20 November 2013 / Technology

Outrageous mark-ups – does tablet memory top the table?

Rich Parris Which? Tech

Comments 22

Tablet manufacturers, such as Apple, Google and Samsung, are marking up the price of extra memory storage by as much as 1,200%. Is this one of the worst price mark-ups yet?

The best thing about owning a tablet is filling it with the music, videos and apps that you love. But all these things quickly take up storage space. That’s why you may be tempted to shell out extra for a 32GB iPad or Android tablet, instead of the cheaper 16GB model.

However, our latest research has found that it costs manufacturers less than £6 to purchase 16GB of extra memory storage from the third-party suppliers they use. Yet they charge consumers as much as £80 for a model with more storage.

The tablet memory storage mark-up

Buy a 16GB Apple iPad Air and it’ll cost you £399, but its 32GB big brother will set you back £479. Apple uses a type of Flash memory called MLC in its tablets. Like all Flash memory, this is a traded commodity with a tracked market price, and in October this year 16GB of MLC traded at an average of just £5.85.

That means Apple’s £80 charge for an extra 16GB of storage equates to a price mark-up of 1,267%, based on the market price. And we’ve spoken to industry insiders who insist that the manufacturing costs of adding the extra storage to tablets is negligible.

Apple isn’t alone in this trend, though it does charge twice as much for an extra 16GB as Amazon does for its Kindle Fire HDX (£40 more for the 32GB model). Google whacks on an extra £70 to step up from the 16GB Nexus 10 to the 32GB version.

If you’re not keen on paying so much extra, you can buy models that let you pop in a memory card for added storage instead. Microsoft’s Windows Surface tablets and Samsung Galaxy Tab 3 have handy memory card slots.

Other big mark-ups

Sure, tablet manufacturers are free to set their own price structures, but knowing the price mark-ups involved can certainly leave a sour taste.

Of course, price mark-ups aren’t the domain of tablets alone. You’ll also see a similar story with smartphones and other electricals. Can you think of any worse pricing mark-ups? And would you still be prepared to shell out extra for a higher capacity tablet knowing the price mark-ups involved?

Comments

Malcolm R says:

20 November 2013

It would be interesting to see just what the cost of all the proprietary components in any of these devices is. My hunch would be that, like phones and laptops, the material cost leaves a very healthy overall profit. However, this is the way of the world, where the worth of a product is what people are prepared to pay.

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Patrick Steen says:

20 November 2013

Yes, very interesting to know. Here’s something I spotted recently. It’s speculative and I can’t confirm its reliability, but in a teardown of Sony’s new PlayStation 4, this site found the components to cost around $381 to build (it sells for $399 in the US): http://allthingsd.com/20131119/teardown-shows-sonys-playstation-4-costs-381-to-build/ This doesn’t take into account packaging, research and development, marketing etc.

Historically gaming manufacturers sell consoles at a loss – the PS3 cost $600 to buy, but $850 to make when Sony first launched it. They then make the money up on the software sold, and work to reduce the cost in future revisions.

I expect this differs to Apple’s pricing tactics for its tablets, as Rich found in his research into tablet memory storage.

Malcolm R says:

20 November 2013

Presumably games consoles are like printers – it’s what you need to spend in games and ink that make the profit. Your same source gave the cost of building an iPad Air as $274 against a selling price of $499 – little scope for after sales profits here perhaps. However, a large investment in development goes into these sorts of products, together with heavy marketing costs, so there is a gamble if you get it wrong.

NFH says:

20 November 2013

We should also compare iPods and iPhones. The only significant difference between them is that the iPhone has a phone function, whereas the iPod Touch has not. Although an iPod Touch 16GB costs £199, an iPhone 5S 16GB costs £549, i.e. £350 more or 2.75 times more just for a phone function. Given that a simple mobile phone on its own can cost only £20, this is a huge mark-up just for the phone function.

Julia R says:

20 November 2013

Talking of mark-ups, why should we pay £1 on the $1 for electronic goods?
UK customers are often forbidden from buying from US sites (by US electronics companies?) or if permitted, pay the same price in UK Pounds. There is no justification for this.
I have worked in two US companies in the UK, both sited here as costs (labour, etc) were lower.
With many US companies ‘avoiding’ tax in the UK, it’s about time we UK consumers were treated equally (notwithstanding our ‘special relationship’) by the US.

