UK vs US – do we really pay more?
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.
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.
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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