UK vs US – do we really pay more?

by , Digital Producer News 04/07/2012
Dollar vs Pound

Not only do we have to watch with envy as the newest tech products hit the shelves in the States weeks or even months before they arrive on our shores but there has long been a suspicion that our patience is usually rewarded with higher prices.

A quick look online at the price of products in the US will certainly have you foaming at the mouth and aching in the wallet. Advertised prices in the US are considerably cheaper than in the UK – but that’s not necessarily the full story.

Sceptics of this UK vs US price divide often – quite rightly – point out that the sticker price in the US – online or otherwise – isn’t the total price. That once you add in state and local sales tax the prices between here and there really aren’t that different. But is it true?

US vs UK prices head to head

We compared online prices for five different tech products at four shops; Currys and Amazon in the UK and Best Buy and Amazon in the US. Importantly, we made sure to include local and sales tax – where applicable – in the final US prices. State and local sales taxes vary widely in the US so to be sure we weren’t getting a tax bargain we used California – which has the highest state tax in the US – and Los Angeles which also has hefty local taxes.

So what did we find?

Well, start foaming at the mouth because sales tax or no sales tax we are having our pockets emptied. All of the products we checked were cheaper in the US – some by a considerable margin.

UK prices up to 26% higher

When comparing the two major big box retailers the difference in price was striking, with a Macbook Pro costing a whopping 26% more in the UK. While Amazon UK was consistently cheaper than Currys, all but one of the products was cheaper still at big box US retailer Best Buy and often much cheaper at their counterpart Amazon US.

On average the difference between the cheapest UK price and cheapest US price was 16%. The largest difference was 21% which translates as an extra £142 out of your wallet.

Consumers in UK consistently paying more

As ever there are a few caveats to the information above. Apart from in a handful of states Amazon in the US don’t currently charge any state or local taxes – a situation that will change this year. It’s also worth noting that for a handful of our goods Best Buy added a $6 ‘recycling fee’ – as required by Californian state law. For consistency we haven’t included the price of shipping in our prices as in most cases this was free or you could opt for free in store collection.

Five products in four shops on a single day is not by any measure a scientific survey but it does give a fairly conclusive indication that UK consumers are paying a lot more than their US counterparts.

Why are we paying more?

So we are paying more, but why? In the past, when manufacturers have been accused of charging UK consumers more they have come up with a list of reasons; some believable, some more creative.

Higher VAT
Usually the blame is shifted to the government and our 20% VAT rate, but given the difference between the average 8.1% sales tax in California and our VAT rate is only just under 12% it doesn’t account for differences of up to 26%.

Cost of doing business
Retailers also claim that the cost of doing business in the UK is higher and that the increased cost of hiring staff, rent and other overheads is passed along in the price tag.  One of the more solid answers is that the larger customer base in the US allows shops to buy the actual products in larger and thus cheaper quantities.

Funny plugs
One of the more novel reasons for the price hike is our plugs. Because manufacturers have to fit a specific UK plug to products destined for sale here it contributes to a higher price.

VAT aside most of the reasons above seem understandable, although I’d still struggle to see how the price of a special plug and the cost of renting a shop in Croydon contributes to a 26% difference in the price of a Macbook.

What do you think? Is it fair that we pay more or should manufacturers and retailers do more to lower the price? Have your say below.

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21 comments

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Galal

Definitely, manufacturers and retailers should do more to narrow the differences to be more realistic and in line with real, rather than imaginary, differences. This has been a very long running concerns (maybe two decades now), and nothing has been done about it. I thank Which? for continuing this important campaign to remove the label of “rip-off” Britain!

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UKExpat

The ‘Which” report on why prices are inflated in the UK is of no use to the consumer that “Which” is supposed to protect. All it does is to try and justify the sellers excuses for the inflated prices.

The real reason that the prices are inflated is that the sellers CAN and DO get away with charging higher prices and people in the UK pay the prices asked. Clearly there is a failure in regulation and/or competition in the UK market that allows this to happen.

Perhaps Which should try to change this situation by highlighting the transgressors and maybe encouraging UK buyers to find away of bypassing UK sellers and buying direct from the US market sellers

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Mark Barton

Does your comparison include import duty?

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Aitch

Import duty is quite low – 2.7% on electricals, from memory – but vat is added to the lot.

For mail order, the PO will add an £8 admin fee for collecting the duty and vat. Combine that with possible warranty or voltage problems, high delivery charges, slow delivery and the difficulty of dealing with any problems, and it’s rarely worth buying mail order from the US. I’ve only done so when buying spares for US-manufactured goods

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Jon

Hi Mark,

It would not be relevant to include import duty to the UK as we are only looking at straight price comparions between UK & US.

