4 ms·

Most retailers have margins in the range of 0.5% to 4.5% 30% is clearly not a reasonable margin...

doctor_eval 6y ago
I think placement in the App Store should be considered not in terms of credit card fees but more like placement on the shelves of a supermarket. I don’t know the economics of supermarkets but I do know it’s not just cost+. Sellers have to buy display space, participate in promotions, etc etc - all on top of the cost of the actual goods. I’m too lazy to look it up but I wouldn’t be surprised if the gross margin in the App Store is in the same region as for non essential supermarket goods.
- arvinsim 6y ago
  Apple didn't become a trillion dollar company by collecting small margins. It's fair to assume that the 30% has a fat profit margin.
  - doctor_eval 6y ago
    I can see why people may think I’m defending Apple, but I’m not. I made my point badly but I’m trying to say that the way to explain the 30% is not in terms of the low cost of cards etc but in terms of the norms of other retail businesses. 30% is a high number relative to credit card fees, but a quick google (see my previous comment) suggests it would result in a GP in line with supermarkets. I think it’s a good comparison because supermarkets provide retail shelf space and access to consumers for a very large number of barely differentiated goods... Think of the 30% as a retail mark-up rather than fee. If you were to sell cookies at a supermarket you can expect that the supermarket would add 50%. It’s the same in the App Store except that you’re supposed to add the 30% yourself. I guess it scales better that way. In any case, I suspect the 30% has very little to do with Apples costs, and much more to do with retail profit norms. What’s happening with Hey is that they’re setting up a little card table out in the supermarket car park, and trying to sell their stuff. I can’t imagine any supermarket letting that happen for long.
- sebastien_b 6y ago
  Given the state of the App Store, that placement is the equivalent of a needle on that grocery shelf. So now on top of the 30% you give Apple, you also have to buy ads in that same store for it to be more visible to users (assuming a competitor hasn’t outbid you). And that 30% you’re already paying? It doesn’t replace your marketing requirements one bit, so that “placement” by Apple doesn’t justify that fee.
  - doctor_eval 6y ago
    No I think you misunderstand. I’m not saying the 30% is Ok, nothing like that. I’m just saying that if you want to understand why it’s 30%, perhaps looking at other storefronts is better than just comparing it to the raw card fees. A quick google suggests I’m right [0] - Coles is a large Australian supermarket chain that makes gross profit of 24.4%, which after card and infrastructure is probably about Apple’s GP on the App Store. So sure, 30% is a lot, and I personally think it should be less, but it seems very much in line with other storefronts. [0] https://www.gurufocus.com/term/grossmargin/GREY:CLEGF/Gross-Margin-Percentage/Coles%20Group https://www.gurufocus.com/term/grossmargin/GREY:CLEGF/Gross-...
    - sebastien_b 6y ago
      My point is that, regardless of their cut, the "exposure" the App Store supposedly brings is likely practically nil, unless you're lucky enough to get 'featured' by them. So it's not like you end up being able to save costs by getting rid of your marketing department because "hey, you're on the App Store!". Additionally, you're not allowed to sell the same software at a different, higher, cost to make up for Apple's cut, so you effectively and up losing even more revenue, since you need to keep your own existing marketings costs, maybe even have to pay into Apple's ads on top of your 30% to market there as well for actual exposure, since you essentially end up as a needle in a haystack, because the App Store is full of cheap crappy apps that Apple is pushing developers to create to fill up their store, because "courage". (edit: I read from other comments that differing costs seem to be allowed now - "Hallelujah, it's a fucking miracle!") Additionally you don't have any option of providing the download yourself-they force you to use their "service", and hence "pay" for said service, instead of being able to control that cost yourself. Because "courage". And besides, I don't see how comparing fee structures between completely different industries as justification for Apple's cut is a valid argument in this case ("they do it too" or "they're even more" means the other guys are just as bad or worse - it's shouldn't be a pissing match of "who's worse?").
mikekij 6y ago
Well, 30% isn’t their margin. It’s their gross revenue. Calculating the margin would require knowing their hosting / development costs for the App Store ecosystem.
- stephc_int13 6y ago
  Sure, they have some infracture and personel cost to maintain the store. But I think we're talking about millions here, not Billions...
  - lotsofpulp 6y ago
    I wonder why a competitor hasn’t sprung up if it’s just millions.
    - fomojola 6y ago
      You need a phone to be a competitor.
      - threeseed 6y ago
        There are hundreds of phone manufacturers. Should be pretty easy to topple Apple if you just need to throw a few million at the problem.
  - threeseed 6y ago
    And what about the costs of designing, building, marketing and supporting iOS ? Very much getting into the hundreds of millions if not billions.
    - stephc_int13 6y ago
      This is their product, and they are not giving it away for free, last time I checked...
deleted 6y ago
[deleted]
etchalon 6y ago
Retailers do not have margins of 0.5% to 4.5%. They might have net margins around that amount, but their gross margins are generally closer to 30-40% depending on the industry. Clothing retails have insane gross margins. Grocery stores have terrible ones.

