Why are Apple laptop prices the same at all stores?
October 13, 2006 11:17 AM   Subscribe

The price of Apple computers doesn't vary by retailer. How does Apple dictate pricing to their resellers — and how do they do this without breaking price-fixing laws?

I've been shopping for a new Apple laptop - and find it strange how no matter which store I try the prices are identical. (The only exception is the educational discount when buying at a university computer store.)

Here's an example: MacBook 13.3" TFT 1.83GHz, Intel Core Duo 512MB, 60GB, Combo Drive - White is $1,249 (CAD) at all of these stores [1, 2, 3, 4]

I'm intrigued since most manufacturers have a "suggested retail price" which is usually inflated and the actual retail price will be lower and vary greatly. Apple seems to have an "enforced retail price" which is moving in the realm of price-collusion. (i.e. "let's all agree to not sell for less than x.") Does anyone know how Apple gets such consistent pricing from independent stores? And how they do this legally?
posted by kamelhoecker to Work & Money (25 answers total) 1 user marked this as a favorite
 
Price-fixing laws only apply to competitors -- in this case, Apple only sells through people who agree to sell for the given price (this is actually true, heard through a friend who works at an Apple store). You can sometimes find cheaper prices through online retailers, but never by more the $5-10 -- I assume they get away with this by classifying the discount as a coupon or something.

This has been the source of some historical trouble between Apple and Best Buy, since the Best Buy customer base typically goes for the lowest price, Apples haven't sold well in that venue (they pulled the Performas and later the iMacs out of Best Buys).
posted by j.edwards at 11:29 AM on October 13, 2006


I imagine the margins are so narrow that retailers don't benefit from undercutting each other, too.
posted by sourwookie at 11:37 AM on October 13, 2006


Apple gives very low profit margins to retailers. Like an iPod that Apple sells direct for $200 may have a wholesale price of $190. If you're a retailer and you're only making $10, there's not much gain from selling it for $191 and making $1.
posted by smackfu at 11:38 AM on October 13, 2006


Apple retailers often seek to distinguish themselves by offer "free" upgrades, including extra RAM and other goodies. Of course, these are only free if you successfully navigate the rebate maze and get back the money that you have to front for them. Still, it can effectively lower the price of a machine.
posted by alms at 11:42 AM on October 13, 2006


MAP pricing agreements [minimum advertised price]. For a retailer to get $$$ for co-op ads, they must agree to the MAP.

This just isn't Apple, many products do this. Look a Sony TV across multiple retailers. Same thing.

In the Apple case, there's a lot of merchandising dollars at stake, and because it is a smaller base, you can't make it up on volume. Margins on computers are pretty thin, so it isn't like a retailer would not accept the marketing dollars and charge half-off. They'd be losing a lot per system sold. So it would be a great way to go out of business fast. If an Mac mini is $599US everywhere and you made 5% margin on it, why sell it for less since you'd lose thousands of dollars to spend on advertising. You'd sell more for $525 but you wouldn't have the money to let anyone know about it. For Apple specifically, they might have something in their "Apple Authorized Reseller" program which give you the discount only if you do not sell it for $x less than MSRP.

Retailers can get arounds some of these deals with rebates and bundles. MacConnection usually is $4 cheaper than MSRP but they will also throw in a printer or a bag to get you to chose them over their competition. They still get Apple's help paying for the catalog. Win win. As long as the "free" thing doesn't cost too much.

This isn't collusion since it is Apple controlling/protecting its own price points.
posted by birdherder at 11:45 AM on October 13, 2006


See also Bose, Monster Cable, etc
posted by Steve_at_Linnwood at 12:13 PM on October 13, 2006


ok, so margins are thin and consumers aren't getting hosed. but i'm still not clear why this isn't considered collusion and price fixing.

j.edwards: price fixing only applies to competitors - but aren't the independent retailers competitors? Isn't Apple simply brokering the deal so that the retailers don't have to talk to each other? (i.e. "charge x, everyone one else is, and we'll all make more money.")

birdherder: MAP is an interesting tool for leverage. but I imagine Apple could also just say, "if you don't sell at $x, we'll stop supplying you with product."

Perhaps the real reason that apple is selling computers and they aren't controlling the whole computer market - just the Apple market - this is acceptable?
posted by kamelhoecker at 12:18 PM on October 13, 2006


i'm still not clear why this isn't considered collusion

Collusion with who? There's only one supplier here.
posted by influx at 12:28 PM on October 13, 2006


If the margins are so tight, how then can Amazon offer their relatively big rebates ($100-200)? Do they reduce the margins to razor thin and then make it up on volume?
posted by cramer at 12:36 PM on October 13, 2006


cramer: It might also be a loss leader. If you're buying a Mac on Amazon, you'll probably also buy Office, iWork, other software, a webcam.. etc. Amazon has pretty heavy margins elsewhere.
posted by wackybrit at 12:42 PM on October 13, 2006


influx has it: you're looking at the wrong place. Apple supplies the laptops to all the competitors and does so at a very high price (to ensure the Apple stores/ online can compete).
posted by yerfatma at 12:44 PM on October 13, 2006


kh, if this question is not merely academic, you might consider perhaps the safest route to low(er)-priced, guaranteed Mac gear: the Apple Store bargain basement. Here they offer discounted, refurbished items that are usually recent models, with as-new warranties and the option to buy AppleCare.
posted by rob511 at 1:07 PM on October 13, 2006


Kind of offtopic, but if you can hold off a few weeks, they're supposed to be coming out with new Apple laptops any day now.
posted by myeviltwin at 1:09 PM on October 13, 2006 [2 favorites]


If the margins are so tight, how then can Amazon offer their relatively big rebates ($100-200)?