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Aitch

State tax isn’t payable on US mail order goods unless the retailer is based or has a significant presence (e.g. distribution centre – I mean center) in the same state as the delivery address, unless I’m much mistaken. That makes US prices even lower than your chart suggests.

When travelling to the US, I order in advance for delivery to my hotel, after checking the hotel doesn’t mind. I include “checking in mmddyy” in the delivery address. I’ve never had a problem yet.

You do have to find a retailer prepared to (a) accept a UK-based credit card and (b) deliver to a hotel. Amazon is particularly good but many others are ok with this, e.g. B&H for photographic goods. With Amazon, you pay sales tax for delivery to California and a couple of other states, with B&H you pay sales tax for NY deliveries.

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Topher

I think everyone has missed the point, and it is a very simple one. People who sell things, price them at what the market will bear. It is basic economics.

New cars are a good example. A german made car for the american market will be cheaper than it is in europe, and it will have more features included in the base model price. The car, has to be shipped to the USA and in general, its US pollution specifications will be more severe too.

Americans dont expect to pay as much as we do for cars. It’s what the market will bear.

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moaner

the usual practice seems to be, remove the dollar sign ($) and replace it with a pound sign (£) and don’t bother with any of that exchange rate nonsense.
on a slightly different subject but still related, a few years ago i was thinking about buying a Triumph motorbike and although the factory was only a short drive away it would have actually been cheaper to have one imported from a dealer in France including all related costs.

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scoosh

Obviously US shops can buy products cheaper because they are buying in bulk. It’s a basic premise of business.

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cwoolfork

UK citizens should be demanding a price reduction, ASAP! When I lived in the UK I was always shocked at the price of electronic goods, cars and houses. UK prices make everything here in the colonies seem cheap! That said, goods here in California (where I currently live) seems way more expensive than goods purchased in Florida (where I use to live)! What tha duck!!!

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Fed up

I’m not sure the bulk buying argument is all that plausible as there are 60 million of us in the UK. I’m sure Amazon UK isn’t buying their Nikons in boxes of 10 vs Amazon US buying them in the thousands. Equally, import duties are not applicable in this comparison as both the US and the UK have to import Nikons. Additionally, why should there be a large difference in rent between an Amazon warehouse in South Wales and one in California? One problem is the higher and more rigid labour costs imposed on us by Europe and previous governments, which we all pay for both through higher prices and through higher taxes. Come on people, 20% to the government for every item we buy? We don’t complain because it’s hidden in the price and we don’t like to complain. Poor us (in so many ways)

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Oliver

Been looking into getting a laptop, the cost of buying a dell (through the companies website) is double than that of american site £1,179 vs $899. unbelievable.

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Ripped off

Some of the worst offenders are the ones that sell digital goods. Remember the Adobe scandal when it sold Creative Suite in the UK for a direct $=£ rate when the exchange rate was $2=£ ?
Other companies that are bad for it are Audio manufacturers, the Higher end Audio Technica products are at least 30% more in the UK(and Euro) and up to 250% more. Just ridiculous.

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Me

Buy from states then

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Paul

And when you take into account Amazon in the UK haven’t been paying their taxes, well, it seems rip off Britain is alive and well, backed by a British government who puts the needs (greed) of business before its people.

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Mobit

The Rocket 3 motorbike, which of course is British made in the UK by a British company (Triumph), costs £12900 (Jan 2014 price). In the USA it is £3750 cheaper to buy

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cybergabi

I live in the Netherlands. My wife just brought me a GoPro Hero 3+ camera for me from California, for $300 including tax. This device doesn’t even come with a power plug – it’s just a USB charging cable, so the plug theory doesn’t apply here.
The cheapest you can get this device currently in NL is €348, which equals $476. That’s a price difference of $176, or a whopping 59% (!) premium on the US price – for the identical device.
I don’t think I will ever buy electronics in Europe anymore. This is just a giant rip-off.

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S spencer

What rattles me is for instance, a wii u is £270 or $270 they don’t even bother converting it, just swap the currency symbol, resulting in about a £90 profit !!! Thieving

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Briser

The new Canon 7D MKII just announced – UK £1599, US $1799 – difference to UK buyer… £487!!!

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Briser

And another thing – these prices are the same across all vendors … price fixing agreement?

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Carl

The 1 to 1 ratio has been going on for too long, now I believe we are more aware of that fact, and it hurts, is just a big rip off.

Employers will pay much as little as they can get away with and shops will sell as expensive as the market can take…

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