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> A big part of the cost is local (e.g. internal shipping, running UK-based warehouses, tax), so remain unaffected. It really isn't: http://fitsmallbusiness.co

> A big part of the cost is local (e.g. internal shipping, running UK-based warehouses, tax), so remain unaffected. It really isn't: http://fitsmallbusiness.com/order-fulfillment-costs/ http://fitsmallbusiness.com/order-fulfillment-costs/ Also, Apple's costs (in USD) haven't increased. It's just that they get fewer dollars for a fixed amount of British pounds. To keep the USD they receive constant, they have to increase the price in GBP.

blowski 10y ago
The laptop used to be £1600, so removing the sales tax, Apple UK received £1300. So Apple UK has UK costs, let's say they are 15% of the laptop so around £200 per laptop, and Apple US receives the remaining £1100. If the pound weakens against the dollar by 20%, that £1100 is now worth about £920. So if they put the price up to £1100, then the value that the UK company needs to submit to the US company is now £1300, and the high-street price should rise to around £1800 (£1300 + 15% UK costs + 20% tax). But the price has actually increased to £1900. What's more, this all assumes that Apple can maintain exactly the same profit margins with increasing prices, which they can only do when there is insufficient competition. Also, if Apple were paying UK corporate taxes, their UK costs would be higher, so the currency change would have even less impact. I'm no economist or accountant, so there's a good chance I've got something totally wrong, but on the face of it, this looks like Apple sneaking in a big price rise by abusing their dominant position. In markets where there is more competition, I expect I won't see the same kind of price rises, because the manufacturers will be forced to absorb some of the increased prices. Some price rises yes, but not 20%.
- lorenzhs 10y ago
  I just gave you a link that shows that the costs of warehousing and shipping are much closer to £20 than £200. The cost for their retail stores may have decreased, but even then it's certainly not £200 per device.
  - blowski 10y ago
    I don't work for Apple, so I have no idea of their costs. I did however work for a medium-sized company with a similar business model (design in US, build in China, drop-ship worldwide). While they were nowhere near the size of Apple (total market cap was about $2 billion) their costs of operating in the UK were certainly a lot higher than 1% per unit - they were typically around 20%. I realise that Apple has astronomically large economies of scale, but they also do a lot of UK advertising and have a lot of physical stores. A lot of the costs for the firm I was working for were on things like customer service, wastage (as in fixing and replacing broken units), rates (UK local government tax on commercial properties), etc.

blowski 10y ago

The laptop used to be £1600, so removing the sales tax, Apple UK received £1300. So Apple UK has UK costs, let's say they are 15% of the laptop so around £200 per laptop, and Apple US receives the remaining £1100. If the pound weakens against the dollar by 20%, that £1100 is now worth about £920. So if they put the price up to £1100, then the value that the UK company needs to submit to the US company is now £1300, and the high-street price should rise to around £1800 (£1300 + 15% UK costs + 20% tax). But the price has actually increased to £1900. What's more, this all assumes that Apple can maintain exactly the same profit margins with increasing prices, which they can only do when there is insufficient competition. Also, if Apple were paying UK corporate taxes, their UK costs would be higher, so the currency change would have even less impact. I'm no economist or accountant, so there's a good chance I've got something totally wrong, but on the face of it, this looks like Apple sneaking in a big price rise by abusing their dominant position. In markets where there is more competition, I expect I won't see the same kind of price rises, because the manufacturers will be forced to absorb some of the increased prices. Some price rises yes, but not 20%.

lorenzhs 10y ago
I just gave you a link that shows that the costs of warehousing and shipping are much closer to £20 than £200. The cost for their retail stores may have decreased, but even then it's certainly not £200 per device.
- blowski 10y ago
  I don't work for Apple, so I have no idea of their costs. I did however work for a medium-sized company with a similar business model (design in US, build in China, drop-ship worldwide). While they were nowhere near the size of Apple (total market cap was about $2 billion) their costs of operating in the UK were certainly a lot higher than 1% per unit - they were typically around 20%. I realise that Apple has astronomically large economies of scale, but they also do a lot of UK advertising and have a lot of physical stores. A lot of the costs for the firm I was working for were on things like customer service, wastage (as in fixing and replacing broken units), rates (UK local government tax on commercial properties), etc.