Today has been another big news day for Nexus 5 developments, and hot on the heels of announcements from Telstra and LG regarding carrier and retail availability respectively, we’ve now got a bit of an insight into why there’s such a huge difference in price between the Nexus 5 via the Play Store and via retail channels.
Ausdroid was surprised to learn that while the 16GB Nexus 5 is available for $399 online, the retail version will go for $699, representing a 75% markup in price. This is a significant markup — we as Australians are used to paying an ‘Australia tax’ for products launched overseas when they reach our shores, but a 75% markup is quite a lot to stomach, considering that (on average) this usually reaches around the 20% mark.
LG gave this statement to Delimiter earlier this afternoon regarding retail pricing:
“Nexus 5 handsets sold through the Play Store are done so by Google and are subject to pricing decisions made by Google.
Offline and retail sales through local Australian retail outlets and sales channels are the subject of a completely separate pricing structure that provides for a different support and service model for consumers.
To this end, this provides for a range of different cost elements, including transport and logistics, local service and support costs associated with retail sales staff, physical stores, live sample devices for demonstration, and many other services functions that consumers can access when a device is purchased at a physical store location.”
We have heard rumours that Google sells the Nexus 5 online at almost zero profit, or even at a loss, in order to stimulate interest in the products and the operating system. Considering the hardware contained in the Nexus 5, and the price of equivalent models in retail, today’s announcement of retail pricing certainly seems to support this rumour.
That being the case, Ausdroid can really only recommend one course of action. If you want a Nexus 5, you really should be looking at buying online (links in the site header, above). The kind of pricing Telstra and LG are pushing for the Nexus 5 is nothing short of poor value.. and we’d recommend buying your own handset online at half the price, and connecting it to a SIM-only plan without a 24 month contract.
Understandable tactic from LG for trying to protect their flagship G2 on the retail shelves. Yet, it’s truly an atrocious price nevertheless. Could have gone $549 instead at a $100 premium over the Play Store.
All this proves is that it definitely pays to be informed and read articles like this from Ausdroid, and do your research. Don’t know why everyone is complaining, a company can charge what they like for the product, if people buy it, company wins, consumer loses, but its fair game.
A few points in defence of LG: Most high-end phones selling outright for >$600. LG almost certainly had to be dragged kicking and screaming to accept the Google Play Store pricing in the first place (unless Google is covering the difference for LG). LG makes money from hardware sales, so hardware margins are important for the company. Google on the other hand doesn’t have to worry about that, because its revenue stream comes from the web. Most Australians don’t buy their phones outright — most phones are subsidised by plans. LG’s pricing only inconveniences a small segment of the market.… Read more »
Just buy it from the Play Store. I understand where LG is coming from. Just because Google are willing to not make any money off it, doesn’t mean Telstra or other retailers have to. At the end of the day its business. That business needs to get it shipped tobtge store and then hire a someone to sell it and then all the other costs that needs to be taken in account for it. Not every business is bringing in as much as Google. Telstra doesn’t have the advantage of gaining money back from play store purchases. Stop complaining. Buy… Read more »
Well the Google Play Nexus 5s seem to be directly shipped from Singapore/HK etc, so if LG are planning on stocking them in Aus warehouses then there’s quite a few more middlemen that the product has to go through. It’s still B.S. though compared to Play prices, and smacks of maximizing profits, protecting the market and ensuring that they don’t cannibalize sales of their “LG experience” models ala G2. Who would buy a G2 for $600ish when you can have basically the same specs in the N5 for $450? In the end, LG is a hardware manufacturer and a public… Read more »
Why the complaining? Just buy online. Not rocket science. If it was priced high on the Aus Play store, sure, complain, but its not, so…………………
That’s industrial strength bullsh*t – premium grade. “including transport and logistics” – it’s expensive to transport 0.5kg of phone, particularly when it doesn’t have to go via fedex, honest we use the backs of swans “local service and support costs” – spotty oik in local telstra shop trying to upsell you to an iphone “associated with retail sales staff” – it’s spotty oik again “physical stores” – which is where the main costs are – 30% margin it used to be, including oik. This is why Oz retail is crumbling, because really, is it worth $150 for you to get… Read more »
Hi. You’re wrong on nearly every level. Allow me to address this: – Transport and Logistics: When phones are sold at-retail in Australia it requires local supply-chain management and warehousing. Play Store Edition phones are shipped directly from Hong Kong/Singapore to end users which does not require local warehousing which keeps costs down. – Local Service & Support: Call centres, repair centres, face to face customer service and support triaging, reverse logistics and management. All real, legitimate costs that have to be built into the price of the device when sold at-retail in Australia to be compliant with ACL. –… Read more »
Nailed it kjmci!
