A tweet today made me look at the prices of the Apple Watch in the US and compare them to prices in Europe. Traditionally, Apple’s prices in Europe have been much higher than a simple currency conversion, plus VAT. (In Europe, VAT is included in prices advertised; in the US, sales tax is added to the price advertised, since it varies by state.)
If you look at the Apple Watch, the difference isn’t as big as it might have been. I compare two models:
- Apple Watch Sport, 38mm, $349
- Apple Watch Stainless Steel, 42mm with Sport Band: $549
In the UK, these two models cost:
- Apple Watch Sport, 38mm, £299
- Apple Watch Stainless Steel, 42mm with Sport Band: £519
If you convert the US price to Pounds Sterling at today’s rate, you would get £231 and £364. Add VAT, and a straight conversion for the two models would be £277 for the Sport, and £437 for the Stainless Steel.
The Apple Watch Sport is therefore a very good price, only £22 more than the US model (including VAT). But the Apple Watch Stainless Steel is £73 more than its US counterpart. In other words, the markup on the Sport is 9.5%, but on the Steel model, it’s 20%.
In the French Apple Store, the prices are as follows:
- Apple Watch Sport, 38mm, €399
- Apple Watch Stainless Steel, 42mm with Sport Band: €699
Straight conversions of USD to EUR would be €324 and €510, respectively. Add VAT at 20%, and you’d get €389 and €612. The markup on the Sport is a mere 2.5%, but, on the Stainless Steel model, it’s just over 14%.
So Apple is clearly using the Sport model as a loss leader, not trying to gouge the market at all. The company has probably determined that this is the price at which people can be tempted by this new device. For other models, the prices are more in line with what the company has generally practiced. Heck, even the base model Apple Watch Edition, at $10,000, is reasonably priced. In the UK, it’s £8,000, compared to £7,957 if you did a straight conversion and added VAT.
It’s worth noting that the dollar has been very strong lately, and it’s on an upward trend, so as the months go buy, Apple may actually end up selling the Sport model, and the Edition, cheaper in Europe than in the US.