news Iconic technology giant Apple has applied a substantial markup on the Australian price of its new Mac Pro professional workstation computer compared with the machine’s US prices, with Australians to pay hundreds of dollars more for exactly the same product when the unit goes on sale in December.
The new Mac Pro differs radically from the previous generation of products in the line, featuring a circular new design arranged around what Apple describes as a “unified thermal core” that allows the Mac Pro to be more powerful than previous models, while also keeping the machine “unbelievably compact and quiet”. It also features the latest Intel Xeon E5 processor, which comes with up to 12 cores, as well as dual graphics chips from AMD, faster PCIe-based flash storage, and Apple’s Thunderbolt 2 standard connections, which allow high-resolution displays to be daisy chained to the unit.
“The new Mac Pro is our vision for the future of the pro desktop, everything about it has been reimagined and there has never been anything like it,” said Philip Schiller, Apple’s senior vice president of Worldwide Marketing, in a statement this morning.
However, Apple has also priced the unit substantially different in Australia compared with its pricing in the US. In the US, Apple announced overnight that the new Mac Pro will start at US$2,999 (AU$3,081) for the quad-core model, or US$3,999 (AU$4,108)for the six-core model. The Mac Pro is also customisable, and it is expected that many customers will end up paying more than those sums for the unit.
In Australia, customers will pay AU$3,999 for the quad-core model, or AU$5,299 for the six-core model, for buying the same hardware. This represents a markup of between 17 and 18 percent of the US cost of the Mac Pro, once Australia’s 10 percent GST tax is taken out.
Queried about the issue, an Apple Australia spokesperson highlighted the fact that the Australian prices on the Mac Pro includes goods and sales tax, while the prices quoted on Apple’s media releases in the US did not. However, with GST in Australia being set at only 10 percent, the tax situation does not account for the whole price markup on the Mac Pro in Australia, with prices still remaining at 17 to 18 percent higher even after GST is taken into account.
Overnight, Apple also released Australian and US pricing on a variety of other devices, ranging from a new MacBook Pro with Retina display to new iPad Air and mini models. In general, each has had a smart markup ranging from $100 on most of the iPads to closer to $400 on high-end versions of the new MacBook Pro. Again, GST in Australia accounts for some, but not all, of the price differential.
The price hike activity on the Mac Pro reverses a trend seen in Apple’s pricing over the past year, where the company has appeared to be broadly harmonising prices on some of its products. For example, in June 2012, the company releases new MacBook models, featuring a small markup of only between 10 percent and 13 percent on the models.
The news comes several months after Australia’s Federal Parliament released a landmark report into the prices of technology goods and services in Australia. The report found Australians were being unfairly slugged with price increases of up to 50 percent on key technology goods and services.
In the foreword to the report, Committee chair Nick Champion noted that the importance of IT products to every sector of Australian society “can hardly be overstated”. “IT products are woven into the fabric of our economy and society, and have driven rapid change in the way Australians communicate, the way we work, and the way we live,” the Labor MP noted.
However, Champion added, the committee hearings held over the past year had found that Australian consumers and businesses must often pay between 50 and 100 percent more than those residing in other countries for the same products.
“Evidence presented to this inquiry left little doubt about the extent and depth of concern about IT pricing in Australia. Consumers are clearly perplexed, frustrated and angered by the experience of paying higher prices for IT products than consumers in comparable countries,” Champion added. “High IT prices make it harder for Australian businesses to compete internationally and can be a significant barrier to access and participation for disadvantaged Australians (in particular Australians with a disability).”
“Based on the evidence received over a 12 month inquiry, the Committee has concluded that in many cases, the price differences for IT products cannot be explained by the cost of doing business in Australia. Particularly when it comes to digitally delivered content, the Committee concluded that many IT products are more expensive in Australia because of regional pricing strategies implemented by major vendors and copyright holders. Consumers often refer to these pricing strategies as the ‘Australia tax’.”
The report made a variety of recommendations to address the issue, ranging from the Australian Bureau of Statistics developing a program to monitor prices, that parallel importation restrictions be lifted, and that so-called technological protection measures on digital content be lifted. In addition, the Committee recommended that the Government investigate options by which it could educate consumers on how to actively avoid ‘geo-blocking’ of content.
