Is Apple ripping off everyone in the World apart from Americans? Average iPhone 5 mark-up 29.5%, Samsung S3 -17.5%

March 8th, 2013 - Posted by in Blog, Saving Money

apple rip off

In the UK, we’re often ripped off when buying foreign goods. So before buying a new SIM free iPhone 5, I thought I better check out the price in the USA.

Surprise, surprise! The 32gb iPhone 5 is 22% more expensive in the UK. There are many reasons for the markup, but the main one would be VAT (currently 20% in the UK), but there is a sales tax in the USA, which is similar to VAT in the sense it’s added to the cost of lots of goods. Sales tax varies across the USA, for example California has a base sales tax of 7.50%, and can total up to 10.00% with local sales tax included depending on the city in which the purchase is made.

To get around this I checked out the price of a comparable product the Samsung Galaxy S3 (I’m referring to comparable product in terms of sales tax, not spec). Guess what. The UK markup is -7%. Yes, minus 7%. So why is the iPhone so much more expensive in the UK? Is it just a one off? So I thought I would check a few more countries and found the average iPhone markup was 29.5% and the Samsung S3 is actually -17.5%. See table below:

CountryiPhone 5 32gb markup Samsung Galaxy S3 markup
UK+22%-7%
France+37%-14%
Germany+37%-21%
Australia+22%-29%
Average+29.5%-17.5%

What is going on? At first, I thought the price might be low in America because that’s where the iPhone comes from, but it doesn’t. It’s actually made in China, so the shipping cost to Australia would be lower than to the USA. Where’s the issue? Is Apple milking the rest of the world to enable them to keep prices low in the USA? Or is that the fact that Apple closely controls the price of the iPhone and the lack of the competition means a higher price?

Is there way around paying the higher price for an iPhone 5?

  1. You could order the phone from the USA but the chances are that Apple will refer you back to the UK version of its site, if you could buy it and get it shipped from the USA, you may well incur an import tax as it arrives in the UK.
  2. You can buy an alternative to the “price controlled” iPhone, e.g. the Samsung S3, the Samsung S4 (due to be launched 15th March), or the highly rated new HTC One (due sometime in March).
  3. Or you could do what a few friends have done, buy the previous iPhone model, e.g. 4S on ebay about £300, instead of £599 for a 5 for a 50% discount.

Here is the full data (Source of all Apple prices, Apple official country site):

UK
PhoneUSA Price ($) UK Price (£) Converted UK Price ($1.52 to £1) Markup
iPhone 5 – Black 32gb unlocked$749.00£599$910.48+22%
Samsung Galaxy S3$699.00£429.95$653.52-7%
Source of Samsung priceTargetArgos
France
PhoneUSA Price ($) French Price (€) Converted UK Price ($1.30 to €1) Markup
iPhone 5 – Black 32gb unlocked$749.00€789.00$1025.70+37%
Samsung Galaxy S3$699.00€464.95$552.43-21%
Source of Samsung priceTargetCdiscount.com
Germany
PhoneUSA Price ($) German Price (€) Converted German Price ($1.30 to €1) Markup
iPhone 5 – Black 32gb unlocked$749.00€789.00$1025.70+37%
Samsung Galaxy S3$699.00€424.95$552.43-21%
Source of Samsung priceTargetMobilcom-debitel.de
Australia
PhoneUSA Price ($) Australian Price ($) Converted UK Price ($1.03 to $1AUD) Markup
iPhone 5 – Black 32gb unlocked$749.00$899$916.98+24%
Samsung Galaxy S3$699.00$479.00$493.37-29%
Source of Samsung priceTargetKogan.com

  • UK_Supporter

    If you further add in the tax that Apple, Amazon, Microsoft, etc, etc avoid in countries they sell, but pay 20%+ tax in the US, there is a definite milking of non-US countries to send it back to the US.

  • Muchly

    As you indicated the US price doesn’t include sales tax whereas the UK price does include 20% VAT. This would then suggest that the iPhone is just 2% more costly than the US

    • http://www.happier.co.uk/members/julian/ Julian Hearn

      Sales tax in US varies from state to state, and I’m not sure if it even applies to phones. So I used a comparison of the samsung and iphone prices to illustrate the huge differences in markup on USA prices that Apple seem to be applying.

  • Steve

    I don’t understand why you did this whole explaination of VAT/sales tax, but didn’t add in your example USA sales tax in your tables below. Your headline % would still be 15-20% on the iPhone.

  • http://www.Mobilephones.com Charlotte

    This is a really interesting article. We found similar results in a story that we covered last month, concluding that the iPhone 5, The Samsung Galaxy S3 and the HTC One X is cheaper to purchase in the US than it is anywhere else in the world.

    We have demonstrated our findings in an infographic: mobilephones.com/the-cheapest-country-to-own-a-mobile-phone/

  • JMT

    I’m not sure this is accurate. Look a 32GB iPhone 5 unlocked is US$ 749, that’s GB£ 520 (at £1.00 to $1.44 tourist rate today). Add on VAT (20%) = GB£624. Apple UK Store = GB£599 including VAT! So today its GB£25 cheaper in the UK when our tax is taken into account. Note there may be other duties applicable too, but I don’t know the value of these. Working backwards an iPhone 5 32GB in the UK is the equivalent of US$718 today, i.e. US$31 cheaper excluding any sales taxes.

    • http://www.happier.co.uk/members/julian/ Julian Hearn

      Hi JMT,

      Yes and now do the same with the Samsung price.

      Julian.

  • JMT

    Hi,
    OK for the SAMSUNG SIII White UK 16GB model unlocked, as follows (11th March 2013 at 1525hrs):
    Amazon UK including VAT (20%) = GB£375
    Amazon US excluding sales taxes = US$509
    UK to US price (removing VAT) = US$450 (US$59 less in UK)
    US to UK price (adding in VAT) = GB£424 (GB£49 more in USA)
    For the iPhone 5 32GB model unlocked, as follows (11th March 2013 at 1525hrs):
    Apple UK including VAT (20%) = GB£599
    Apple US excluding sales taxes = US$749
    UK to US price (removing VAT) = US$718 (US$31 less in UK)
    US to UK price (adding in VAT) = GB£624 (GB£25 more in USA)

    All figures are using the current tourist exchange rate of US$1.44 to GB£1.00. Corrections are only for UK sales tax (VAT) and there are no corrections for UK duties.

    So using the US price as a basis the iPhone 5 32GB is 4.1% cheaper in the UK when compared to the US, and the Samsung SIII 16GB is 11.6% cheaper in the UK when compared to the US.

    OK you can save a little more on a Samsung phone when comparing US to UK prices but Apple iPhone prices are still lower in the UK than US when correcting for VAT.

    So I think you comparison is rather spurious. Its cheaper in the UK and Apple devices cost more than the competition. The Apple bit isn’t surprising the fact that the UK is cheaper IS surprising, to me at least.

    • http://www.happier.co.uk/members/julian/ Julian Hearn

      Those amazon prices are from independent retailers, not amazon themselves. I for one would not buy such an expensive and technical item from an unknown brand with little or no after sale service. This is why my prices are from well known retailers, e.g. Target and Argos, etc.

  • Ozzie

    Kogan is an ultra discount website, I wouldn’t use it for the Australian pricing. Most people here don’t know about it.


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