Why do we pay more for certain products than other countries?
It's a question that's puzzled many of us - but there is no one easy answer. Here are some reasons.
Image: AP Photo - Lee Jin man
Fancy an Apple iPhone4? If you like the look of this smartphone and live in Newark, New Jersey, you can get it for $199 (£123). But if you live in Newark, Nottinghamshire - or anywhere else in the UK for that matter - the cheapest you can get it is £439.
If you live in Birmingham, you can get a Dell Inspiron 15 laptop with 320GB of memory for £349. But if you live in Birmingham, Alabama, you can get it for two thirds that price, $399, which is £247.
The long-awaited new Nintendo 3DS games console is more expensive here too: £229.99 compared with $249.99 (£154.80) charged in the US.
Are we being ripped off?
Right across the electronics market prices are higher here. So why exactly is it that we end up paying over the odds for so much? Are there good reasons for it or are we being ripped off?
"The assumption people make is that price is based on the cost of manufacture," Cliff Burgin, principal of pricing consultancy Burgin Associates, told MSN Money. "In fact it is based on what the market will bear."
He said that suppliers will look closely at each market, what competing products are available and their pricing before deciding how to price a new product. For smaller markets - particularly those where translation of instructions, different voltages or other technical issues exist - there might be genuine additional costs.
I checked Apple and Dell prices across numerous markets but it didn't perfectly follow this model. You can get an iPad for £439 here, whereas it costs $499 (£309) in the US, which is as expected. But in the Netherlands, a smaller market than the UK, it costs €499, which at £426 is less than we pay.
"For the pricing of the iPad, Apple would have looked at the position it occupies for its broad utility [the services and apps it has] against other products, even though Apple's combination might be unique," Burgin said.
Tax is only a small part of the answer
Tax differences have historically accounted for some big price differences in some goods. Tobacco, for example, is a fraction of the price in some European countries compared to what it is here. The same used to be true for fuel but this is much less marked now across Europe.
Taxes and duties certainly account for the huge gap in the cost of fuel across the Atlantic. While we pay £1.30 a litre for unleaded petrol, American consumers - who pay only light taxes on gasoline - are now complaining about prices creeping up to $3.11 per gallon, which equates to just 43p a litre. However, with 67% of the UK pump price being made up of duty and tax, the underlying cost of fuel in the UK and US actually appears to be remarkably similar.
So what about those electronic goods? Phones and computers and similar products sold in the UK attract VAT, now at 20%. Those equivalent goods sold in the US also attract a state sales tax. That's true for internet sales too, so long as the retailer has a physical presence in the state where the customer lives. But most US state sales taxes are 6-7% with only a handful over 8%. None are as high as 20% and several have no sales tax at all.
So the biggest difference that could be accounted for by tax differences alone is 10%. Yet, in almost all cases, the discrepancy between British and American prices is way bigger.
Bearing a higher cost
So if Burgin is right, how come the UK market can bear a higher price for so many items than the US? Perhaps Britain is just a fairly wealthy economy.
However, that doesn't appear to be the case either. British per capita national income in 2009 was $35,590 (£22,041 at today's exchange rate), according to Oxford Economics. That is 10% lower than France and Germany and a full 23% lower than the US.
Now, this is a slightly complex field, because the figures are translated at prevailing exchange rates. The slightly more accurate purchasing power parity calculations, which take account of the cost of living in local terms in each country have Britain ahead of Germany, France and even Japan, according to Oxford Economics -- but they still trail the US by 25%.
"The fall in UK GDP per capita in 2009 combined with the decline in sterling means that the UK has seen an even sharper decline in its relative living standards compared with other major economies," said Andrew Goodwin of Oxford Economics.
In other words, boiling down both income and prices after the global financial crisis means that we in Britain can still on average consume more than most European countries, but less than the US. So in purely financial terms the UK market can't bear more but prices are still higher.
Shopping across the Atlantic
There are certainly some strong historic trends at play. For years British tourists have taken advantage, particularly when the dollar has been weak, of visiting the US to load up on cheap CDs, clothes and various other consumer goods that the US offers for less.
American Jenny Evans and her British husband Ian have been regular transatlantic shoppers for years, waiting for the right moment in the exchange rate.
"I look for savings on brand clothing like Tommy Hilfiger and Ralph Lauren," said Ian, noting that in a sale he can get them at a quarter of the price they might be in the UK. They also load up on the very biggest containers of branded shampoos and other toiletries, which are not available in such large sizes in the UK.
Where Brits pay less
However, not everything runs in the same direction. Jenny and Ian Evans notice that many foodstuffs are expensive in the US compared to here. "Bread, chicken and some other foodstuffs are quite pricey. But if you eat out, then it works out about the same," Jenny said.
Many household products and toiletries in the US are way more expensive than here. Take toothpaste. You can buy Crest Total in the UK at many supermarkets for just over £1. The equivalent in the US costs around $5.45 (£3.40). That differential held good for more than 15 brands I checked on the website of giant US drugstore chain Rite Aid.
In fact, whether it is toothpaste, soaps, basic cosmetics, painkillers or feminine hygiene products you can expect to pay at least twice in the US what you pay here, and usually three times as much. And that's even before you look at the ultra-cheap own brands that we have in abundance.
