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Software Price Gap Between the US and Europe
Kensai7 writes "A quick comparison between same versions of mainstream software sold in the USA and the EU markets show a big difference in the respective price tags. If you want to buy online, let's say, Adobe's Dreamweaver CS3, you'll have to pay $399 if you live in the States, but a whopping E570 (almost $900 in current exchange rates!) if you happen to buy it in Germany. Same story for Microsoft's newest products: Expression Web 2 in America costs only $299 new, but try that in Italy and they will probably ask you no less than E366 ($576!). How can such an abyssal difference be explained? I understand there are some added costs for the localized translated versions, but I also thought the Euro was supposed to be outbuying the dollar. Where's the catch?"
Simple. They can get away with it.
Sure, the US price probably doesn't include VAT while the European price does. So let's take those 20% (roughly) of the European prices: that will be $720 for Dreamweaver (1.8 times US cost), and $460 for Expression Web 2 (1.5 times US cost). And I've checked with a local retailer; those are prices for non-localized versions, so that excuse does not apply.
The catch is that we are being ripped off, plain and simple.
Incidentally, the same is true for books. Books are ridiculously overpriced here, and for scientific or technical books it is _always_ _much_ cheaper to order them from Amazon than to buy them from a local bookstore. Even including transportation cost, the difference can be well over a factor two!
The silver lining is of course, that Amazon sells software as well...
It's the same thing with Canada; identical products will cost 10% to 25% more, and in some cases, like automobiles, manufacturers will go to extreme lenghts to insure that canadians cannot buy stuff in the US and import it themselves.
And no, in Canada too, prices are quoted without taxes.
That's simply not true.
There are thousands of Windows distributors in the US. Though MS might be the final arbiter of who gets to distribute MS products, they rely on widespread distribution networks to provide the constant revenue stream they need to stay in business.
With foreign sole distributorships, the only stipulation is that the distributorships provide a certain level of sales and income back to MS (for example). So within the country, the sole distributor sells the product for at least cost, then adds in his cut, then pumps the price up because he has no competition to drive his prices down.
Since the sole distributor acts as a monopoly within the country, the retail outlets have to bear the cost that the distributor charges, and the customers have to bear the costs passed down from the retail outlets.
Yes, it's capitalism, and it's grounded in well understood economics. But it isn't "Supply and Demand at work" in a free market sense.
Back in the 90's when I was shipping software to Europe, the price I'd charge the wholesaler was the same I'd charge local wholesalers. Getting through customs however, wasn't trivial. Import duties in the 90's which were separate from VAT were running around 15-20%. The wholesaler paid that on top of the price he paid us and added his markup which he passed on to the retailer. The retailer turned around and added his markup to the price he paid which included the duty cost plus the wholesaler's markup on the duty cost. By the time it got to the customer, the customer was paying markup on markup on duty plus regular retail-wholesale markups. What initially appeared to be a relatively small duty cost mushroomed into a sizable burden.
I was talking to one of the wholesalers about it and he laughed it off by saying 'yeah, but we get trains!' He'd then piss and moan about his more savy customers buying directly from retailers in the states and avoiding the double markups. That of course, reduced his market which meant he raised his prices more to cover his fixed costs.
Another factor driving prices in Europe was the fact that we'd sign exclusive distribution agreements so a wholesaler owned the market for a specific country. We did that because the wholesaler handled the translation and marketing costs in the specific country (we were a small company). Since he was the only source for a product, there wasn't any price competition. Here in the states, we'd wholesale with 5-6 distributors and those 5-6 companies were cut-throat with each other. The ones who couldn't compete on price, didn't survive.
Until you have to declare it while going through Customs...
It's still a lot cheaper. In fact, if you get a good deal on flights and are buying, say, a few thousand dollars worth of "stuff", it can end up cheaper to fly from here in Switzerland (or the UK, as I have friends there who do the same thing) to the US and shop there.
Import duties for most things in Switzerland is less than 10% - that's assuming you even get checked at customs.
Of course, then you'll see the real difference - spending the U.S. price plus tax, instead of the localized price plus tax. (What, you thought they included tax in the listed price?)
To give an example, a 16G iPod touch here in ZUrich costs CHF 580.-, which is about UDS560. A 16G iPod touch on apple.com is USD400. Decent clothes are (relatively speaking) cheaper still (and will come in reasonable sizes).
Another example is pushbikes, which for some reason they are crazily expensive in Switzerland. I know several people here who have saved well over CHF500.- by importing a bike from the US completely above boardand paying the full customs charges and duties.
Stuff in America is just cheap. This covers everything from consumer goods to services (10 minute taxi ride here can easily set you back USD40+ - it's about USD7 just in flagfall).
It's going to get even more dramatic over the next 1-2 years as the US$ continues to tank.
Probably the same as they'll feel when they learn it was misattributed to Voltaire, and was actually coined by an English-woman!
She wrote the phrase, which is often mis-attributed to Voltaire, "I disapprove of what you say, but I will defend to the death your right to say it," as an illustration of Voltaire's beliefs.
This is where the serious fun begins.