iSupply: iPod Shuffle's components costs only 28% of its retail price
From BusinessWeek's Arik Hesseldahl:
All told, the cost of the shuffle's components, the headphones, and the packaging it ships in comes to $21.77, according to iSuppli's estimates. That's about 28% of the device's retail price. The smaller the component cost as a percentage of price, the higher the potential profit. This suggests the per-unit profit margin on the shuffle is higher than on other iPod models. The component cost for the first iPod touch released in 2007, for instance, amounted to about $147, or about 49% of its $299 retail price. The component cost of the third-generation iPod nano, also released in 2007, amounted to about 40% of its retail price.
Deconstructing Apple's Tiny iPod Shuffle [BusinessWeek]
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So?
Things are worth what people will pay for them. If Apple can get folks to pay for that much of a mark-up, then good for them.
I am shocked - SHOCKED! - that Apple's hardware is overpriced.
But seriously.
With Apple, you aren't paying for just the hardware. You're paying for the "Apple Experience", whatever that may mean to you.
It's like Coca-Cola. People make a big deal out of the secret formula, but it's not really secret. You can search the web and find formulas that can make something that is indistinguishable from the genuine article. But people don't do that because that doesn't have all those mental associations that decades of marketing have planted in their brains.
You're also paying for the software, for iTunes, for packaging, shipping, storage, labor, marketing, profit, etc.
And, of course, the Apple experience.
Television ads and other marketing are probably the main piece of the extra cost involved. I doubt the profit margin is as high as this article suggests.
Is everyone forgetting R&D costs?
Software development, mechanical design, hardware design, etc, etc, etc.
The amount of 'profit' is not determined solely by the cost of raw goods.
28% really isn't a bad ratio, as consumer entertainment electronics goes.
You think that's bad? I heard the components of a Leopard DVD only cost 2¢. Apple charges $130 for that!
@7, ha! Best way to get the R&D point across, right there.
There's also the possibility that assembly costs for something on that scale may have a more significant impact on profit margin than larger devices. It seems a little unlikely, given how dense most other Apple devices are, though.
What about assembly costs? Surely that can't be free either!
I remember when one of my relatives worked in a factory, he would occasionally rattle off the costs of the various goods they produced (after the company had taken its profit!).
Very frequently, they were in the range of 1/10 what you'd see them for in the store. Shipping, packaging, and retail operations are expensive!
I'm sure these articles are great for Apple's shareholders, but it's really soul-crushing for consumers to think about. It's like: Great, this technology is actually really cheap - so why am I still paying out the nose for it?
OMG - Apple is getting money by selling stuff for more than it costs to make? How dare they try and stay in business and act like every other corporation anywhere in the world.
O.o
Why is this a story worth telling?
OK, now tell us what a dell laptop costs to make, or a Ford Taurus, or a box of Wheaties.
This ratio seems quite reasonable to me. Why the "only" ?
as others have said, the price of components is not all that is factored into calculating cost of goods sold. furthermore, the standard reasonable mark up from wholesale to retail is 2.5 to 3 times, and is often much higher based on demand. so...the actual point of this article is that the shuffle is reasonably priced, all things considered?
(and, no, i am not a fangirl -- don't own one, don't intend to own one.)
Apple pay someone to design the i-pod, they pay someone to design the packaging, they pay for machines and equipment to manufacture the ipods themselves, and the aforementioned packaging.
They pay rent and rates, light and heating on the factories that make the ipods, and the offices of those who design them.
They pay people to keep the buildings clean, and to assemble the ipods (or at least operate the machines that build them).
They pay managers to make sure all of the above happens.
A lot of the machines and software they develop never gets used - but they still pay the designers and programmers.
They pay for warehousing to store the ipods, and logistics to move the ipods to retailers.
And now you tell me they want to recoup this money?
The greedy sons of bitches probably take a cut for the shareholders too!!!
OMG the corruption goes further than we knew...
You know those immigrants at the local construction site? - they get minimum wage - seems fair so far right?
WRONG - do you know what there time actually costs them - NOTHING!!!!
They provide only their time and effort - at ZERO cost to themselves - and they get almost £6 per hour!!!
That's over an INFINITY PERCENT mark-up!!!
Greedy sons of bitches...
You guys totally missed the point of this story.
#18: If the point is that the Shuffle's a more profitable per-unit item than the fancier boxes... I don't find that particularly surprising either. The whole point of that box was to cost-reduce the player as much as could be done without bringing it below the point where it would be interesting enough to carve out a niche for itself. I'm still rather surprised that Apple did a good job of finding that tradeoff point in size and (lack of) controls.