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Prices Drive Australians To Grey Market For Hardware and Software

Posted by timothy on from the markets-should-be-bright-green dept.

An anonymous reader writes "The Australian government has been running an inquiry into why technology is so much more expensive to buy down under than in the U.S. In response to the price difference, many consumers are turning to the Internet to buy tech that is imported through unofficial channels at cheaper prices from the U.S. Not to miss out on sales, some retailers are starting to set up special websites that sell this way too. The so-called 'grey market' can save you cash, but could it cost you more in the long run? This article looks at some of the potential problems for people buying technology this way." A companion article examines some of the nitty-gritty of price differences between Australia and the U.S., including the observation that entry-level salaries skew higher in Australia.

14 of 280 comments (clear)

  1. Price fixing by camera makers push me there. by Lumpy · · Score: 5, Interesting

    I buy grey market Lenses from Canon. Because of the price fixing they do for the US market. I can save hundreds, and in some cases THOUSANDS by getting a grey market L series lens over the US market lens.

    --
    Do not look at laser with remaining good eye.
    1. Re:Price fixing by camera makers push me there. by Anonymous Coward · · Score: 5, Informative

      This is a major factor.

      A few years back, I bought Canon's 24-70mm f/2.8 L lens from the US. Including shipping, customs charges (which included GST), and the like, it was around $AU1400. The local price? A mere $2000 or so (can't remember offhand, but I do know it was a significant saving.)

      A similar story: I bought a box set of the first four series of Doctor Who from the UK (Ecclestone and Tennant's series, basically.) Cost: about $AU60. A single series in Australia costs $AU90 - so I got all four series for less than the price of buying one locally.

      There's no doubt that Australia is being gouged. The only question is, what's a reasonable markup, given that we are a small, geographically spread nation? (Population: about 7.5% that of the USA. Land area: about that of the 48 contiguous states. You do the math.) That there almost has to be a markup is a given ... but I don't think that what we're currently paying is particularly reasonable, all things considered.

    2. Re:Price fixing by camera makers push me there. by Lumpy · · Score: 5, Interesting

      There is no "reasonable" markup argument when they do region and country price fixing. I can buy any canon lens significantly cheaper from friends in Japan and pay for shipping than at any location in the USA. Canon is marking up HARD the lens prices for other countries.

      I've been buying lenses at prices that many dealers would kill for. And the lens was bought at a retail camera stop in Japan and packed in a box and shipped to me here in the USA.

      --
      Do not look at laser with remaining good eye.
    3. Re:Price fixing by camera makers push me there. by ozmanjusri · · Score: 5, Interesting

      So why is downloaded software marked up by similar or greater amounts?

      And how come I can get a camera from the US cheaper than a vendor who would presumably have access to cheaper shipping than individuals?

      --
      "I've got more toys than Teruhisa Kitahara."
    4. Re:Price fixing by camera makers push me there. by xaxa · · Score: 5, Insightful

      Is there a reason that there 'almost has to be a markup'(beyond the costs of shipping)?

      I don't know if this applies to Australia, but some products are more expensive in the EU because the legally mandated warranty for the product is longer than for the US. I can buy a TV here in the UK, and if it breaks within three years there's a good chance it's the place I bought it from's problem (there's some complication, depending how long it lasted). If a manufacturer makes shoddy products, they're either going to do some QA and try and send the better products to the EU, or increase prices to cover the increased costs.

      (Similarly, a company might increase costs in the USA to pay for the higher cost of liability insurance.)

    5. Re:Price fixing by camera makers push me there. by Nursie · · Score: 5, Informative

      This does not explain why it's often 30-50% cheaper to buy from a foreign source and pay individual shipping from overseas. Even taking into account the 10% GST it's obvious Australians are being charged more becsause people think they can get away with it.

      These same people are now kicking and screaming because the internet destroys their easy scam.

    6. Re:Price fixing by camera makers push me there. by tlhIngan · · Score: 5, Informative

      Is there a reason that there 'almost has to be a markup'(beyond the costs of shipping)?

      Depends on the laws of the land, actually.

      In Europe, for example, import duties (25%+) and VAT (20%+) are added on to the cost of a good you see. When the price tag says $700, you pay $700. Not like North America where it's $500+tax.

      Of course, the other reason is local distributors are often the cause. You see, a manufacturer rarely if ever sells direct to the retailer. Instead, they sell to local distributors, who usually get exclusive distribution rights to a geographic region. Usually a country-sized portion, sometimes a continent, othertimes much smaller. Depends how big the manufacturer is, and how much product gets moved - the more popular, the smaller the regions tend to be.

      That distributor is who determines the local price based on the MSRP and what they sell to retaliers at. And often times, that distributor enforces the distribution agreement for multinational retailers. Exceptions usually are the likes of Amazon (who may shift US inventory to other countries), or Walmart (who has their own huge logistical department who may receive goods from many distributors at a central warehouse in another region). Or have sufficient muscle to be able to shut out a local distributor if they try to gouge (e.g., Wal-mart).

      In Canada, the retailers are often complaining that the Canadian distributors are the ones marking up the goods - they can't really move too much on prices because they're paying more.

      And yes, I've seen many small businesses complain - they often will admit that a customer can buy the same product from Amazon.ca cheaper than what the store can get it from their distributor (which is why the store doesn't stock the product).

      And there can be multiple layers of distributors as well. When some store claims to "cut out the middleman", they're lying. There's always a distributor somewhere along the line (and if there isn't, on of the existing distributors will offer it, if possible).