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NFH says:

20 November 2013

This is often the case, but for a true comparison you need to remove UK VAT from a UK price by dividing it by 1.20. Only then can you compare it with US prices which always exclude sales tax. Even when comparing pre-tax prices, I agree there is often an unreasonable disparity.

+adrianchapmanlaw says:

20 November 2013

If you are filling a tablet up with videos and music, you are doing it wrong. It is perfectly possible and acceptable to stream most stuff in most locations in the country.

obviously for some people local storage is the only option but even then you will not get many films even on a 64gb tablet. Check out some of the wifi nas drives they are much cheaper per mb than SD cards and MUCH bigger.

I have been using google music to stream to my phone for the past 6 months with no tracks chosen to be stored on the device google cleverly cache’s it so the playback doesn’t stop in times of no signal. Same thing with youtube, it buffers enough to cope with the short outages that you get on motorways although if you are planning to watch youtube on the move you had better make sure you have data plan with plenty of storage.

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Peter says:

18 January 2014

For those who don’t have unlimited (or very generous) data plans, however, a simple answer is to look for products which can take a microSD card.

Robert says:

20 November 2013

What is wrong with a company selling a lower price, lower profit level product as well as a higher profit level version.
Its just market force pricing – common for many products.

Its confusing having this discussion here and an almost identical one on your Technology site

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PeterM says:

25 November 2014

A very nice idea, but firms like Apple have always been going for hype and exclusivity – heaven knows how much the Apple Watch in gold will cost (starting price for the basic watch said to be US$ 350, so we can probably expect to pay 300 to 350 pounds here!) – and that type of firm is looking to the better off end of society to buy their gear.

(Sadly many in the media are users, so there’s also a load of free publicity given to Apple, etc. How many times do you hear people on radio mention the ‘iPod’, ‘iPhone’ or ‘iPad’, rather than ‘music player’, ‘mobile’ or ‘tablet’?)

Many of these devices (the top end smartphones, for example) are sealed so there’s built in death when the battery can no longer be charged. It’s in by design people, and sadly, so many people ‘love’ the products they blindly buy and buy again a few years later.

dieseltaylor says:

20 November 2013

I do wonder how people manage life without having the latest advances like smart phones, tablets etc etc.

I suspect there are many who are grateful to the early adopters for finding out all these things and making a hooha over pricing. If anything experience teachs is that in electronics you wait a year or two and you get todays top tech at a knockdown price.

richard says:

23 November 2013

You Which writers need to understand the differences between cost (what it costs to make something), price (what you can sell it for) and value (what it is worth to a customer).
It may only cost an extra £5 for 32GB of memory but if customers perceive it to be worth £80 then that is the price Apple etc can charge
If it isnt worth that to you then dont buy it.

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Peter says:

18 January 2014

Good point, well made. It annoys me when (usually American) adverts say XYZ Free (a value of $xyz) when it’s really just THEIR price, not MY value.

I look at a product / service at face value – if I am willing to pay that price I will, and whether it costs them a lot or a little it’s mostly what I am willing to pay that is the deciding factor.

richard says:

23 November 2013

sorry, this part of my comment got lost…

If products were priced at the incremental cost then the first iPad would have cost £millions (whatever it cost to develop the iPad) and nobody would have bought it. The commercial skill of Apple etc is in developing products that customers value more highly than the average cost of making them.

Rob Andrews says:

23 November 2013

heh.. If you went to the Fat Duck I’m sure that you would be paying way more for a meal with the same ingredients as your local restaurant. Or that uber Audi car shares rather a lot of components with the less glamorous and cheaper Skoda.

It’s not what’s in it, it’s what people are prepared to pay. Apple et al can charge what ever they like. We’re not forced to buy their products. Yes, you could think that it seems obnoxious and unfair, but if you are thinking that it’s because you can’t afford the upgrade. If you can you wouldn’t give it a second thought.

Me, I can’t, but I just deal with it. Same was as I’d like to eat at the Fat Duck lots rather than Prett or consider a Skoda Octavia rather than an A6 🙂

dieseltaylor says:

24 November 2013

I await next the onslaught on chemicals mixed and sold as perfume as a proper target for consumer disgust ……
: )

Andrew says:

27 November 2013

I was looking for a table saw recently and read an article which recommended the
GTS 1031. The bosch website had a comment from a disgruntled customer who could not understand how the identical GTS 10J could be so different in price.

The specs seem to be identical (except for the obvious 120V US and 240V Euro)
The US 1031 cost $299 and the UK £589

Even with import costs the markup for being a UK customer seems rip-off Britain/Europe.

