Why iPods Sell for $250, No Matter What

Even while everything else falls in price — TVs, DVD players, etc — why is it that a few specific items always stay hover around one price point? Slate disects the concept of Minimum Advertised Price (MAP) which is what companies like Apple use to prevent stores from undercutting each other — and their own retail stores.

Use of MAP in some form is fairly common in the gadget world, though few companies seem to pursue it with the rigor of Apple or Sony (both of whom operate retail stores). Shawn DuBravac of the Consumer Electronics Association believes most gadget manufacturers prefer to let the market determine price, and the dispersion described by Varian and Baye suggests he’s probably right. (None of the companies I contacted for this story would discuss their pricing strategies with me.) That means good deals for shoppers willing to search them out.

What does this mean for you? It means that no matter where you go, you’ll never get a deal on an iPod and it also explains why stores like Costco offer iPods at essentially the same price as Amazon et al. You learn something new every day, don’t you?

Gadgets for Sale … or Not [Slate]

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11 Comments so far

 
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magellan (Who am I?)

Wasn’t it just two years ago that the iPod Photo was $500? And the original shuffle $99?

 
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Yellek (Who am I?)

Thank goodness for the Australian Trade Practices Act which makes it illegal for a wholesaler to dictate the price offered to a customer by a retailer. Of course I never see discounted iPods here either…

 
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Isaiah (Who am I?)

Stagnating consistancy, eh? I guess it prevents headaches in a way - you know that the iPod will be within a few dollars no matter where you go to pick it up, so no point in looking for a “deal”. XD

 
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NW Guy (Who am I?)

The US has a law similar to the Aussie Trade Act, but obviously there are ways around it.

Is it just me…or does the iPod pricing go beyond the basic gadget. Aren’t all of the add-on items; covers, earbuds, etc similar in price controls? I wonder if all of the companies making peripherals are a front for Apple, or led by ex-Apple employees?

 
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Jon (Who am I?)

Actually, this isn’t totally true… I bought my mom a refurbished ipod nano for 60$ less then “retail” from the apple store no less… she loves it, I love the price and it didn’t take up too much room in Santas sleigh so my guess is he is happy as well. There is always a way around these type of things… I bought my last HP desktop for 300$ off the retail price using the same “refurbished” price and have never had any problems with it neither. Same holds true with most manufacturers… you just need to dig a little deeper to find the deals.

Jon

 
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NW Guy (Who am I?)

Thanks Jon; but second hand is always cheaper than retail; that was the foundation of eBay and Craigslist. That is like comparing previously leased cars with the MSRP.

Did the desktop or ipod come with “treats” similar to the returned WalMart zune?? I wouldn’t think so since you came through a refurb channel.

 
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Jon (Who am I?)

Hi NW Guy, I am not talking about “second hand” but refurbished… there is a big difference, I would NEVER buy a computer or any electronic unless the price was a joke from anybody but the original manufacturer. Say what you will, but refurbished are usually covered under original warranty, the parts that where broke fixed and a thorough diagnostic.

I bought my HP directly from HP (had 90 day warranty attached), same with the ipod Nano (1 year warranty). Both looked brand new and if there was something screwy on them, no big deal, they will fix it for free. This has saved me tonnes of money in the past and will continue too… I don’t know why people buy things retail anyhow… usually the warranties are about the same as refurbished, you may be able to get a cheaper “extension” as well and the price is knocked down to boot!

The best deal I have found so far was on a free D40… but that my friends… is another story ;-)

Jon

 
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Paul Thompson (Who am I?)

Apple is such a strange company. I suppose if I had taken more classes in marketing or finance, maybe I’d understand. But my B.S. in Computer Science perspective, sometimes I just really don’t understand these sorts of actions.

Ah well, their laptops are sexy, though…. :)

 
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Lp (Who am I?)

I rather like Apple’s use of MAP. Choose the method you’d like to purchase based on service and the buying experience, not on who has the best deal in town.

I wish the auto industry would follow this model. Maybe they do these days and I just don’t know it, because it has been years since I have made a purchase. But looking at sticker prices and wondering how much you can dicker with the agent depending on their quotas and what kind of month they’ve been having and whether they’ve been in an argument with their S/O on the way to work… its just a lame model for retail, IMO.

Plus, this method is so much cleaner. Here’s why. Some people will find out about a deal after they have made a purchase. So they take their purchase back to store #1 to make the purchase from store #2. That’d happen a fair amount for even 10% off of two fitty.

Lp

 
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Jon Lee (Who am I?)

Minimum advertised price is what any manufacturer would like to have. The difference between Apple and “any manufacturer” is Apple currently has a monopoly on the market (whether for fashion or for technology), and thus can set the tone, and thus the price of it’s products at whatever it likes.

Obviously this is not the case for cars, as neither GM, Ford, or Toyota come close to holding the entire market, or too significant a share of it.

As for whether or not minimum or maximum advertised prices are any good, there’s a lot of debate. I for one am not against price floors or ceilings to a certain extent, and any (economic) scholar will agree with me on this. In this case, Apple is only exerting it’s dominance over a very young market, and eventually it too will have to play by the rules of free market trade.

Of course, that all depends on how soon the competitors decide to actually create a worthwhile alternative to the iPod.

 
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ishka (Who am I?)

ishka baba lababa looo

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