      And yes, said distributor can often be a subsidiary of the company - e.g., Canon USA, Canon Canada, Apple Australia, etc. Or a separate company (e.g., Ingram Micro, Digikey). Sole distributorships are also possible (e.g., comic books and stuff are practically only available through Diamond).

      And yes, they often do rather monopolistic things as well - like refusing to honor grey-market warranties - they'll suggest you send it back to the store you bought it from).

    7. Re:Price fixing by camera makers push me there. by Solandri · · Score: 5, Interesting

      There is no "reasonable" markup argument when they do region and country price fixing. I can buy any canon lens significantly cheaper from friends in Japan and pay for shipping than at any location in the USA. Canon is marking up HARD the lens prices for other countries.

      I'm not excusing Canon's pricing, but the higher prices outside Japan are not completely unwarranted. Being a Japanese company, Canon's budget projections and business decisions are based on Yen. Whenever they sell in a market which uses a different currency, they have to take into account the risk of currency fluctuation. That is, their pricing outside of Japan has to be based on their worst-case projection for what will happen to the local currency in the coming year. Otherwise they could end up in a situation where they're selling lenses for less than it cost them to make.

      You OTOH are not looking at an annual operating budget. You're looking at a single snapshot of currency exchange rates on the day you buy. That considerably reduces the window of currency rate movement, and so Canon's markup outside of Japan seems enormous to you. You're only concerned with how much the USD could drop against the JPY in the day it takes your Japanese friend to buy and ship you the lens. Canon is concerned with how much the USD could drop in the year it takes them to sell their inventory, then convert that USD back to JPY.

      I got burned by this a few years back. I took a cross-border job in Canada at near my then-current salary converted to CAD (about USD$0.97 at the time). The first few months were great - the CAD went up to USD$1.07, meaning I'd essentially gotten a 10% pay raise. But then a little over a year later it crashed, dropping to below USD$0.80. None of this affected my Canadian co-workers, since their living expenses were in CAD. But I had to convert my paycheck to USD to pay my bills, so it hit me hard. Any time you're conducting long-term business which involves currency exchange rates, you have to factor in potential movements in exchange rates. (I kept most of my pay in a Canadian bank until the CAD eventually went back up to around USD$1.00. But the money I had to transfer to pay bills at the time was "locked in" at ~USD$0.78. It's a loss I'm never getting back because I didn't consider the possibility of the currency value changing as much as it did during my employment.)

  2. Ah, the sweet smell of free trade... by fuzzyfuzzyfungus · · Score: 5, Insightful

    Worldwide scrounging for the cheapest labor, juciest tax breaks, and laxest regulations for them, region coding and 'grey market' for you.

    Low friction international capital markets for them, border and immigrations controls for you.

    See, 'free trade' is awesome!

    1. Re:Ah, the sweet smell of free trade... by girlintraining · · Score: 5, Insightful

      Yeah; I'm waiting for the day they abolish prices altogether and just list the cost of everything as a percentage of your income. That's the pricing model everything is moving towards anyway -- not what something is worth, but what they can get away with charging you. And if any of you asshats stand up and make an "invisible hand" argument, you're waking up tomorrow with a horse head next to you. This is not the result of free trade, but the restriction of free trade. Those corporations are shoving region coding down your throats, signing exclusive contracts and manipulating distribution channels to artificially alter the prices, and buying off government officials to make it all legal. That is not capitalism. It is not free trade. It is exploitative, and should be stopped.

      --
      #fuckbeta #iamslashdot #dicemustdie
    2. Re:Ah, the sweet smell of free trade... by macraig · · Score: 5, Insightful

      What that counter-argument does is justify institutionalized usury. Usury is inequity in a transaction when there is not an equal exchange of value. That leads to concentration of wealth. Before the Industrial Age, gross concentration of wealth wasn't as commonplace, but the Industrial Age and mass production has made it possible to concentrate wealth in a fashion never seen before that: rather than ripping off just a few people for a lot, it's now possible to rip off a lot of people for just a little and still get just as filthy rich. The people who control the means of mass production can get filthy rich without ever having to worry about villagers wielding pitchforks; the usury is spread so thin that individual villagers just don't notice the tiny knife being inserted and twisted. Multiply that by hundreds of mass producers, though, and the villagers notice but can't figure out where to march with their pitchforks. That's why the Occupy movements are so disjointed right now; they really don't know who to blame because they have so many tiny little knives in their backs rather than one big one. I miss the good old days when you knew who the Really Bad Guy was. Now there's hundreds of Slightly Bad Guys.

  3. because of the extra staff needed by Anonymous Coward · · Score: 5, Funny

    Companies like Newegg and Amazon must employ extra staff to invert the contents of all the packages to be sent to the Australian market. It's hard to have robots do this because of the sheer variety of size and contents. Most electronics are made in the northern hemisphere also to be sold there, so are naturally constructed rightside-up for that market. Employing so many people to flip the products over costs money, which is naturally passed on to customers in that market.

    It sucks for our AU friends, but it's the natural cost of being in such a small niche market.

    1. Re:because of the extra staff needed by crazyjj · · Score: 5, Funny

      Not to mention the fact that discs spin in the opposite direction down in Australia.

      --
      What political party do you join when you don't like Bible-thumpers *or* hippies?
  4. No way man! by JustAnotherIdiot · · Score: 5, Insightful

    You mean when you artificially jack up prices, people will try to find a way around it?
    I'm shocked.

    --
    What do I know, I'm just an idiot, right?