs.google.com/spreadsheet/ccc?key=0AmUJMRccl_skdGo0d0tBV1RlWUpmUEd0VDZ2dkdBX3c#gid=0 (they are being updated by readers as I write this.)
Martin ·
This has been my theory too. I think Apple use the exchange rate when they introduce the product, and unless there are big changes, they stick with that price for that product for ever.
Advill ·
As a rule that is "universal" products are priced about the same in amount but different currencies, I traveled very often to Texas in USA living in Spain and the same occurs with items as cars a Mini Cooper S is about the same 25.000 in Europe (in €) that 25.000 dollars in USA (-33%), same story with Mercedes or BMW.
If you book a travel in Europe they will charge you let´s say 1.200€ , but if you do it through a US IP address your cost will be the same ....in dollars, again -33%, Apple runs in the same track and many others too, Procter & Gamble shampoos or Kellogs cereals.
The rule seems to be that most of the "out of USA products" subsidize the US market with a 30% "discount" and most of "made in USA" products benefits of an extra "Pricing" income.
Rgds.
Bernardo Carvalho ·
How did you calculate the Brazilian "expected" price? 60% import tax + x% sales tax (varies state by state) + what else?
Marcos_El_Malo ·
I would guess that Apple uses a buffer to protect against fluctuations in exchange rates. They do something like this to protect against fluctuations in RAM prices when the customer adds RAM through build-to-order options.
Marcos_El_Malo ·
Is that "ho" or "hao"? (could be a difference in dialect; I learned a smattering of Mandarin eons ago)
Thanks for the interesting factoid!
Marcos_El_Malo ·
Other than playing off the name, how is this free riding off the work done by the economist? Other than playing off the name, how do you consider this to be derivative?
I suspect you're trolling, but I ask in case you are not.
Wessel Kosterman ·
Interesting point. You could add the volatility of the eur/usd of the month prior to product launch to estimate its influence. But I guess there aren't enough data points to show a meaningful result.
Anonymous ·
Horace - I think apple does the currency conversion when it updates/introduces a product line - and keeps that same pricing until that product line is refreshed.
Hence, different product lines have different currency conversion rates depending on when each product line was introduced/refreshed.
Hypothetical:
product A is introduced. product B is introduced 6 months later & the US dollar has appreciated 10% vs the local currency since product A was released. Product A remains at its original pricing, while product B is priced at the equivelent 10% higher dollar value. Therefore product A will appear cheaper than product B when converting it at the current exchange rate.
Anonymous ·
Those prices are as of today! As far as I know there's no iPad being assembled here in Brazil yet. But iPhone 4 8Gb is just being manufactured and should be available soon here and/or somewhere else.
Anonymous ·
I haven't seen any signal or slight interest from Apple in reducing profit margins here in Brazil. Indeed, what cause me to ask Horace for some help was the abusive prices Apple applied to the unlocked iPhone 4S models!
Davel ·
I believe that is Cantonese.
Christian Peel ·
I entered a few currency exchange rates from google into your spreadsheet, and used these to calculate the equivalent value of the apple products in USD, as well as the percentage of the US price. All these values are further down the document in unused rows (I hope you don't mind that I entered these). The Brazilians and Argentinians are getting charged much more than their US counterparts!
Only a few asian countries have values less than the US.
odaiwai ·
Yes, that's correct. Ho is Cantonese for good, while Hao is Mandarin for good. Cantonese is mainly spoken in Southern China, while Mandarin is the official language of the entire nation.
Interestingly, in Shenzhen, where most Apple products are made, most people speak Mandarin because there's such a mix of migrant workers from all over China.
Freshtacos ·
You should be able to get all these prices simply by going to the online apple store then clicking the "change country" link at the bottom of the page.
Tim F. ·
I would expect Apple to take a bit of a hit in countries where duties/taxes would make the product unreasonable expensive (even though prices in Brazil remain seemingly "unreasonable" even after taking a hit on pricing) while trying to make up for it in regions/countries where the surcharge is lesser but the market poses less relative competition.
But, yes, this data set will be interesting.
Tim F. ·
Also: it looks like Brazilian production lines could have a significant impact on South American sales.
A German ·
There are at least four factors that may contribute to price differentials: - Exchange rate fluctuations: Apple does not change the international prices when the exchange rate fluctuates (except in fairly extreme cases). That means that they like to err on the side of caution and build in a small buffer. - Special dues like the “copier tax” in Europe that has already been mentioned. - Hitting a price point: Apple does not usually price it’s product at 276 local currency units. Given that they are a commercial enterprise, it seems likely that they more often choose the next higher valid price over the next lower. (E.g., choose 299 over 249.) - Cost of localization: It used to be in the 1990’s that Apple tried to recoup the cost of localization of the OS through its hardware prices (or so I’ve been told by people working gin the company). Don’t know whether they still do this.
fumjusta ·
In that case, would it be useful if we use the currency exchange rate at around the time when a product is introduced? This way we could estimate how much "allowance" Apple is taking into account for currency fluctuation.
Emilio Orione ·
You should add also the cost of assistance, the after sale cost can vary from country to country, for instance the cost of man work is different.
Anonymous ·
German, if so why the same appears in many other products, from cars or boats to wines or IPads?.