Wow! Extremely costs! Much transport and logistics! High retail staffs! Insert picture of doge here. I weep. I Weep for Australian retailers and their exorbitant costs. They give me very sad. But whatever those costs are, it’s all irrelevant to consumers, who are not compelled to support these real or imaginary costs. Supply and demand bitchz. The fact is a $699 phone is not going to ship many units, when the same thing can be obtained $270 cheaper with not much more fuss. Actually with less fuss. So as Happy Dog (Doge?) pointed out, at the end of the day… Read more »
Sorry kjmci, but you’re wrong – mainly on the level of missing the point. Whilst I was being facetious in my post, the serious point is that the Australian retail and it’s margins are an old, dead, business model. You predicate your points on the supposed value attributed to shop on the high street, the ‘expert’ ‘sales staff’, the ‘live’ devices, etc. and try to justify the excessive margin as being needed for the benefit of the proletariat; who of course know no better. The reality is different. Australia retail space is massively overpriced, based on that old business model… Read more »
For the sake of disclosure, I do have “stake” in the game as I’m a former device launch manager for one of the big three telcos in Australia. I’m now a product manager for a major telco in the UK. However, this gives me a unique insight into how the market operates and responds to the launch of products in a way that a casual outside observer could never have. While you’re basing assertions on subjective and anecdotal evidence, I have a grounding in the statistics, sales figures, channel-splits and feedback that comes from launching hundreds of devices into market.… Read more »
They give me very sad! [Shoo! Bad doge!] Whatever the costs are, it’s all irrelevant to consumers, who are not compelled to support these real or imaginary costs. Economics bitchz. Go and look up perfect supply elasticity. That’s what Google is offering. Bored by elasticity? Try this: A $699 phone is going to ship very few units, when same can be obtained $270 cheaper with not much more fuss. Actually with less fuss. As Happy Dog (Doge?) pointed out above, at the end of the day Telstra is a business, and they are going to find out that there is… Read more »
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They give me very sad! [Shoo! Bad doge!] Whatever the costs are, it’s all irrelevant to consumers, who are not compelled to support these real or imaginary costs. Economics bitchz. Go and look up perfect supply elasticity. That’s what Google is offering. Bored by elasticity? Try this: A $699 phone is going to ship very few units, when same can be obtained $270 cheaper with not much more fuss. Actually with less fuss. As Happy Dog (Doge?) pointed out above, at the end of the day Telstra is a business, and they are going to find out that there is… Read more »
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In the case of the Nexus 7, I think based on what I’ve read that Asus had always intended for the tablet to be a budget device before it was repurposed by Google into the Nexus. That probably at least in part explains Asus’s willingness to price it on par with the Play Store.
I feel sad for Australia’s tech industry. So often it seems to be pushed aside as a fad or something. Rumours were that Google was interested in buying the old Gold Coast Hospital…the council knocked them back.. now it’s been announced that they’re going to demolish it, divide the land and sell it off.
It’s kind of sad really. Australia’s a great place to live for so many reasons… but the price of technology here, compared to other places… my goodness.
Wow, and I thought we had it bad in India. Here the price starts at $475 on Play Store, while LG will sell it for around $20 more, so not exactly that much of a hike,