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Worth a fortune: Why there are no cheap iPhones in Ukraine?

Author : Nina Hlushchenko

20:35, 11 October 2017
Worth a fortune: Why there are no cheap iPhones in Ukraine?

Author : Nina Hlushchenko

And what affects the cost of consumer electronics in our country

20:35, 11 October 2017

Read original article at 112.ua

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Ukrainian prices for the first “grey” (illegal) iPhone 8 consignment are traditionally impressive - an average of $ 1,300 for the base model at the start of sales. Of course, the "gray" market at the start of sales is not an indicator; it reacts on demand with a supply. The Asbis Company (the official distributor of Apple technology in Ukraine) has not yet announced the cost and terms of "white" (legal) supplies, and the "gray" market plays by its own rules. However, even when the iPhone 8 and its flagship iPhone X appear in Ukrainian stores in accordance with all legislative norms, they will cost more than in the developed countries of the world.

 

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No magic. To a large extent, the final cost of the device will depend on taxes. Being very poor according to world standards, the Ukrainian buyer of technology (not only Apple, but in fact any brand and any device imported into the country legally) pays more taxes and fees compared to his neighbors in the region.

What about other countries?

The price on the iPhone differs not only from country to country, but even within the US - because in every state they have different taxes. The prices are indicated without taxes - for the country this is a common practice. Business Insider portal gives a comparative table with prices at the start of sales of the iPhone 8. The cheapest device is in Japan and the US (after taxes), the most expensive - in Russia and the European Union. The difference is 400 dollars!

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A similar work has been done by Quartz portal in relation to iPhone 8 - this time the anti leader is Hungary. In this country, the junior flagship of the line-up will cost as much as iPhone X in the US and Japan. This time the price difference between the countries on the list is $ 300.

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What about Ukraine?

Many factors affect the price at which electronics is being sold in Ukrainian stores. Let’s suppose there is a device X that costs a certain amount. Its cost in a particular country will be affected by the volume of supplies, the cost of logistics, brand awareness and competition in the price segment, which entail costs for advertising, service, taxes, certification, labeling requirements, employee compensation, the number of intermediaries between the manufacturer and "shelf ".

As a key factor, the interlocutors of the editorial board called taxes and certification. "Only taxes play a key role in the formation of the price of hi-tech products, the rest depends on the" greed "of the intermediaries between the producer and the end user. But in order to sell the product legally, it is necessary to pay VAT and import duty, within the country - 20% VAT, % of income tax, etc. There are a lot of taxes, "comments Olexander Shyrkov, general director of NIS, distributor of Xiaomi in Ukraine.

Taras Jamalov, CEO of Lenovo in Ukraine, also draws attention to this. In the Ukrainian office, Lenovo has expertise in the CIS region, so the company compares domestic experience with work experience in other countries of the region - Belarus, Georgia, Russia, etc. "Among the special factors that are specific in Ukraine and really play a big role - the cost of certification and the amount of VAT (the presence of mandatory import VAT). In Ukraine, there are a huge number of regulatory measures; it is much higher than in other states. Talking about specifics of the region, then only in Belarus we see the same level of costs for certification, even in Georgia they came to a smaller number of norms,” the top manager of Lenovo comments on the situation.

In the cost of product, there are logistics and additional costs that arise on the way from the border to the "shelf". Lenovo says that 10-17% can be added from above: distributors, wholesalers and retailers, overhead costs. The company gives an example that the manufacturer previously signed a contract with European distributors and those in turn - with the Ukrainian distributors. "At the stage of relocation of goods from the producer to the intermediary, as a rule, a" black hole "arose: the invoice price could be changed, the goods could go not to where the manufacturer intended. Now we conclude a contract with a Ukrainian legal entity and in this situation there cannot be additional links. We provide invoices to Ukrainian legal entities and promote the "white scheme." Direct delivery helps us to reduce the price. We at least save a week at a minimum, and a cost of 0.5-1%," Taras Jamalov comments. If in a percentage ratio this figure seems small, then for such a large company for a year it transfers into a significant amount.

The scope of supply affects a few things. First, localization. To make the device accessible to Ukrainian users, it should at least have an interface in Ukrainian and work in local networks (now most middle and top segment smartphones support the basic communication standards that are accepted in the world, although with 4G in different regions there still could be problems). Localization needs the money, and the bigger the quantity is, the lower is the cost on each model.

Ukrainian requirements for labeling are more serious than in other European or American states. "Despite the electronic version of the instruction in Ukrainian, a physical instruction should be in each box, although, for example, in Switzerland it would be enough only in English," Taras Jamalov explains.

In addition, there is still a price factor for distributors. A typical example is Meizu smartphones. For this Chinese brand, Ukraine is one of the largest markets. In our country, devices under this brand are cheaper than, for example, in neighboring Russia. In "Citrus" stores they say that as an official distributor the company gets the most favorable prices on the Ukrainian market, but on the whole they comment on the matter reluctantly and say that the figure is not related to sales volumes.

Among the factors that affect the cost slightly, Olexandr Shyrkov notes costs for service and advertising: the better the product is, the lower is the cost of service support; and the more often the product comes to your eyes, the more money is spent on its promotion, comments NIS CEO.

The price reduction is stimulated by high competition (although it concerns the budget segment in the most part, both in smartphones, laptops, tablets, etc.) and low labor costs. "However, there is taxing, and it becomes difficult to find out, subjectively - as a result, in Ukraine, the costs are rather higher, than lower," says Lenovo CEO in Ukraine.

Although Asbis does not yet announce the cost of the "white" iPhone 8, the company assures that the price will be comparable with other countries, and they note one more moment that has an impact on the Ukrainian consumer. "There are a number of factors that influence certification, taxes, logistics, as well as the cost of a monetary resource (lending to both business and consumers): in Ukraine this rate is higher than in other countries. Prices with these factors are parity compared to other countries. Deficit can slightly influence prices, but there is competition, which smoothes out this influence, " comments Vitaly Melnichenko, Apple Team Leader Asbis UA. A representative of the official Ukrainian distributor of Apple technology says that the word "expensive" can usually be heard from an audience that compares prices either with the "gray" market, or with a purchase in another country, taking into account the VAT refund, or with prices on the Apple website for US , which do not contain taxes and VAT.

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