Wherever you buy Apple the prices are almost exactly the same, and the items never go on sale. As far as I was aware, legally once a retailer purchases stock they are free to sell at whatever price they want to, so how do Apple keep a reign on all the retailers from discounting?

I believe Apple works this by setting up agreements with retailers to be Apple resellers. I'm guessing this is how they dictate the prices. Fairly sure Apple doesn't allow anyone to resell their products (at least not the mac side).

In the past one of the common complaints was that non-official apple resellers tended to be at the back of the queue for new releases; so, they miss out on 'easy money' sales, you know, the mad dash for the nTh iteration i*

That's just one way, no doubt there's lots

http://gigaom.com/2009/12/09/who-is-getting-rich-off-the-iphone/

I always assumed it was just that they had razor-thin margins on everything and everyone was prepared to stick to the RRP because if they entered into a price war, everyone would lose (except Apple).

Yeah. Margin on Apple products is between 8-18% on RRP compared to 35-48% for most other brands.

I always assumed it was just that they had razor-thin margins on everything and everyone was prepared to stick to the RRP because if they entered into a price war, everyone would lose (except Apple).

They may have razor thin margins but that still wouldn't stop retailers entering into a price war. Even if a retailer was making $1 a product on Apple stuff it would be worth doing to get the extra feet through the door and into the store as well as the publicity as being the cheapest for apple.

I remember many years ago hearing that certain sunglass brands had control over retailer brands which is why they were never ever discounted or on sale, just like Apple. Just have no idea how they do it.

I remember many years ago hearing that certain sunglass brands had control over retailer brands which is why they were never ever discounted or on sale, just like Apple. Just have no idea how they do it.

Glasses/sunglasses are a bit different. Most of them are owned by the same parent company. Half of the stuff OPSM and Sunglass Hut sell (same company) are their own product (eg, Oakley, Ray Ban).

its all agreements, if you want to be an apple reseller you have to agree to apple terms and conditions, this covers everything from how the product is displayed, where it is displayed where you can by the display from, what content is on it and how much you are allowed to sell it for. they make different pricing agreements with different retailers which is why some sell it cheaper than others, but even then its not by much..

and this is why apple is evil.

from how the product is displayed

you generally won't see apple products side by side with competitor products.. can make it quite hard to make a comparison when you're trying to do the smart shop thing...

its all agreements, if you want to be an apple reseller you have to agree to apple terms and conditions, this covers everything from how the product is displayed, where it is displayed where you can by the display from, what content is on it and how much you are allowed to sell it for. they make different pricing agreements with different retailers which is why some sell it cheaper than others, but even then its not by much..

while apple resellers may enter into extensive agreements with apple, these would not include anything more than a recommended sale price. if apple dictate a minimum price to resellers then that is called resale price maintenance and it is illegal under the trade practices act.

so i would guess it is due to very low margins on apple products.

Yeah. Margin on Apple products is between 8-18% on RRP compared to 35-48% for most other brands.

In that case Apple is being ripped off by the parts OEM!!!! Because Macbooks are a f***ing rip-off. Haha.

EDIT: Hey, that link above is really cool. Nice find.

8-18% being the retailers cut. apple takes another 50% before costs im sure.

apple are f***wits that's why

Further to what Taggs said above, the only recourse open to a supplier with regards to resale price occurs when a retailer sells a product underneath their own cost - at that point the supplier (in this case apple) is legally allowed to stop supply to that retailer.

On the margin thing, while apple products may well have low margin between their RRP and invoice prices, the larger retailers will certainly be making more cash from the Apple devices; thanks to LTI's and other rebates (co-op advertising, merchandising programmes & so on) that are directly linked to volume/revenue at a top line level.

Of course, with these products you also need to bear in mind that retailers simply do not need to enter a price war - there's no need to sacrifice margin for a product that is in high demand, generates good stock turns and therefore contributes to overall profitability of the retailer.

How do Apple control prices?

