Amazon and Apple: how American firms fleece Brits
Filed under: TV, Phone & Broadband
A quick check on Google shows me that, over the past 12 months, one pound sterling has been worth between 1.67 and 1.53 US dollars. Conversely, the value of one dollar has varied between 60p and 65p. As I write, the pound-dollar exchange rate is 1.595, so one US dollar is worth just short of 63p.
Unfortunately, some American businesses throw the established exchange rate out of the window when deciding how much to charge British customers for their goods and services. In some cases, US firms mistakenly believe that one dollar is worth as much as one pound.
One high-profile practitioner of an unfair 'strong dollar' pricing policy is tech giant Apple.
Last September, I paid £399 for the cheapest iPad 2 (the 16GB Wi-Fi model). However, in the USA, the exact same item cost $499. Applying the exchange rate in force at that time, my UK-bought iPad 2 cost me around $635. In other words, it cost $136 more than the US-bought version, which is more than a quarter (27%) extra.
Following the launch of the new iPad last month, I checked the pricing of Apple's new range. So Apple seems to believe that one dollar is worth about 80p, instead of its current value of 63p.
Even worse, Apple's premium pricing also applies when buying music and films from iTunes and apps from the App Store. A track costing 99 cents in the US costs 79p over here, which is the same 27% mark-up.
It's largely a tax problem
Hence, Apple artificially inflates the price of UK-sold goods by around 27% -- or does it?
I know that VAT (Value Added Tax) at 20% accounts for £66.50 of the £399 VAT-inclusive cost of a new iPad. Furthermore, the US has state sales taxes that bump up prices there, too.
However, sales taxes in the US vary from 0% to 11.5% and average 8%-9%, so these are nothing like as high as the UK's 20% VAT.
Apple's true mark-up
Even after stripping out UK and US sales taxes, there remains a significant mark-up to buy Apple products in the UK, as this calculation shows:
Therefore, Apple's true mark-up is close to 6%, which is much less than the 27% mark-up suggested at first glance by the VAT anomaly. Even so, this additional margin bumps up prices and thus delivers higher profits to Apple at the expense of British buyers.
Here's another example of a foreign firm (Japanese, this time) taking British buyers for a ride.
In February, the new Olympus OM-D EM-5 was launched around the world. This high-end camera retails for £1,149.99 in the UK, but sells for $1,299 in the US. What kind of mark-up is this? Let's crunch the numbers to find out:
Amazon's sneaky pricing
On Saturday, Amazon launched the new touch-screen version of its hit Kindle e-reader. In the US, the Kindle Touch 3G retails for $149, but is on sale at £169 in the UK.
Stripping out VAT, the UK-bought Touch 3G costs £140.83, which translates into $223.54. That's $74.54 more than the US price, which is a 50% mark-up. Ouch!
I can't see any valid reason why firms like Apple, Amazon and Olympus should charge more for goods in the UK than in the US. It's time this rip-off ended.
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