I think placement in the App Store should be considered not in terms of credit card fees but more like placement on the shelves of a supermarket. I don’t know the economics of supermarkets but I do know it’s not just cost+. Sellers have to buy display space, participate in promotions, etc etc - all on top of the cost of the actual goods. I’m too lazy to look it up but I wouldn’t be surprised if the gross margin in the App Store is in the same region as for non essential supermarket goods.

arvinsim 6y ago
Apple didn't become a trillion dollar company by collecting small margins. It's fair to assume that the 30% has a fat profit margin.
- doctor_eval 6y ago
  I can see why people may think I’m defending Apple, but I’m not. I made my point badly but I’m trying to say that the way to explain the 30% is not in terms of the low cost of cards etc but in terms of the norms of other retail businesses. 30% is a high number relative to credit card fees, but a quick google (see my previous comment) suggests it would result in a GP in line with supermarkets. I think it’s a good comparison because supermarkets provide retail shelf space and access to consumers for a very large number of barely differentiated goods... Think of the 30% as a retail mark-up rather than fee. If you were to sell cookies at a supermarket you can expect that the supermarket would add 50%. It’s the same in the App Store except that you’re supposed to add the 30% yourself. I guess it scales better that way. In any case, I suspect the 30% has very little to do with Apples costs, and much more to do with retail profit norms. What’s happening with Hey is that they’re setting up a little card table out in the supermarket car park, and trying to sell their stuff. I can’t imagine any supermarket letting that happen for long.
sebastien_b 6y ago
Given the state of the App Store, that placement is the equivalent of a needle on that grocery shelf. So now on top of the 30% you give Apple, you also have to buy ads in that same store for it to be more visible to users (assuming a competitor hasn’t outbid you). And that 30% you’re already paying? It doesn’t replace your marketing requirements one bit, so that “placement” by Apple doesn’t justify that fee.
- doctor_eval 6y ago
  No I think you misunderstand. I’m not saying the 30% is Ok, nothing like that. I’m just saying that if you want to understand why it’s 30%, perhaps looking at other storefronts is better than just comparing it to the raw card fees. A quick google suggests I’m right [0] - Coles is a large Australian supermarket chain that makes gross profit of 24.4%, which after card and infrastructure is probably about Apple’s GP on the App Store. So sure, 30% is a lot, and I personally think it should be less, but it seems very much in line with other storefronts. [0] https://www.gurufocus.com/term/grossmargin/GREY:CLEGF/Gross-Margin-Percentage/Coles%20Group https://www.gurufocus.com/term/grossmargin/GREY:CLEGF/Gross-...
  - sebastien_b 6y ago
    My point is that, regardless of their cut, the "exposure" the App Store supposedly brings is likely practically nil, unless you're lucky enough to get 'featured' by them. So it's not like you end up being able to save costs by getting rid of your marketing department because "hey, you're on the App Store!". Additionally, you're not allowed to sell the same software at a different, higher, cost to make up for Apple's cut, so you effectively and up losing even more revenue, since you need to keep your own existing marketings costs, maybe even have to pay into Apple's ads on top of your 30% to market there as well for actual exposure, since you essentially end up as a needle in a haystack, because the App Store is full of cheap crappy apps that Apple is pushing developers to create to fill up their store, because "courage". (edit: I read from other comments that differing costs seem to be allowed now - "Hallelujah, it's a fucking miracle!") Additionally you don't have any option of providing the download yourself-they force you to use their "service", and hence "pay" for said service, instead of being able to control that cost yourself. Because "courage". And besides, I don't see how comparing fee structures between completely different industries as justification for Apple's cut is a valid argument in this case ("they do it too" or "they're even more" means the other guys are just as bad or worse - it's shouldn't be a pissing match of "who's worse?").

mikekij 6y ago

Well, 30% isn’t their margin. It’s their gross revenue. Calculating the margin would require knowing their hosting / development costs for the App Store ecosystem.

stephc_int13 6y ago
Sure, they have some infracture and personel cost to maintain the store. But I think we're talking about millions here, not Billions...
- lotsofpulp 6y ago
  I wonder why a competitor hasn’t sprung up if it’s just millions.
  - fomojola 6y ago
    You need a phone to be a competitor.
    - threeseed 6y ago
      There are hundreds of phone manufacturers. Should be pretty easy to topple Apple if you just need to throw a few million at the problem.
- threeseed 6y ago
  And what about the costs of designing, building, marketing and supporting iOS ? Very much getting into the hundreds of millions if not billions.
  - stephc_int13 6y ago
    This is their product, and they are not giving it away for free, last time I checked...

deleted 6y ago

[deleted]

etchalon 6y ago

Retailers do not have margins of 0.5% to 4.5%. They might have net margins around that amount, but their gross margins are generally closer to 30-40% depending on the industry. Clothing retails have insane gross margins. Grocery stores have terrible ones.