Tuesday, January 30, 2007

iPods in the Caucasus: Indexing or Pricing?

Half-serious, half-joking, the Economist put forward the Big Mac Index as a comparative tool to measure purchasing power and currency valuation. The idea was that McDonald's, wherever it is, has standardized procedures for doing identical Big Macs -- consequently price differences should be fairly indicative of discrepancies in purchasing power. An overview of the idea is here (somewhat ungenerously, the Economist makes its Burgernomics available only to subscribers).

Recently an Australian bank suggested a similar comparison of iPods. Arguably this is more of an indicator for smart predatory pricing, since iPods sell for much more than their production costs. So what does this mean for our region of the world? You probably would expect sales price in the South Caucasus to be fairly homogenous.

Well, it isn't. Taking the 2 GB Nano iPod for comparison, the newly opened Apple shop in Yerevan asks its customers for a cool 288 US dollars. In Tbilisi, the same iPod will set you back 224 US dollars, whereas in Baku, the Apple website lists its price as 199 US dollars.

Various explanations are being offered. Azerbaijan may have a larger local customer base, allowing them to charge less for the individual item. Armenia may have higher transport costs, or simply a dealer that can keep a very straight face. It is also possible that many Armenian customers actually shop abroad, and those that are left locally are prepared to pay the premium. Internationally, the Caucasus stretches across the higher medium-range. In Brazil the same iPod Nano costs a whopping 327 US dollars, in the US a mere 149. Azerbaijan is somewhere close to the UK, Ireland, Finland. Details, with some discussion, here.

Further hypotheses welcome. Thanks to JonathanK for pointing out the topic, and our CRRC staff for instant research. A comparison of the Big Mac Index in the Caucasus to follow.


xcaucasus said...

Comment by UlviI:

Let's be serious - who in Azerbaijan uses Apple Mac? Everyone prefers Microsoft here, and for sure pirate copies of it. I tried to find original Microsoft Windows program, they told me in the store that they do not import it, because it costs $200 and no one buys it. And this is AZEL, the official partner of Microsoft in Azerbaijan, as they say...

Instead they downloaded a pirate copy of MS Windows into my new laptop that I purchased from them.

I have not seen anyone here using iPOD either. Plus what credit card can an Azeri use to buy/download music from apple.com? Is there a normal bank/financial system here? Whith what internet speed - 100.000 mgps?

Where have you seen a post-Soviet Azeri trying buy a music, when he can use extensive pirate copies from local or Russian websites?
Everyone here considers me a stupid, because I only buy original CDs.

And finally, why we are not talking about importing companies paying bribes to get away with custom fees and therefore keeping the prices lower in Azerbaijan than Armenia where they do not have their "Kemaleddin", or Georgia, where custom and tax duties consist
55% of the national budget's revenue section?

Azerbaijan can be close to UK, Finland, Ireland only in dreams, not in reality.


Stranger_Here_Myself said...

- It is not only music that can be downloaded from the iTunes store for listening on an iPod. Plenty of free educational and otherwise enlightening podcasts are available - and these are an invaluable addition to the scanty intellectual diet available to us in Azerbaijan. We also find ways to purchase, for example, printed books from the Amazon.com website, despite possible difficulties with credit card payments and the often slow and inefficient delivery by the government postal service.

- It is true that the Internet speed may be slow but I have seen many taking time to download pirated music and films from the Web, so why not the iTunes products?

- For those who prefer the music from pirated CDs purchased in local stores, there is an option of transferring that music onto their iPods through the appropriate (free) software.

- You don't need an Apple Mac for using an iPod. It works with Microsoft software just as well.

As to the explanation of why iPods cost more in Armenia and Georgia than in Azerbaijan, it is not inconceivable that the Apple store owners in Baku may have an answer to that question. Their address is 27 Azerbaijan avenue and phone - 493-4868.

Perhaps, a higher purchasing power of Azerbaijani population is one of the factors?

Unknown said...

People that do not read books will listen to them through earphones
and carry heavy iPod "music box" as memory, instead of using lighter flashdrive?

I mentioned this and also asked with what payment card? And why to pay when you can steal?

That CD-> .jpg transferring software too is illegal, stolen, and is a pirate copy.

The blog info/price indexing talks about iPods that people can afford
to buy, not about the kind of software used by publishing house. I too talked about Apple Mac as personal computer software, not industrial one.

The same Apple Mac store in Baku was closed and remained so for over a year. If they had such a good business, why were they closed?

Prices can be low when there is higher demand, that's true. But when there is no demand by our youth to buy iPod and they prefer fancy cell phones and change them every month as new models enter the market, how can Apple store keep the prices low, unless they can import them through cheaper "methods", which is not a secret - everyone knows.

Ulvi I.