Analysing the price tags of Apple Mac portables

17 June 2009 - Filed under Life Outside Work

It’s been a week since the Great Apple Announcements of 2009: new operating system, new laptops, and new phone. It’s no secret that Apple profits hugely from its culture of secrecy; publicity generated from worldwide speculation on its yet-to-be-made product announcements must be worth an astronomical sum every year. What’s also unique about Apple is that the company exercises total control over the prices of its products, worldwide, no matter who the reseller is. The retail prices are consistent throughout the country and Apple products, portables computers in particular, are always excluded from those crazy-20-percent-off-all-laptops-only-until-Monday promotions at nationwide computer retail stores. Some stores do offer a whopping $2 off the set retail price; if you’re lucky, $20 off – but never 20 percent.

Other than qualifying for education discounts, there are only two ways to get Mac computers at real bargain prices: Wait for the release of new revisions and products (typically every 8-9 months), rush to a reseller and pick up a previous generation model hundreds of dollars cheaper than what it was only a few days ago. If you can’t wait for the perfect timing, get an Apple-certified refurbished Mac that comes with the same warranty terms as brand new ones.

One of the strong selling points of the June 2009 Apple announcements is that due to the slowdown in the economy, Apple took bold steps to bring down the prices of its new and updated laptops. This does not happen often as Apple traditionally takes pride in being able to stay in the high-margin, premium segment of the market. Indeed, cutting the price of the high-end MacBook Air by a jaw-dropping US$700 is a bold move. Even the entry-level Aluminium MacBook (now called MacBook Pro) received a 7.7% price cut in the U.S., which is significant especially with all those enhancements that allegedly justify the upgrade to the “Pro” moniker.

There is, however, one problem: those price cuts aren’t global. In many cases, a downward movement in the U.S. doesn’t equate to similar drops in other countries; in some cases, it’s just the opposite. Regardless of how Apple repositions its products in the United States, the retail prices of Mac computers around the world are governed (I think) by one thing: Apple’s own calculations of hedging against fluctuations in currency exchange rates until the next round of product announcements. Sure, the suppliers and retailers of other brands do that, too, but in the case of Mac computers, there is only one monopolistic decision maker along the entire value chain: Apple Inc. Once set, the local price sticks until the next revision of that product line; no individual retailer can touch that, no matter how great their buying power might be.

One question piqued my curiosity: Is Apple responding to the observed and forecast fluctuations in the different currencies in a reasonable, consistent manner, or are they simply padding international retail prices in a way that ensures added profitability outside the U.S. all year round? So I did some calculations myself based on data I could get hold of. In my limited research, I compared the prices of four different Mac potables in the U.S., Australia, and New Zealand over a 16-month period, i.e. three revisions in the pricing. The models represent the base configurations (hence the cheapest advertised prices) of:

• 13-inch MacBook Air
• 15-inch MacBook Pro
• 13-inch White MacBook
• 13-inch “Unibody” Aluminium MacBook (debuted in October 2008)

Oddly, obtaining raw data was the hardest part; you’d think Google and Wikipedia will tell you everything, but try finding the answer to this: How much did the base 15-inch MacBook cost in New Zealand before the new unibody range was introduced in October 2008? As I pondered before, the Internet is not that generous to information not deemed current. In any case, various sources unearth the following:

Advertised prices (local currencies)

Model	Feb ‘08	Oct ‘08	Jun ‘09
13-in MacBook Air US	$1799	$1799	$1499
13-in MacBook Air AU	$2499	$2899	$2399
13-in MacBook Air NZ	$2999	$3299	$2999
15-in MacBook Pro US	$1999	$1999	$1699
15-in MacBook Pro AU	$2699	$3199	$2699
15-in MacBook Pro NZ	$3199	$3699	$3499
13-in White MacBook US	$1099	$999	$999
13-in White MacBook AU	$1499	$1649	$1599
13-in White MacBook NZ	$1799	$1899	$1999
13-in Aluminium MacBook US	N/A	$1299	$1199
13-in Aluminium MacBook AU	N/A	$2099	$1899
13-in Aluminium MacBook NZ	N/A	$2399	$2399

Now here’s a caveat: The advertised retail prices in the U.S. don’t reflect local taxes whereas ones in Australia and New Zealand have the Goods and Services Tax included in them. As such, I based the subsequent calculations on before-tax figures. I also looked up the exchange rates on Yahoo! Finance for these key dates:

• The day the revisions and/or new releases were announced, i.e. new pricing begins to take effect
• Two weeks before the next round of announcements, i.e. speculation is on the rise and current pricing is rapidly approaching the end of its life cycle

Moving on, here’s the first part of the number-crunching:

Okay, now I can objectively say that while the prices of the four portable models have come down by 12% in the U.S. over the past 16 months, the drop in Australia has been much less significant. Meanwhile, those same models have actually become more expensive in New Zealand. Do these prices then correctly reflect the changes in the currency with respect to the USD? Roughly so. No complaints there.

By changing the absolute dollar figures into relative ones for the chosen dates, I get:

In terms of hedging against currency fluctuations, the February 2008 pricing clearly paid off. The sudden drop in the values of the AUD and NZD did erode all of the initial premium, but still kept the local prices very much on par with the U.S. prices towards the end of that cycle. Thanks to the dramatic change in exchange rates, however, customers down under were paying no more than what the Americans were paying – How’s that for a change? (It’s not shown here, but AUD and NZD prices fell even further to as low as 85% of the USD prices one week before the October 15 refresh, which clearly called for urgent adjustments from Apple’s point of view.)

The launch of the new products in October 2008 reflected the global economic downturn and the resultant changes in exchange rates. Unlike the previous cycle, however, Apple did not insist on 15-20% premiums on the AUD and NZD prices this time. That still worked at least in Australia, because the AUD bounced back to give a handsome 15% premium by the end of that cycle. The NZD, on the other hand, did not recover as much – in customers’ favour, that is.

Apple used the June 2009 refresh to bring the premiums almost back to the pre-crisis level. What’s interesting here is that the revised AUD prices (=USD+15%) are consistently higher than the revised NZD prices (=USD+11%). If anything, it may be a reflection of the continuing decline of the NZD.

Contrary to my long-held perception, it turns out that customers in New Zealand are not paying outrageously more for Apple Mac computers than customers in the U.S. or even Australia do. That certainly defies the ludicrously high price tags and the absence of price drops across the board locally. Meanwhile, customers in Australia have received price cuts they surely deserve this time around. So… after all that number-crunching, I have no choice but to reluctantly award Apple a brownie point for not ripping us off *that* much.

2009-06-17  »  JK