David Crookes look at price differences between the UK and the US, and whether the gap is closing
Brits can be a canny bunch when it comes to saving cash. Hundreds of thousands of people subscribe to weekly money-saving emails, many more use price comparison sites and price trackers, and there are also lots of apps that pick up where we are at any one time and point us to the bargains that are all around us.
But there is one bugbear that sticks in the back of the mind of many consumers: the feeling that we’re still often paying more for our items than people who live in other countries. No matter how much we save, we cannot help but look enviously at the most notable of territories, the United States of America, where technological goods in particular sell at cheaper prices than in the UK.
The difference in price can sometimes run into the hundreds, and that has prompted thousands of people to look further afield when making a purchase. Seldom is this more noticeable than when Apple brings out something new and shiny, prompting newspapers to do a quick price comparison, and leading website commentators to pore forth with typical vitriol about ‘Rip-off Britain’. Yet there is no denying the truth. A lot of technology is cheaper if you buy it from an American store, and even when you take into account sales tax and export duties, the savings can seriously stack up.
Apple’s Watch Sport, for example, can cost UK buyers up to £75 more than if it was bought in the US. This differential is based on the 38mm Sport version costing £299 in Britain and $349 (£224) in America. If you buy the watch in a state that does not have sales tax (such as Montana), the savings are particularly huge, but even in states such as California with 9% sales tax (which takes the price to $380.41 (£244.64)), the saving is still some £54.
Why is this? Well, some companies such as Sony say it costs more to do business in the UK than it does in the US (and Japan). They say the European market is broken up into so many territories and that by pitching a higher price, they’re also able to protect themselves against a fall in currencies. Apple has said in the past that its international product prices are suggested on the basis of currency exchange rates, local import laws, business practices, taxes and the cost of doing business. This is an argument put forward by other firms too.
But it could also be claimed that companies will also simply charge what they feel the market would be willing to pay, and there’s no doubt that prices would fall if the demand for items declined. Yet as long as people are buying, there is no incentive not to capitalise on the extra money the UK can pull in.
Digital Services
Never is this more stark than when looking at digital items, which often cost more for UK consumers than for those in the US, even though there is an absence of packaging, shipping and any tangible item whatsoever. Subscriptions to the movie and TV streaming service Netflix costs from £5.99 in the UK but from $7.99 in the US, for instance. That’s the equivalent of £5.12, and it’s made worse for the fact that America gets more content than we do in the UK, and it also gets television shows earlier.
Spotify is another offender. It costs £9.99 in the UK but $9.99 in the US. This is a typical tactic – simply copying the same price but in different currencies – but it means American listeners enjoy their music at a more tuneful £6.40 each month. It’s a strategy that has been copied by Apple Music, Tidal and Deezer, and it has led Marc Gander of the Consumer Action Group to declare, “British consumers are constantly taken for mugs” (more so considering that in Europe, customers pay 9.99, which means the UK is even more expensive than across the continent).
Yet it goes on. Amazon Prime costs £79 in the UK and $99 (£63) in America. Complete Adobe Creative Cloud accounts cost £45.73 each month in the UK and $49.99 in the US – the equivalent of £31. Windows 10 Home can be downloaded for £99 in the UK but for just $119.99 (£77) in America. The price gap is getting narrower, because we get fewer dollars for our money these days, but our pockets are taking some battering, it would seem.
Jetting Off
Before you start checking out American websites and booking flights, though, there are a few things to bear in mind when shopping outside the EU. The first is that not everything is cheaper (an Intel Core i7 4960X Extreme Hex Core CPU costs £735.99 at Amazon.co.uk and $1,147.80 (£737.23) at Amazon.com), but these examples are few and far between.
More important is getting items through customs. When you seek to bring an item back to the UK from outside the European Union, you’re viewed as an importer. If you go in person, your items must be declared as you re-enter the UK, and if they’re sent by post, then the Royal Mail is legally obliged to inform HM Revenue & Customs, which can not only hold up delivery but leads to a card listing the current charge being popped through your door.
The potential charge can be made up of excise duty, customs duty and import VAT, which is applied to goods over the value of £18 (or over £36 if sent between two private individuals). There will also be a Royal Mail handling fee of £8 if you’re being sent items through the post. All of this usually has to be factored in when comparing the price of goods between the two countries and when working out if you’re better off buying from home or abroad.
There are also limits, which differ depending on whether or not you’re going to America in person or buying online. Currently, the limits are set at £390 for those who fly home with goods from the States and £135 for those who prefer to travel via a click of a mouse. Should you fall foul of the rules, then purchases from America could become very expensive as duty is added, starting at 2.5% for goods up to £630. Stay within the limits, especially if you’re jet-setting, and the savings can often pay for the trip itself.
The discrepancy between physical and online purchases has not gone unnoticed. The consumer group Which? has not only called on manufacturers to play fair, but last year it also urged the government to raise the current threshold for import duty on goods bought online to the same threshold as that placed on goods brought back from abroad, so that shoppers can take advantage of cheaper goods on sale in the US.
