Re:apple fixes the price (Score:5, Informative)
by Anonymous Coward
The parent got modded up as flamebait, but the statement is in fact true. There IS Apple price fixing for it's authorized resellers.
I work at an Apple Authorized Reseller in Los Angeles, and Apple has made it pretty clear that if we drop the price by more than $50, we aren't going to be an authorized reseller much longer.
Personally, I think it's terrible, because there is quite a profit made on Apple hardware by us, particularly G5 desktop systems, and iPods.
Basically, we could knock a good 74-100$ off the iPod without losing money. And I think if we did such a thing, we'd get a pretty healthy customer base very quickly.
Discuss.
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I'm not particularly crazy about the mini... it's nice in it's own right, but I would prefer an iPod (for the wife—it's been something she's been wanting since it came out, but still isn't "economically friendly" for us right now).
I've always wondered about how much money Apple charges on their products and why they strongarm their resellers. No wonder there are hardly any Apple stores in Ottawa!
If a reseller was willing to sell something for even less than the asking price (and still make a profit) is a valid indicator that Apple is perhaps pricing their products to gain money, not marketshare. I know they're in the biz to profit, but I agree that dropping the price by even $75 – $100 for something like an iPod could spark even more interest from people who would otherwise overlook an Apple product.
The question for me that begs to be asked: How much does Apple mark up all their products?
Secondly (sort of off the topic): Why don't they take a more pro-active pricing effort for the Canadian market—auto-dealers do it... why not Apple?
Apple has Gross margins in the 24-25% range. This is public knowledge as they are a public company.
What must be said is, that margin is out of there door. Additional Margin is gained buy Resellers and there own direct marketing vehicles. IE. Apple Stores.
For a computer manufacturer in this day and age to have margins of this size is remarkable. It shows that Apple is in no way interested in growing market share. Rather, concentrate on great product development and profit.
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but it will annoy enough people to make it worth the effort".
I work at an Apple Authorized Reseller in Los Angeles, and Apple has made it pretty clear that if we drop the price by more than $50, we aren't going to be an authorized reseller much longer.
Not the case in Canada. We can sell everything at a loss if we want. Obviously, we wouldn't be around long if we did.
Quote:
Personally, I think it's terrible, because there is quite a profit made on Apple hardware by us, particularly G5 desktop systems, and iPods.
Basically, we could knock a good 74-100$ off the iPod without losing money. And I think if we did such a thing, we'd get a pretty healthy customer base very quickly.
Ha ha ha!! I wish we made even close to that on an iPod.
Things must be quite different in the US.
It is nearly impossible to determine price margins on retail electronics and computers from the "outside" of the business, and it's even much more difficult than you might imagine if you are "inside" the business.
Being in a different country only adds to the problem.
Chances are unless you are directly managing both the purchasing and accounting of a given reseller, you don't know the actual cost of an item or group of items. And even then, you won't know it unless you establish, monitor and implement the steps to calculate the figure.
If you are part of a chain, a franchise, or otherwise have a separate distribution channel run by your parent company, it's guaranteed you won't know the actual cost to your company, although you can be sure it's lower than whatever internal price list you base your retail pricing strategy on (and it's also likely that your per-location cost is higher than that listed on your price list. You may be paying for shipping, for example, while your distribution chain had it drop-shipped and negotiated free shipping).
Even if you are managing those areas, you may be missing out on cost reduction strategies your competitors are using; your cost is just that. It does not mean it will be identical to the reseller across the street's net cost for the same item, even when they buy from the same price list you have.
Keep in mind that I'm referring to the identical item purchased at the same dealer cost price.
Possession or knowledge of the confidential price list will give you an idea; however there is one sure-fire thing to say about the dealer cost listed on that sheet: it's not your true cost.
Actual margins will be different, and could be higher or lower than "dealer cost", depending on how you buy, whom you buy from, where you are physically located from the warehouse, how you ship and recieve, how much you buy, how you manage your inventory, how often you buy, how you time your purchase orders, how good you communicate with your distributor, what your negotiating position is with your distributor, whether they credit you or offer a further purchase discount in lieu of your local advertising of their product, how you pay for it, how you get the money to pay for it, and which method you use to pay your staff to sell it.
Then you have a number you can use to base your markup on, which is supposed to cover your cost to get it out the door and provide a sustainable profit so you can stay in business.
As for the slashdot post, this is pure guessing, but:
He's in LA, where his distribution costs may be near zero; it's a huge containerized freight port and Apple's products come from Asia.
His citing of a range of prices (74~100) may indicate that his ability to take advantage of cost reduction strategies varies.
It's perfectly legal to discount wholesale prices based on volume, and LA sounds like a good place to move some quantity.
It's not legal to have different price lists for different resellers; if I buy one in Muskogee and the guy from LA buys one, we both buy from the same price list (assuming we buy from the same distributor) but I may not be in a position to buy 1,000 and he might.
The cost to a reseller in Muskogee is probably much higher than what the LA store pays; margins may well be quite small for small volume US-based resellers and the retail price has to reflect that or you won't have any dealers outside major cities.
It's not uncommon for a single reseller in the US to buy in the same quantities as the whole of Canada.
You can be sure that, all things being equal, the LA reseller will have lower costs than a well managed high-volume Chicago reseller due simply to distance from the port of entry and/or the time necessary to restock from a warehouse's location.
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