With their Reality Distortion Fields.

As an employee of a store thats also an apple retailer i can tell you its because the margin is minimal at RRP and usually allways negative at any sort of discount. I know there are incentives at the buying level for the large retailer, but at store level its zip. We make some money from accessories and speaker docks etc, thats all. 8-10% is dreaming. 35-40% on other similar products is also fantasy in a chain store. (with very very few exceptions).
Eg: Ipod Nano 8Gb on sale for about $170 ($199RRP) loose about -$17 a hit without addons.
The worst is iphone. Eg: Store floor cost for an 32gb iphone is $1042. Sell $1042. Zero margin. Goes under after costs.
Apple is very stringent on its presentation and pricing etc also.
We are allways asked for discounts on ipods and when we have to refuse im allways called a liar and scoffed at when admitting there is no profit to discount. They say its ludicrous we would sell things under cost. If you only knew how much stuff goes out under cost!
Ipods have NOTHING on Nintendo though. Take a $350 xmas Wii pack with 2 bonus games. -$150 under cost EVERY one sold at store level. Yes there are incentivies and rebates at higher levels again but that look of "kill me" on the salespersons face is genuine. We dont get a cent and at store level its a massive hit. All to match prices, make turn over and market share.
As mentioned above, they are draw cards. People in the door and hopefully they will buy something else. Just like KMART and DVDs etc. They would loose heaps on them but noone goes there JUST for a dvd.

So let me get this straight, you sell nintendos and iphones below cost just because it attracts customers that might buy something else? holy f***en s***

We are allways asked for discounts on ipods and when we have to refuse im allways called a liar and scoffed at when admitting there is no profit to discount. They say its ludicrous we would sell things under cost. If you only knew how much stuff goes out under cost!

Tell them that the reality is that I will sell it ten times over to the next person.

reminds me of the story of the bus company that turned around there business by creating 8 businesses and inter selling - costs stay the same but they make the margin on every step of the process - which is what apple do

cheap way of bypassing trading laws

Clearly whoever you're working for is getting done. Wholesale on a Wii at $399 is 355-372 on volume. Nintendo (and Microsoft, SCE) run on a business model of turning a profit on the games. Wholesale on new release titles is typically higher, but varies from 40 to 10% below retail.
You have to remember that there's two costs - profit and operating costs.

Our Wii's do have a floor cost of about $370. The packages were with two extra games. Usually Super Mario and another game or whatever the competition was doing to meet them. Nintendo games have a floor cost (with a few exceptions for old ones) of about $77+ each. $370 + $77 + $77 = $524. Sell at $347 = lose over $150. Nintendo might rebate a small portion of that to the 'higher powers' but store level is a loss. On very popular items like that and ipods etc its supply them at the given market value (usually lead by your big w's and k marts) or the customers think your just ripping people off. The RRP for a Wii has allways been $399. The costs havnt changed, only the percieved price. I dont want to sound like "feel sorry for the poor retailer", its purely to illustrate the topic of this thread. Turn over in large stores is very important as well as profit.

I apologise for differing from the ipod topic with nintendos, but the model is basically the same so i hope its answering the question.

it was a nice insight into how things work at a retail store dproc, thanks!

What you forget is that the price to retailers is based on economics and not actual cost price.

you really think its costs 330 to build and ship a wii? my guess is the actual unit costs around 20 bux - the rest is price bloat - whether thats in unnecessary advertising costs, to inflated shipping costs including margin, to recouping R&D..to nice chairs in the VIP area of the directors lounge - it all goes back into the product "cost"

if the economics place the end buyers price point as 400 for something like this they will make sure it costs 400. even if they could do it for 30 to a retailer – it’s not good business to sell a unique product for less then what a buyer is willing to pay for it.

they make the money on each stage of the product by controlling and separating the business units responsible for the various stages. – making each unit responsible for its own profits, thereby increasing the overall profit to the parent company.