"We have an intensely competitive grocery market in the UK," said Cliff Burgin. "If supermarkets get their teeth into a product category, they force prices down."
It would be nice to distil a clean, neat answer to the conundrum of differing prices between countries. But in the days of the global shopping trip, perhaps we don't need to.
With Brits travelling to Hungary and Cyprus for dentistry, Hong Kong for bargain spectacles, Singapore for the cheapest electronics and the US for a whole array of cheap designer goods, the travelling consumer might still be able to end up a winner.
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I agree with some of you, Yes the labour spend left, right and centre ,but for the good of the people. where tories think only for the rich and try to privatise/ sell everything.They do undermine the lower class,and try to press us under.
Immigration should also be stricter, we should do like Australia, you can come if you have a qualification needed and you need to support yourself for at least 2 years, before you can claim anything of the state. But no government has the guts to say or do anything( as it could be classed as racist) it has nothing to do with that, England is over crowded.
Most people on here seem to have it sussed. We Brits I'm afraid to say, are more than willing to moan about the price of this and that, but few are willing to do something about it. As a nation, we do not stand our ground and stick together. For example, fuel duty, council tax etc. If a certain town feels its being ripped off on their council tax, when services are being cut, cctv is switched off, police patrols are non existent, ASB is on every corner, band together and refuse to pay it. They cant jail the whole town. They might actually take notice!!
The French stick together, whether it be blockades on fuel depots, strikes, burning paris to the ground. They are almost always taken notice of.
I understand that people have jobs, families and mortgages to think about, but we are getting to the point where we are turning a blind eye to crime on our own doorsteps, instead of stepping up and saying 'No! I'm not having that!' Where does it end?
why the recent references to the idiot governments,,, we have been ripped off for years and years ,,,, high car prices ,,, fuel prices were always higher than europe. now its an art form ,,, from insurance bandits to profiteers all with government backing,,,, one that's inbound is water meters even though water companies are failing to stem leaks everywhere lol,,, road tax doesn't fix roads. council tax was a sweeping rip off riding the wave of poll tax ,,, guess what it was the same thing just renamed to appease ,,,,, where did the idiots think households were going to get money from to pay for people as they turned 16. councils wouldn't allow solar panels now its a great way to screw people for 300 quid in planning permission.stand by for council tax re-evaluation and we are all going to get shafted ,,,thats inbound to. buddy will knock on your door and say ,,,my what a big property you have and double what you pay now lol.
people here keep bending down so they are fair game.
the rip off is in bred in business,from gas exported to europe in the summer and sold back to the national grid at vastly inflated prices.the full oil tankers that sit offshore worldwide while the gamblers in the city push the prices up......i could go on.rip off britain and the bastards are proud doing it
Before the 80's and the Thatcher goverment most overseas companies from Japan for instance brought goods into this country via UK distribution companies, which on the whole were UK owned. Then the likes of Sony, Canon and Panasonic were allowed to set up shop here themselves and became Canon UK as an example.
That resulted in Japenese companies bringing stock into there on companies. British companies used to drive hard bargains and always negogiated on prices. Nowadays big oversea companies charge whatever they like here becaause no one is going to stop them. The current practise of bringing stock into Europe first then shipping into the UK also adds extra costs on. Most camers, printers TVs are all sored in Germany or Holland fisrt
I think its the old story goverments let overseas companies do just what they want thinking it will create jobs here but it never seems to work that way. I had a camera store for 20 years amd the **** camera companie release retail prices 3 or 6 months ahead of the product getting here by the time they did those prices were firmly established,
In part I think it's because people in the UK don't tend to haggle. I will almost always do this on expensive items and at least 50% of the time it works.
I know someone who never does this and even paid the full asking price on a house in the recession because she was too embarrassed to negotiate. She probably paid thousands more than she had to.
No wonder foreign manufacturers refer to this country as 'Treasure Island'!
It seems people forget what the Tory idiom is. Undermine the lower classes, drive them out of work and out of power so they can be pushed into the gutter and then force them to work for peanuts on the penalty of benefit refusal.
Scrooge and Smarmy by Charred Dickh**ds
billy bob..."you voted for the tories"???
What ? You mean if Labour had been re-elected that they would be by now sorting out the issues that the vast majority of us have been talking about????
Don't be naive.
None of the major political parties have got the b@@@@cks to do what is required.
The parties that do have the balls,are marginalised and persecuted by the press."You're a racist if you support that party"."You're a bigot if believe that".How many times are these kind of phrases used?
Come the next election,put your cross firmly in the box of whoever will take us out of Europe,and don't believe the Labour/Tory scaremongering.
Er could you tell me where in newark NJ
U can buy an iphone 4 for $199 dollors !
cos i sure as hell cant find one!
I believe they are just greedy bas***** and they know joe public are thick pretentious idiots who are accustomed to bending over, and take advantage of it!!!
I remember my Dad way back in the 60's saying to me, one day a pair of boots will cost £200, I scoffed and laughed, well the laugh was on me!!!
When comparing my salary in the late 70's/80's, I get paid less now than I did back then?????
VIVA LA UK REVOLUTION
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