Amazon is one of the few places online that does have Apple stuff below Apple online price. Like the $200 nano is $180 at Amazon. And there's no MAP stuff involved there, since they are clearly listing it at $180.

I assume it's because Amazon has a huge amount of leverage due to their size, so they get better prices. Plus they're all about sales volume. If they can sell a lot of $200 products, that pleases Wall Street even if they don't make much money on each one.
posted by smackfu at 1:37 PM on October 13, 2006


kamelhoecker, the answer to your question is in the very wikipedia entry you linked to:

Price fixing is an agreement between business competitors selling the same product or service regarding its pricing.

In the scenario you've described with Apple, there is no price-fixing agreement between independent Apple dealers to set prices at a certain level. Apple is the one setting the prices.
posted by The Gooch at 1:56 PM on October 13, 2006


A similar process to avoid technical charges of collusion occurs in many guilds. The guild asks its members what they would consider accepting in payment for X service; it then sets the rates based on that information and tells the customers that Y price will get you X service. Because the guild *members* are not specifically talking to each other to determine prices, it does not count as price-fixing/collusion. It's very technical and legalistic, but it doesn't break the rules.
Similarly, because Apple retailers are not talking to each other, they are not guilty of collusion/price fixing even if the end result is exactly the same as if they were talking directly.
posted by katemonster at 11:36 PM on October 13, 2006


Costco doesn't sell their laptops but they do sell the new iPods for $189...
posted by Mick at 5:34 AM on October 14, 2006


It may well be an illegal practice. The one-liner justifications thrown about here really aren't useful for addressing the question.

However, this kind of pricing restriction is common in many industries, so there have probably been some challenges.. My Mom ran a knitting and yarn store for a few years, and she was subject to MSRP restrictions from her biggest supplier. At the same time, that supplier would allow large retailers to sell the same products at below her cost.

The use of the term margin on AskMe is suspect.To me, margin is (price - cost)/price, and markup is (price - cost)/cost, where cost is the wholesale price you paid to get the item. By varying the definition of cost, you can end up with radically different numbers. It is very likely that markup on most Apple products is far in excess of 5%. Specifically, it is hard to imagine the markup on Apple computer products being less than 20%, or the markup on consumer electronics products being less than 60%.
posted by Chuckles at 8:00 AM on October 14, 2006


People aren't specifying whether they're talking about Apple's margin or the retailer's margin, which is part of the confusion. It's the retailer's margin that is slim and relevant in this case.

It doesn't matter how much Apple's margin as a manufacturer is, since it's a fixed value for any given Apple product no matter who sells it.
posted by smackfu at 8:04 AM on October 14, 2006


I'm talking only about retailers.

You know, you can buy gift cards for Best Buy at 20% off through rewards programs (surely there are American equivalents?). 99% of Best Buy sales must be at margins above 20% for that to be possible.
posted by Chuckles at 9:34 AM on October 14, 2006


OTOH, when Best Buy mails out a coupon for "15% off on any one purchase," it invariably excludes video game systems and Apple products. I'm not denying that retailers have high margins on electronics in general, just they are much lower on Apple products.
posted by smackfu at 9:46 AM on October 14, 2006


It may well be an illegal practice. The one-liner justifications thrown about here really aren't useful for addressing the question. - Chuckes


Ok, let's try again:

Price-Fixing/Collusion: Every independent Ford dealer in your county secretly comes to an agreement to artificially increase profits by setting the minimum sales price of the Ford Explorer XYZ at $27515

NOT Price-Fixing/Collusion: As part of the contractual agreement with the manufacturer to sell Fords, dealers agree not to advertise the Ford Explorer XYZ below the dealers MAP price of $27515
posted by The Gooch at 10:44 AM on October 14, 2006


Oops- replace "dealers" with "manufacturer's" before the "MAP price"
posted by The Gooch at 10:50 AM on October 14, 2006


Bringing up car pricing reminded me of Toyota's Access Pricing, which prompted action by the Competition Bureau of Canada (US law is different, of course, but..).

Toyota kills no-haggle sales price strategy:
it was also controversial with the federal government. An investigation by the Competition Bureau examined allegations that the monthly setting of prices by dealers in a particular region amounted to price-fixing.

As part of a settlement of that probe last year, Toyota Canada agreed to make it clear to dealers and sales people that they could sell vehicles for less than the Access Toyota price.

In addition, the auto maker agreed to donate $2.3-million to charities as part of the settlement.
posted by Chuckles at 11:36 AM on October 14, 2006


they're the only people who make apple stuff, so they determine what you buy their kit for. they're pretty ruthless. the company I work for makes more profit on a few audio cables than it does by selling a macbook.

cheekiest thing about their pricing policy for me is the way that the macbook in black is far more expensive than the one in white. they're exactly the same spec. wtf.
posted by 6am at 6:32 PM on October 15, 2006


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