Economics 101

Kind of like mw2, no way in hell that s*** cost $100 to make and yet chumps everywhere ate it up like well trained monkeys.

you really think its costs 330 to build and ship a wii? my guess is the actual unit costs around 20 bux - the rest is price bloat - whether thats in unnecessary advertising costs, to inflated shipping costs including margin, to recouping R&D..to nice chairs in the VIP area of the directors lounge - it all goes back into the product "cost"

Actually initially it cost Nintendo (and SCE and Microsoft) more to make the consoles than they would sell them for. This has *always* been the way with consoles - Nintendo 64, XBox and Playstation were no different, SuperNES was a great example. The consoles themself are a loss-leader.
While they don't quite cost the ticket price to manufacture, by the time they add packaging and copywriting, shipping, marketing, and general operating costs they're well over the wholesale price.

Why do you think games wholesale at ~USD35 each? Of that around $5 goes back to the developer (sometimes nothing, it depends on their contract with the publisher - often these days they're contracted to develop a title at a fixed fee), and a large chunk goes to the licenser - SCE, Microsoft, Nintendo etc. The big losers in the gaming industry has always been the developers - they're like music artists in the way EMI, Sony etc take 70 cents from every dollar, except that games companies can't make their fortunes by touring like musicians do.
The profit on selling one million consoles isn't that great, but the profit on selling 35 million games? Now that's something they can sink their teeth into.

Edit: Oh, I should add that while initially they sell consoles at a loss, over time technology and production costs do come down, and then they begin to make a profit off them as they can produce them at a lower cost.

last edited by Raven at 08:02:30 31/Dec/09

I was under the impression that Nintendo have never sold any of their consoles at a loss, ever.

Really? I had the impression that Nintendo was making money on each Wii, not a loss?

my point is its all fabricated costs to make sure a product that can be sold for 'x' is sold at 'x'

graph a supply and demand curve and qty/price curve and thats how you find how much a consle sells for..

when nintendo says they are selling at a loss and poor us.. you really think that?

its reminds me of the ekka in the 80's when they would list the prices of everything in the bag so you could see you were getting 12 bux worth of stuff for 5 bux.. OMFG HOW CAN THEY DO IT I"LL TAKE ELEVENTY!!!!!

Apple will take away your right to stock their product.

Its basically the only company i know of that operates like this, its crazy, but it works. If you don't sell enough CPU's in your region you also run at risk to loose your rights to sell the items.

PM me for apple prices :)

Wait, they actually tell you to meet certain sale levels or they'll cut you off?

That's amazing.

its true

XaltD , can you get me a cheap 27" imac? :D

Back in 2008 Nintendo made $6 profit on every console sold. You can bet your arse they are making more now with inevitable improvements to production and no real price drop in sight.

The Wii was a pretty clever product. Their competitors launched expensive hardware at a loss, planning to recoup from licensed software sales.

Nintendo just duct taped two gamecubes together and added a grandma-friendly controller and won, with a console that is the most shipped and least played..

sif Apple products.

Cheapest way to get Apple hardware, but you need be a dev:

http://store.apple.com/au_epp_55827/

http://developer.apple.com/products/membership.html

Student and premiere are good value, select not so much.

Wait, they actually tell you to meet certain sale levels or they'll cut you off?

yeah at first I found that puzzling too. still, I don't think Apple intend on ever overtaking PCs for marketshare worldwide.

to their credit they do have decent quality service - even if a replacement DVD drive does cost $600 in a notebook.

Nintendo just duct taped two gamecubes together and added a grandma-friendly controller and won, with a console that is the most shipped and least played..

heh so true. Just this weekend I've loaded up 'Pimp my Wii' for an effortless automatic fix to some of the kids games not working correctly.

I wish we had that proggy 2 years ago.

So let me get this straight, you sell nintendos and iphones below cost just because it attracts customers that might buy something else?

the money is in the services - not the product. I miss the days when computer retailers were awesome places to make a living ;(