How Apple maintains prices virtually everywhere

By on January 15, 2013, 6:00 PM

Say what you will about Apple and why its products deserve (or don't deserve) their respective price tags, but here's an interesting, tangential query: how exactly does Apple maintain such consistent pricing across so many vendors? Macworld believes they have the answer -- a multi-faceted strategy called price maintenance. In short, Apple leverages low resale margins, incentives and tight product control to maintain its prices.

Chances are you've noticed it yourself -- not only does an iPod Mini sell for $329 on Apple's website, but also sells for the exact same price at big-box retailers like Best Buy and Wal-Mart. The same goes for most Apple products, in fact, whether it's an iMac, a Macbook Pro or an iPhone. While common tactics like setting an MSRP (manufacturer's suggested retail price) are often used to set prices, big discount stores like Wal-Mart famously ignore such suggestions, undercutting competitors and making up the difference with volume sales.

According to Macworld, Apple's first tactic is wholesale pricing that isn't much cheaper than retail pricing. Best Buy can attest to this, although exact numbers remain a closely guarded secret. By minimizing reseller profit margins, Apple ensures those stores won't stray too far from MSRP. Any reseller that dares to slash its prices risks losing what little profit there was to be had on those shiny stacks of expensive Cinema displays and Macbook Airs.

Apple's second strategy is rewarding resellers who play by their rules. Although profit margins tend to be slim, Apple issues incentives to retailers who keep their prices close to a declared "minimum advertised price". For retailers who go too far over or too far under these prices -- no incentives for you. Once again though, what these incentives are remains a mystery.

Legal though it may be, Apple's price maintenance strategy is guaranteed to elicit controversy. However, it does offer some benefits to both retailers and customers.

Apple's homogenous pricing theoretically helps small retailers. Although Tom's Computer Shop won't make the same fortune Best Buy makes with volume, Tom can compete with Best Buy's prices (and certainly compete with service). If Tom's hoping to get rich though, he'll likely want to diversify and start servicing those Macs, too.

Stable, well-controlled pricing and products also helps Cupertino's products retain their resale value -- a somewhat beneficial phenomenon for Mac and iDevice owners looking to trade-up.

Despite all the uniformity in pricing, one way customers can get a substantial discount on Apple products is buying refurbished. Although refurbs aren't for everyone, Apple does offer the same warranty on its refurbs as it does its new products -- that's at least a marginally comforting incentive to buy refurbished.




User Comments: 9

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spydercanopus spydercanopus said:

Interesting article. Sounds like a form of price fixing. May be why I don't know any small tech shops that sell iphones.

Guest said:

If we did this is would be seen as bribes/kick-backs, legal wording way around this. You pay this amount and/or sign this contract for this price and I pay you under the table kind of dealing

Guest said:

This stuff has all eternity there, its not only apple, its sony, samsung,etc etc even mobile carriers selling phones or plansdo the same, but the tactics seems tricky but see it as this....the product is one thing and apple just the dealer(and not considered the producer),then apple is just like walmart or best buy or any other store, so they fix the price so apple receives the same profit as walmart, and the difference with the "Other stores" is that they receive just less than apple (we dont know how much) and in that way they close all the third party distribution channel.

PinothyJ said:

Although refurbs aren't for everyone, Apple does offer the same warranty on its refurbs as it does its new products -- that's at least a marginally comforting incentive to buy refurbished.

In Australia EVERYONE has to do this, so it is not simply some amazing feat of generosity from Apple...

Guest said:

Apple totally suck.

Every day there os more evidence of it.

Get a Win8 phone or die.

Skidmarksdeluxe Skidmarksdeluxe said:

Hmmm... Apple must be The Mob's undergraduate.

Sir Alex Ice Sir Alex Ice said:

Yeah, one small problem with price control: it reeks of monopoly and it is against free market and competition.

Not to mention it is illegal even in back water countries like Romania, where price fixing is severely punished if proven.

Guest said:

Good thing they do it in America, then.

taimuraly taimuraly said:

Don't think that is the case here in UAE, Dubai. My Dad bought an iPhone 5 64GB for AED 4099 ($ 1116.01) where as the price listed on the online Apple UAE Store is AED 3,399 ($ 925.43).

The shop is a well known electronics retailer in the Middle East and even has a separate Apple branded section. But Apple products do come in here through the grey market so it might just be that the store isn't actually an authorized retailer.

( By the way my dad bought the 64GB because he was told by the salesman it was faster -_- )

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