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dieseltaylor says:

27 November 2013

US list price according to Ebay seller is US $489

If you look at Amazon they say the price is:
List Price: $765.00
Price: $299.00 & FREE Shipping. Details
Because our price on this item is lower than the manufacturer’s suggested retail price, the manufacturer does not allow us to show you our price until you place the item in your shopping cart.

Which tends to make me believe that you cannot believe everything you read. The main competitor for the Bosch is the DeWalt DW745 and there again the Amazon price as to RRP has the same huge discrepancy. Currently it has Bosch and DeWalt by the wotsits trying to keep market share.

Ultimately Amazon* will be able to drive out of business shop based competitors because it has much bigger bulk buying power and hugely lower overheads in terms of shops. And of course in the UK pays virtually no tax. Once local shops/DIY stores have been obliterated then it will charge to make the most profit from us.

Being a manufacturer is not necessarily an easy thing if you cannot make adequate profits. And the US is an object lesson on mispricing and predatory pricing.

*The UK’s number one tax avoider is Amazon. Amazon’s UK subsidiary paid £3.2m in corporate taxes in 2012 on sales of £4.3bn – a rate of less than 0.1%. In 2011 Amazon’s sales in the UK were £2.9 billion but they only paid £1.8 million in corporation tax.
http://www.ethicalconsumer.org/boycotts/boycottamazon.aspx

dieseltaylor says:

27 November 2013

“Outrageous mark-ups”

Would anyone here sell a art masterpiece for the original price paid to the artist or would you sell it for as much as you could get?

If you have made a 1000 bottles of perfume would you sell them at cost plus 10%, or what the market was prepared to pay?.

I have no doubt that 99% of readers would maximise their price and this generated topic is really kind of pathetic in its avoidance of how people and the real world work. Sure tell us there is a big mark-up but if it is worthy of comment surely it is about the people who are prepared to pay any price for the new gizmos.

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Peter says:

18 January 2014

Actually, no, it should perhaps have been about not including the ability to read from a slide-in memory card (just as ‘wavechange’ posted after you – had not seen that when I posted my, similar, comment).

There was an article I read somewhere that a tube of toothpaste cost about 50p in a country in S America, but £2 in France. What we need to do, if we hate high prices, is to boycott products until the price goes lower.

Unfortunately, for every person that buys “own brand” products at the supermarket, someone else buys soups, beans, toilet paper, etc, etc (and in the entertainment world, someone will pay hundreds for a seat at a gig, or for a football season ticket, and the ticket touts can charge what they like, and someone will pay that rip-off price), so the “boycott for lower prices” idea doesn’t work, making it a divide of those who can, and those who cannot, afford these products / services…

(oh, and yes, it’s a shame that some are so keen they queue round the block to be able to get some gizmo the first day it is available… sad, and with lots of spare cash, I have to assume.)

wavechange says:

27 November 2013

When RAM was expensive it was easy to save money by buying Apple laptops and installing additional memory purchased from another supplier. Now it is not an easy job to increase the memory or even install a new battery in any recent Mac laptop. RAM is cheap, so it is obviously lucrative to sell iPads with additional memory, on the basis that the average user is unlikely to be able to upgrade their machine.

If most manufacturers start selling tablets with slots for memory cards, then Apple may lose some of its customers or be forced to follow suit.

Peter says:

18 January 2014

Seems simple to me that if you have lots of media (be it music or video) you could put copies onto 8 GB, 16 GB, 32 GB and if you have deeper pockets (and your device can handle them) 64 GB microSD cards.

I use 2 GB, 4 GB and 8 GB microSD cards in my Android mobiles to store photos and music. There are some neat little USB adaptors so you can copy a few GB of MP3s onto a microSD card and put in your mobile… and MP3s are easy to make backup copies of in case a hard drive dies after a few years (not like buying from the internet, where you are not always guaranteed you can download after a crash, without paying again for something).

No “buffering” while waiting for data via a wireless link, and you don’t “fill up” your device, either.

Now you know why some money grabber manufacturers don’t include any way to plug in a memory card… even some of the iMac range don’t have a DVD built in (means extra money if you need a way to read a DVD sent by a relative, for example).

Does anyone remember that Sony Mavica camera from the mid-90s which took a 3.5″ floppy disk? OK, it couldn’t store many photos (think it was 20 per disk) but you had practically unlimited capacity just by taking one floppy out and putting another in. Hard on batteries, but it was a starting point!

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