TechTalk #GlobalEconomy #Smartphones #PriceDiscrepancy
🤔 Ever wondered why phones and other devices cost more money in some countries than others? Take the iPhone 15 Pro, for example. It ranges from $994 in Japan to $1,451 in Sweden. What gives? Here are some reasons and possible solutions to consider:
- Taxes and tariffs: Different countries have varying tax policies and import tariffs, which can greatly influence the final price of a device.
- Exchange rates: Fluctuating exchange rates can impact the cost of importing electronics, especially for countries with weaker currencies.
- Supply chain challenges: Delays in production, shipping, or distribution can lead to higher prices in certain regions.
- Market demand: Prices can also be influenced by local demand and competition within each market.
So, what can be done to address these disparities? One possible solution could be for companies to work on standardizing prices across regions, taking into account local economic factors. This could help create more transparency and fairness for consumers worldwide. What are your thoughts on this? Let’s discuss! 🌎💬
Region specific pricing is common in many industries. Something that costs $100 US could be affordable to someone in the US, but very expensive if that is the average weekly salary. Companies sell for what the market can bear, in most cases the risks and costs involved in arbitraging price differences aren’t worth it. Of course smuggling takes advantage of this, but in a lot of cases the big opportunity comes from differences in taxation between countries rather than in market prices
Market forces, buying power, labour charges and then taxes. Sure there are more.
You know… There is such a thing as taxes…
In some countries, for example VAT is 23%, 25%, 19%, 24%, 20%, 21%… In Europe alone, the VAT spread is from 8% to perhaps 27%
Let’s simplify the situation to the max. Let’s assume that an item in the US costs $1000. It is sold in Europe in a country where VAT is 20%. 1000$ * 20% = $200 of VAT alone, so if the seller doesn’t want to sell the item cheaper than in the US then he has to raise the amount to about $1200
Not to mention other costs (transport, customs, local taxes). Hence, something bought in the US for $1000 may be priced at $1500 in Europe, and this does not mean that the seller will make $500 more on products sold in Europe.
In this case base prices are similar after exchange from dollar (apple seemingly controls distribution). So it should be mostly due to different % taxes, like VAT in the EU space, but could be due to (steep) import taxes like in Brazil.
When there are more/less middlemen involved the price could swing even more.
Firstly, the American price is misleading because it doesn’t include sales tax. But even if it did, most of the world has way higher sales tax thsn the usa
So, J_Class_Ford mentions many of the factors.
The only one they don’t mention is difference in the cost of support. The consumer businesses must provide customer support in the language of the user. That means iPhones sold in Sweden must have customer support in Swedish. That means either starting an office in Sweden to provide it or employing Swedish speakers who live in another country. Some languages are more expensive to support than others.
Companies *generally* have one goal- turn a profit.
Large companies have teams of analysts who run market research and equations to determine the most profitable price for their products. This isn’t as simple as “sell it for all the money”, because then nobody would buy it. The goal (again, *generally*) is to sell for as much money as possible to as many people as possible.
So market researchers look at things like: how much money does the sample population have to spend? How much are they willing to spend on our product? What percent of buyers will be priced out at X price? What about at Y price? How much more market share will we gain at X price? Y price? How will X/Y price influence buyer sentiment? How does this influence our sales next quarter? Etc, etc.
Additionally, there are logistics teams who analyze the costs to manufacture, transport, and retail products. They look at things like: where should the product for this market be manufactured? What does it cost to manufacture there? How much will it cost to ship to X market? What about Y market? What are the import tariffs in X/Y market? Taxes? Do we already have established retailers here? What will it cost to establish retailers, and how do we earn that money back? Etc, etc.
In any given market, the answers to the above questions will vary and the price of the product will be determined for the maximum profit and growth in that given market.
This is just the tip of the iceberg, but you get the idea.
**The price determined is the one that balances all of these (and more) factors to best capitalize on the given market. In the Netherlands, the sweet spot happens to be somewhere around $1,334. In Japan it is close to $994.**
In the United States of America advertised prices are always before taxes are added to the final paying price, while in Europe they already include the taxes. Then every country has different tax rates, Apple will also add fees for currency conversion, logistics, advertising ecc…