The rule is that USA markets gets the cheapest prices ALWAYS , and US companies benefits USUALLY selling the same product costlier in export markets.
The subsidy of the World to US in this combination is around 15% of total trade..
El Aura ·
Economies of scale. Serving a big market like the US is cheaper (on a percentage basis). The US also serves as a promotional platform: see we are successful in this import, large and price-competitive market and we are successful in a market which receives a lot of worldwide attention due to Hollywood, English-language media based in the US but consumed worldwide, English being the global language, etc.
Anonymous ·
Apart from currency fluctuations, there are differentiations with respect to 'the cost of doing business'. E.g. EU Consumer Protection laws (implemented slightly differently in each country) already give a protection that is close to what AppleCare offers (though not many customers know this) for free (it's the law). Housing/transport cost and local business taxes differ. Then there are rules and regulation to adhere to in each country. Then there is the difference between countries with Apple Stores (US) and dealers (which will have a small influence, but Apple still needs to price its online store equal to what dealers offer). Some of these will be fixed cost per item sold and not variable, so that could explain larger differences on cheaper items (like AppleTV).
El Aura ·
Question about custom duties (import taxes). When Asus Australia imports from Asus Taiwan, it has to pay duties (assuming computers imported from Taiwan to Alaska are not exempt from custom duties due to any bi- or multilateral agreements). When Apple Australia imports from Apple Taiwan (or directly from Foxconn Taiwan), it should equally have to pay duties.
When Asus USA imports from Asus Taiwan it has to pay duties. But shouldn't then Apple USA also have to pay duties if it imports from Apple Taiwan (or directly from Foxconn)? Of course, Apple importing Foxconn or Apple Taiwan might have to pay duties only on its much lower internal price. The same would be true for Asus Australia though the margins of Asus Australia are likely much smaller thus the difference will also be much smaller.
Shouldn't we thus (a) correct for the appropriate customs duty rate in all countries, including the USA? And (b) apply that rate not on the end user price but on the internal price?
Anonymous ·
As has been mentioned several times, the US does not have a VAT, and sales tax is not included in the list price on US stores. The tax rate is very localized, but 7-10% is typical. It doesn't cover your full 15% disparity, but it is a significant difference.
Also, the dollar is the default currency for Apple.
Anonymous ·
Agreed. Only VAT should be added.
Jussi Hagman ·
Cost of running a business in Europe is higher than in USA. There are several reasons for that, taxation, personnel costs, transportation costs, consumer protection, localization, dealing with differences in regulation between the countries.
And the mentioned scale also makes competition more fierce in USA.
r.d ·
Horace,
If it is not too inconvenient, Is there a read-only spreadsheet link that you can provide that doesn't require google log-in.
Matt Ryall ·
Horace, in the US prices, shouldn't you include sales tax based on the location of sale? I believe you pay around 8-10% on top of the Apple store price, depending on the state.
Horace Dediu ·
You can also pay zero as in New Hampshire. But that's not the point. I'm not trying to find out how much more expensive the products are in a particular country. What I'm trying to find out if the difference between product pricing is consistent between countries. In other words if the "surcharge" is consistent across products. See the blue bar charts in the post. The US is only used as a common benchmark and defines the ratio between products prices.
Rj ·
There is an interesting issue with Apple pricing that is relevant here; they don't seem to change prices once they announce them.
That is, the initially-announced price remains consistent until that range is next refreshed. This is true in all markets that I have considered and while it may not be absolutely true globally, it seems to be very largely true. The two price changes that I can recall off the top of my head are the original iPhone US price drop and the recent adjustment to the App Store "Tier" pricing that impacted several currencies. There are other examples but they are relatively rare and exceptional.
So when Apple announces a price for a product in any currency, that price represents the current price of the currency against the US dollar and also Apple's expectations for fluctuations in the value of the currency over the lifetime of the product. A product like the iPhone that has a relatively short period until the next refresh is likely to be closer to the actual exchange rate at any point in time during its life than a product with a longer refresh rate, such as a Mac Pro.
In general, Apple seem to be relatively conservative with their foreign exchange rate expectations, preferring to be certain that they will earn at least as much selling any item in any market as they do in the US (plus any local taxes and charges) than to be locally price competitive.
Apple also rounds their pricing to marketing-orientated numbers in the local currency. There might be some sensitivity at this stage in the process to the price-competitiveness of their products (do we round down or up) but I think it might be hard to discern from outside, since expectations for currency fluctuations (especially recently) seem likely to be more "noisy" than any other signal in this mix.
Halex ·
I'm doubly sorry for taking so long and for not being completely useful. The fact is that taxes in Brazil are really complicated, but there's this link that I hope you can get Google-translated: http://www.planalto.gov.br/ccivil_03/_Ato2004-2006/2005/Decreto/D5602.htm It's the law that exempt computers under R$4k, I believe. That includes some Macs, but I reckon that calculation this is… a pain.
(On a side note, I just heard you on The Critical Path #18. Great show!)
Matt Ryall ·
Okay, I understand. Unfortunately, I think your goal here might be missed by people who are interested just in comparisons of prices between countries. It's a common story in the media outside the US: how much Apple is "ripping off" consumers in our country. Some people will read your data in this frame of mind, without realising the raw numbers don't provide an apples-to-apples comparison.