“UK consumers are getting a raw deal by paying up to hundreds of pounds more for the same tech products on sale in the US,” said Which? executive director Richard Lloyd. “Manufacturers should play fair and explain why consumers are paying more for buying in the UK.” The current rule affects some electrical goods, which attract an import duty rate of 3.7%. Some items including televisions incur a duty of 14%. But there is some good news.
Duty Free
Certain products do not attract any duty when they are being imported into the EU. This includes most household furniture and books, but it also extends to computer software, desktop PCs, digital cameras, laptops, mobile phones and videogame consoles. This is brilliant for Micro Mart readers intending to slash the cost of purchases, not least because it cuts out any uncertainty over whether or not there’s going to be a surprising bill when your item hits these shores.
So what is cheaper and what effect does this have? Well, an Xbox One games console bundled with Halo: The Master Chief Collection currently retails on Amazon.co.uk at £349.90, whereas on Amazon.com it will cost you $342.84. That is the equivalent of £220.33 at today’s rates, a significant saving. But to import this machine would require Amazon Expedited shipping to the UK costing $6.99 (£4.49) per shipment and an additional $2.99 (£1.90) per lb, which would add up to $38.87 (£24.97). Add VAT at 20% (£44) and a UK power lead at around £2.99, and you’d be looking at paying £296.78. Even then, that would save you £53.12.
Let us do the same with a 27” Apple iMac with a 3.2GHz processor and 1TB of storage. The UK Apple Store quotes a price of £1,449, including VAT of £242. On the US site, you can buy the same machine for $1,799. With the estimated tax of $118.73, the price increases to $1,917.73. Since this is the equivalent of £1,230.73 if you go over to the United States and buy this in person, you’d be saving £218.27. That’s not quite enough to cover a return flight to the US, but combine it with some other goodies while you’re out there and the savings will inevitably stack up.
What’s more, if you go at the right time and shop in the right places, then saving potential increases even further. A good number of department stores in the US will slash prices further, and it’s possible to get discounts for being an international visitor (some exclude electrics and electronics, so do your research; Macy’s, for instance, has a Visitor Savings Pass that will take off 10% on items and is valid for 30 days but it’s no good for tech purchases). Our Apple iMac retails for $1,679.99 at Best Buy, though, so with our sums above you can expect to lop off at least another £70 – an additional sum that could just about buy you a return ticket if you’re lucky.
Best Buy is a particularly good store to check out, with lots of discounted technology products available. A GoPro HERO4 Session HD Waterproof Action camera is $399.99 (£256.60) and comes with a free $40 gift card. The official GoPro website lists this product at £329.99. A HP Officejet Pro 8620 e-All-in-One Printer can be bought from Amazon.co.uk for £143.40 but at Best Buy for $149.99 (£96). You could slice a couple of hundred pounds off a Micro 1.40TB internal solid-state drive (Best Buy $3,704.99 (£2,375); Nigelohara.com £2,563.35). And you could buy an Acer 21.5” LCD HD monitor for $129.99 (£83.35) from Best Buy or for £111.22 in the UK and save £28.87) since monitors, unlike TVs, are exempt from duty.
Buying from Best Buy if you don’t intend to visit in person is difficult, though. The company will ship to the 50 US states, the US Virgin Islands, Guam and APO/FPO military addresses, but it will not ship anywhere else outside the US, so you either have to get a friend in America to forward it on or you just have to get flights across the Atlantic. Best Buy will not ship to freight forwarders (or at least to those known to it, so hunt around for obscure ones if you want to go down this route), and it says it assumes that products will be used in the US. Should it suspect otherwise or know that the address is being used by a forwarding company, then the order will be cancelled.
Disaster Strikes
Obviously one of the perils of buying from America is what happens if something goes wrong with the item. It will not be as easy to return it. You need to carefully look at the terms and conditions of a sale and what happens with international orders. If you manage to buy an item from a company such as Best Buy and get it forwarded on, are you entering murky waters?
If you have a problem with an item you’ve bought from America and you have a complaint about how a company is dealing with you, then you can try the Better Business Bureau, which helps to resolve disputes, You can also try the Federal Trade Commission. This, according to the UK Citizens Advice service, will take action against the trader, but it will not seek to resolve your individual complaint.
There are ways to protect yourself, though. By making a purchase on a credit card for an item valued at between £100 and £30,000, you will be protected, and that extends to anything you buy online, by phone or mail order. This protection is laid down in the Consumer Credit Act 1974, most notably in Section 75, which removes the risk of being put into debt for goods and services that fall below expectation. It makes the credit card company jointly liable.
But what about warranties and guarantees? Generally, if the item you buy is from a global manufacturer, you should be covered by its warranty. You won’t be covered by European Union regulations, though. When you buy an item from abroad, do some research and perhaps even tweet to the company that makes the product you’re purchasing to check its policy. You’ll want to know whether or not the warranty being offered is worth the paper it’s written on for your circumstances. If you don’t mind that there could be an element of risk, it’s still worth bearing in mind that most products should arrive without any associated problems.
With all that in mind, it might be worth considering where you next book your trip. If you have a lot of technology items to buy, then a trip to the US is likely to be well worth your time. Book at the right time (during the sales and around Christmas), and you may well benefit from the cost-cutting that will be going on. Just remember to have a spare suitcase to hand. If you’re anything like us, you may well need it.