Monday, December 10, 2012

So you want to buy an iPhone 5...

Good morning economists. I heard a rumor that you want to buy the iPhone 5 this holiday season. In most countries around the world where there is an official Apple store, prices are kept around the range of the suggested retail price. In countries where the only available option of getting the iPhone 5 is through resale retailers though, it is a whole new ballgame.

Last week myself and my significant other visited a well known store in Cyprus which specializes in providing mobile telephony services. We noticed that there was an iPhone 5 on display, however there was no price tag for the phone. We knew that the retail price for a 16 GB iPhone 5 in the UK is currently at 530 pound sterling which is approximately 660 Euros. We assumed that the UK price would be indicative of the iPhone 5 price in Europe. We were shocked to discover that the particular retailer demanded 900 Euros. 900 Euros!!! That's 724 pound sterling, almost 200 pounds above the suggested retail price. That's $1165 which is double the retail price in the USA!!!

When confronted about the outrageous price, the store manager explained that the difference was because of exchange rate discrepancies. "Convert the pound sterling into Euros", he said. "You will see that it comes out to 900 Euros." Cheap excuse made to fool ignorant buyers.

The goal is of course to sell as many iPhones during the Christmas season and then drop the price to regular levels in February. Plus, they have the chance to sell the iPhone 4s which they still have in stock for 650 Euros, which was its retail price before the new version made an appearance.

What's even worse is that the rest of the retailers are following the same example of charging outrageous prices in the holiday season and decreasing them to regular levels in January or February.

In the end we did not buy the phone for those of you who wonder. But another buyer who was at the store with us did! I looked at him in a funny way. Afterall it was because of people like him, who are prepared to pay a ridiculous sum in order to be among the first to own a gadget, that the retailer is overcharging.

So who is to blame for the high price? The retailer or the buyer?

Have a nice day!

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