Wednesday, October 21, 2009

The cost of things

The first thing I noticed when I moved to New Zealand was how expensive everything seemed. The problem, I quickly learned, was that I was constantly converting prices to US dollars. Once I stopped doing that, I realised that things weren’t anywhere near as expensive as I’d thought.

Later, I noticed some things really were more expensive: Expensive things that had to be imported from overseas. New Zealand allows parallel importing—that is, a business can import goods directly into New Zealand so that consumers can buy products at much cheaper prices than they’d find through “official”, “authorised” importers. The “official” importers declare that the goods aren’t covered by manufacturer warranty, but even if that’s true, they’re still covered by New Zealand’s Consumer Guarantees Act, which is even better.

Some businesses provide strong incentive to find alternative sources, companies like Apple Computer.

For example, Apple advertises on its New Zealand Online Store that the Mac Mini is available “from $1398”, which, at the moment, would be $1,046.96 in US dollars. Trouble is, Americans actually pay “Starting at $599”, which is $NZ799.84. That means we pay nearly 75 percent more than purchasers in the US.

Okay, so take the US price (in NZ dollars) and add GST. The Mac Mini would be $899.82—still nearly $500 less than we’re being charged—more than enough to pay to have one shipped to New Zealand.

Up until the recession, pricing between NZ and the US was more comparable, as it still is, more or less, for music on the iTunes Store. But Apple has had huge pricing discrepancies in the past, and I know people who had friends order Macs in the US and ship them here (they just had to pay GST when it arrived here).

This sort of huge price difference isn’t all that common, but when it happens, it’s because a product is difficult to obtain except through authorised distributors. There are usually ways around it for people who really want the product. The point is, we shouldn’t have to do that.

I always used to think that the reason Americans pay so little for products is that the market is so huge, and obviously that’s a factor. But it sometimes also looks like those of us outside the US help American business keep prices low by subsidising our American cousins. “Global economy”, indeed.

Update 22 October 2009: Along similar lines, Melbourne’s The Age reports that “Aussies pay top dollar for Windows 7”. The basic version will cost $A199 to upgrade, while it’s $US119 in the US (equivalent to about $A129).However, at the Ultimate version will cost Australians $A429 for the upgrade—almost double the $US219.99 ($A238) price in the IS.

Microsoft justified this by claiming “taxes, freight costs and currency fluctuations” were the reasons for the higher prices. The weak US dollar means that the Australian and New Zealand dollars both have greater purchasing power than they had only a few weeks. Try another excuse Microsoft—and Apple.

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