Why my pricey smartphone is not the apple of my i
It was love at first swipe. I still remember the first time I held a gleaming iPhone in my hands. The smooth surface. The shiny cover. The high-resolution display. The awe-inspiring idea that the entire bank of human knowledge - from the bible to Wikipedia - resided in my palm.
Today, I am a woman scorned. A woman betrayed. A woman who has fallen out of love with her iPhone. Why?
Quite simply, Apple is ripping me (and you) off blind. And it’s all completely legal. Aussies regularly pay twice what Americans pay for identical IT products, including devices, downloads, software and games.
Downloads of popular music singles – such as Gotye’s Somebody That I Used to Know – cost $2.19 in the Australian iTunes store, but only around $1.30 in the US iTunes store.
But it’s not just downloads. A Choice survey last June found the 16GB Apple iPad costs $679 in Australia, but just $640 in the US.
And it’s not just Apple. Microsoft’s basic Office software costs $189.00 in Australia, but $122 in the US.
Since last July, a parliamentary inquiry spearheaded by the tech-loving Labor MP Ed Husic has been seeking a “please explain” from the tech giants on why Aussie consumers are slugged more than their US counterparts.
Apple, Microsoft and Adobe have been, understandably, reluctant to front up to explain their bare-faced price gouging.
In a dramatic twist this week, the committee has summonsed the companies to appear at a public hearing in Canberra on March 22.
There is no suggestion the companies have done anything illegal. But it is abundantly clear the tech giants have been engaging in what economists call “price discrimination” between US and Aussie consumers.
Price discrimination is when sellers charge buyers different prices for the same product or service. Many companies regularly discriminate among groups of customers on the basis of age – by offering discounts to seniors or students.
They also do it or by geography – such as by charging higher prices to inner city residents whom they presume to be richer.
Have you ever wondered why drinks at trendy inner city bars cost wildly more than the same drink in a pub in the suburbs, even though transport costs would presumably be lower to the inner city? It’s price discrimination.
Sellers are constantly trying to exploit buyers’ different willingness (and ability) to pay.
The next time you fly, consider that it is unlikely that every passenger will have paid the same price for their fare. Advance bookers will likely have paid a lower price, having signalled by their early purchase that they are more price conscious. Last minute travellers will have paid more, having signalled they are less price conscious or perhaps a business traveller.
The prices we regularly pay are not only by the costs of supply, but the strength of demand. Ideally the seller would likely to be able to charge the top price a consumer is willing to pay. In practice, it’s hard for companies to know what this price point is. At what point is the price too high that consumers will simply walk away from the transaction?
It is clear that the big tech companies have targeted Australians as people with a high willingness and ability to pay. Our relative affluence – a low jobless rate and real income growth at a time when US incomes have gone backwards – acts as a signal of our higher willingness to pay.
It’s kind of like the rich guy who walks into a car sales yard dripping in diamonds and bling. Can I offer you a test drive in our latest model Rolls Royce, Sir?
Except, when it comes to IT purchases, the tech giants are selling you the exact same car, but at mark ups of around 50 per cent. It is particularly galling when it comes to downloads through iTunes. Apple incurs no extra shipping costs delivering your music. Indeed, you pay the cost of downloading. It’s just blatant discrimination.
Retailers like Apple, Microsoft and Adobe are just charging whatever they think they can get away with it.
So what can we do about it? As always, it pays to shop around. Check prices online.
Unfortunately, the tech retailers have technology, “geoblocking” software, which enables them to identify the location of your computer. Some retailers will simply block Australians from buying American goods from an Australian address.
Consider a trip to the US to purchase your tech goods. Or you can use the service of new websites like MyUSA.com, FetchUSA.com.au or PriceUSA.com.au who will accept delivery of your goods to a US address and post them to you.
Price USA will also purchase the goods on your behalf if the retailer insists on an American credit card.
Retailing is increasingly a global market. The internet makes it easier for consumers and retailers to compare prices and in turn makes it harder for individual companies to get away with charging different prices to different consumers. If they do, some other retailer will come up with a cheaper price in an attempt to steal customers.
We are no longer captive to the tech giants. It’s time we wise up to the rip off, get angry and switch to Android and other competing or upstart tech companies.
By outing the discriminatory pricing strategies of big companies like Apple, Microsoft and Adobe, the parliamentary committee is helping consumers to wake up to the need to shop around. It is possible the inquiry could also result in greater legal protection for people who try to get around geoblocking on their computers.
But just the threat consumers might walk away could be enough to get Apple and others to lower their prices.
Then again, breaking up is hard to do. And my iPhone is so shiny.
Jessica Irvine is National Economics Editor. She regularly checks her emails on her iPhone at firstname.lastname@example.org
Comments on this post close at 8pm AEDST
Read all about it
Up to the minute Twitter chatter
The latest and greatest
Good morning Punchers. After four years of excellent fun and great conversation, this is the final post…
I have had some close calls, one that involved what looked to me like an AK47 pointed my way, followed…
In a world in which there are still people who subscribe to the vile notion that certain victims of sexual…