The Federal Government has not yet responded to the report’s recommendations.
opinion/analysis
Apple’s price hike on its Mac Pro unit is clearly illegitimate. I think most Australians are happy to wear price hikes of 5 percent, 10 percent, even potentially something as high as 15 percent. But the prices we’ve seen publicised today on Apple’s Mac Pro line (if you take tax out of the equation) are as high as 17 to 18 percent higher than the same units being sold in the US. And that’s just not cricket. Costs are higher in Australia than in the US — but not that much higher, especially when you’re a company with the economies of scale which Apple has built.
Image credit: Apple
I think using today’s usd/aud exchange rate in unfair considering the large movements that have been happening recently. Using the 100 day moving average is a more balanced way to look at the numbers
100 day average
US$2999 = AU$3249+gst = AU$3574
that’s still a $425 dollar difference which I believe is larger than can be justified.
+1
Slight change to the thought though. I wouldnt have any problems if the price was set at $3599 or even $3699 in your example, to set a stable price that means they dont have to change the price every time there is a 3 month trend away from a standard ~95c.
Biggest problem I see is that retailers have already bought stock, so if they’re holding it for any length of time they might lose out with a fluctuating dollar. Also, as a consumer you want some sort of consistency, and when our dollar is at parity or better the percieved price difference really jumps.
To put it a different way, if our dollar was at 80c right now, the price listed isnt that far from being the same, and its been that low plenty of times. If it was $1.10 the difference is much higher.
It is worth noting that the Mac Pro is assembled in the USA now too, so local prices there don’t need to include any international shipping fees.
Previous Mac systems were assembled in China and other places, so shipping fees were pretty much universal I am guessing.
I have no idea how much difference this makes though.
They don’t actually manufacture much (if any) of the components in the US, though. If they’re using Micron memory, then they’re OK for RAM and possibly SSD, but the mainboard, CPU, PSU, HDDs, chassis, graphics card(s), peripherals and monitor(s) are all imported. But yes, there’s an extra shipping burden for anyone outside the US now. That’s hardly a significant cost, though – when bringing in containers of computers it works out to a few dollars per unit (a 20′ container costs around $1k from the USA in single unit quantities, the price per unit drops substantially for a few dozen 40’ers).
No, the biggest cost of imported IT products to Australians are (usually) our local importers and distributors; other Australians adding on 30 to 40% by being middlemen. Sometimes it is the manufacturer (Redline auto products, for example, have a huge markup for every region outside the US no matter who the distributor is because they only care about their own domestic market. Adobe have been guilty of similar practices), but most of the time in the IT sector it is the importer/distributor taking a cut that results in these universally inflated prices.
If you want to figure it out, you just need a purchasing officer from one of the major distributors to leak a copy of their purchase orders and customer price lists – then you’ll be able to see what they buy their stock for, what they sell it for, and finally compare that with retail prices. With that detail you will clearly see just what percentage each step adds to the final price.
But good luck getting data like that – there are probably only two dozen people in the country with access to such information.
I’m not sure you can say the price differences are “illegitimate” simply based on a currency conversion and subtraction of GST. For example, Apple may expect to sell relatively low volumes of the Mac Pro in Australia, but know that users of the Mac Pro will expect rapid restoration of problems. So it may need to hold quantities of expensive spare parts in Australia, whereas in the US the population size may mean the overall cost of holding spare parts is lower per unit. (Of course I am pulling this out of my arse and it is equally possible that Apple Australia is just going for the price premium factor… but I think it is worth appreciating that business overheads are more complicated than simply doing a currency conversion between two countries.)
At the above prices; they can afford to buy (at retail cost; not wholesale cost) 1 full Mac Pro unit and keep it in storage in Australia for every 5 they sell.
Maybe it will cost them 1 unit’s value to store it.
So lets call that 1 full mac pro worth of parts for every 6 mac pro sold.
If they have a failure rate that high I wouldn’t be buying it.
Well that’s an interesting and valid analysis :)
Whilst the above is valid, if I were Apple I wouldn’t be looking at the past exchange rate, I’d be more worried about the predicted rate over the next 12 months for their product cycle. Given the above pricing we can only assume they think the AUD will weaken.
“And that’s just not cricket.”
They don’t play cricket in the US. Only baseball. They love to ‘slug’ us with their prices.
(Sorry, I couldn’t help it!)
“Costs are higher in Australia than in the US”
And that is where the contention is. The cost of living in Australia is higher.
Visitors rightly complain about it. US visitors also.
But where does this ‘cost’ of living come from?
We import all our technology from Japan, China, Thailand, USA.
We import a lot of clothing.
