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"The 2GB Nano retails in the US for $199. Of that, iSuppli reckons, less that half - $90.18 - goes on components. Chuck in $8 per unit labour costs, and Apple's base margin is a whopping $100.82. You can probably add a little more for software development - they're paid in pizza, no?"
I love it when someone guesses raw material costs, fudges estimations of labor, and determines profit margins based on those 'facts' alone.
It's almost marx like.
Is this supposed to be a bad thing - or even a surprise - that somebody is making money on those little trinkets?
Still, it's not near the 50% gross margin the article tries to imply. They might be getting 15% but I doubt the cut for the rest of the supply chain leaves them even that much. The real money is in the content people (or more likely, their parents) buy and play on them. After they saturate the market that will pay for the little gadgets they'll start giving them away.
One should really order a case at the same time as the iPod itself. When the iPod arrives, take it out of its box while holding a soft cloth. Admire it for a moment. Then put it in the case and never take it out again. It's the only way you'll be able to prevent it from getting all scratched up and covered in smeary fingerprints.
Thirty years ago, the standard practice in the retailing I was involved in was to double it, and add freight-- so it doesn't look that out of line to me. And in case anyone is interested, I saw about 5% of the total price as profit- in a good year.
Let me see if I understand.
A basically worthless electronic trinket that cost $100 to make and sells for $200, and people are surprised?
On the thread, Hidden Cost of Free Trade (http://www.freerepublic.com/focus/f-news/1486862/replies?c=9) you disagreed with me when I claimed that people would not be willing to pay substantially more for a product simply because it was made in America.
The Ipod is a perfect example. My Ipod states, "Designed by Apple in California Assembled in China." In other words, it was made in China for $8 in labor.
If American labor was used to assemble the Ipod, it would cost hundreds of dollars more. And how many Ipods would be sold if the price of them was $400-$600 instead of $200?
Another possibility would be to raise the import taxes on the Ipods to "help the American worker."
But first off I don't know how raising taxes on this item would help American workers. And secondly, sales would definitely suffer if there was a stiff tariff levied on the product.
Must be one of those "profit" scams I keep hearing about.