Sour Apples

This April the MacBook Air arrived in Iceland and retailed from 189.990 ISK. The krona dropped the next week and a couple of weeks later you were paying 219.990 ISK for the same computer. Today, it will set you back 269.990 ISK.

And that is the beauty of the ISK for the Icelandic economy, you never know what you are going to get.

Apple is sold through an Independent Marketing Company, basically a reseller with extra benefits in Iceland. It is a format rarely used by the computer giant but has its benefits, such as not having to serve such a small market and taking the focus off larger markets. The IMC has been accused of extreme over-pricing because of its exclusive rights to the Icelandic keyboard. Without disclosing sensitive information, I can confirm that the profit margin is quite low, plain to see for anyone in failed attempts of large companies in importing Apple’s through their own reseller channels from abroad.

No the problem is a familiar one to those who have worked in retail in Iceland. Firstly the currency, secondly trade-barriers.

The ISK’s rollercoaster ride means that companies such as Apple IMC in Iceland never know what the price of their products are going to be next month. Every purchase and every budget is made in total uncertainty. Shoot to low and you don’t have enough products, aim too high and you have boxes of stuff sitting in your warehouse sucking your cash-flow dry. And these scenarios can happen very close to each other because the fluctuations are so wild. The losers are the company itself and the customers.

In Iceland, iPods are insanely expensive. The new 16GB Nano retails for 52.990 ISK which is over 440 USD. In the US it costs $199. It is not explained only in the weak currency though. For some peculiar reason, iPods are classified as recording-devices (like dictaphones) at the customs. So with VAT, customs and a special products tax the government ends up taking 57% of the retail price of an iPod in Iceland.

The result is that somewhere between 60-75% of iPods in Iceland have been purchased abroad, ploughing money from the shareholders of Apple IMC and out of the economy.

It means higher prices for those who cannot travel and money exiting the economy that could be put to work within it. Why should businesses want to work in this environment?

Why would customers want to live in this kind of environment?

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