We import a lot of food stuffs.
Then overseas markets jack up the prices, and it makes it more expensive to buy what we need.
Cost of living goes up in response, and the forces the Job market to increase our pay packets.
Nurses, Construction workers, Taxi drivers, Teachers all go on strike till they get a fair increase also.
We all end up getting paid more, and then companies like Apple and Microsoft claim that ‘Australian can afford to pay more’.
Well duh, because you keep putting prices up.
Idiots.
I think it’s high time we stop buying this crap from overseas monopolistic companies, and either don’t buy their stuff at all, or only bought new stuff from them every 8-10 years. Then they might get the idea we don’t like buying their stuff at those prices.
Just so you know, they do play cricket in the US, it actually predates baseball. It may pale into insignificance compared to baseball, by there is a USA cricket association. Their status is in the group just below the countries with test status. Associates? Affliliates?
As for the rest, thats pretty much capitalism in a nutshell. One area drives another area, which in turn drives a third area, all getting into a cycle of increasing numbes, resulting in higher costs, higher wages, and higher profits. It gets noticable here when we go through something like the GFC relatively unscathed (note: RELATIVELY) so our cost of living remains strong when compared to the rest of the world.
People dont believe me when I say we’re actually one of the lowest taxed countries in the world, but we are (note: if someone disagrees, back it up. I can). End result is more disposable income, hence more capacity to spend. Part of why our housing is so expensive. End of the day, the market varies depending on that capacity to pay for something, and we’re in a pretty sweet situation in that regard.
But that still doesnt make a geotax legit, and thats what this is.
The Mac Pro’s basic model will be 2500 pounds including VAT in the UK – that’s just under AUD$4200. In India it will go on sale for 230k rupee, which converts to just under AUD$3900.
A vague snifftest (apart from making me wonder why it’s not cheaper in India) makes it seem like average cost of living/wages impacts the local price.
Why is 10-15% markup considered ok, but 17-18% – a potential difference of 2% – a ripoff? You quote a report that mentions digital content, but that obviously doesn’t apply here.
Apple aren’t the only ones keeping up the price hikes.
Purchasing Visual Studio 2013 with MSDN (digital downloads, so no shipping fees here!) comes in at $1,199 USD for purchasing in America, $1,912 AUD ($1,841.56 USD) for Australia, and $2,378 NZD ($2,000.05 USD) for New Zealand.
How can they justify 54% and 67% markups for digital downloads?
What difference does the relative value of the AUD and USD make? It’s Apple’s product and they’re entitled to charge whatever they like for it. As a potential customer, you have two choices: buy their product or don’t. It’s not like an overpriced computer with a fruity logo is some food staple which we’d die without.
The argument is that its discrimination. Simple as that. If we’re being overcharged just because we’re in Australia, thats an unfair basis for pricing. If the higher price can be justified, then its a different matter, but when you look at the stock shelf price in the US, and compare it to here, there isnt anything to justify a significant portion.
I’d say that ‘overcharge’ is a risky term to use in this context. Apple are essentially charging what the market will take, factoring in some things like local income levels, number of hours worked to afford the product*, etc.
What you find justifiable may not agree with what they find justifiable. I mean, Apple have a pretty decent markup even in the US – they’re pricing themselves into a certain segment with their products.
*As an example, as a chef in Australia, I am paid roughly twice what I will be when I move to the US in a year or so. Some costs vary by region, but overall the rough proportion of money spent on things like accommodation, food, utilities, etc, remains (on average) similar.
In that context, why do Australians think that they have to work half as much to afford something being sold by Apple?
YMMV depending on what industry you work in.
Didnt say it was overcharging, I was just using it as a basis for it being potentially discriminatory.
But I disagree with what you replied anyway, They build a product, they incur costs locally/internationally at their dollar value, which sets a standard build cost for the product. That build cost doesnt change to any large degree. If their US price is $2999 its because it costs (to pick a random number) $2000 to build the product, then they add their profit margin on top.
That $2000 build doesnt change just because they sell the product in Australia, so anything more than what they would normally get in profit is a geographical decision.
Just because we can afford to pay more doesnt necessarily make it right to charge us more as a result. Why do Americans think we deserve to pay more, just because we earn $70,000 a year on average? Our dollars are near enough to parity that the costs shouldnt be all that different.
If you own a McDonalds franchise in Vaucluse in Sydney, does it make it right for you to charge twice as much for a Big Mac, simply because the locals can afford to pay it?
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