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 How your gadgets are priced in the Philippines

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PostSubject: How your gadgets are priced in the Philippines   Thu Oct 21, 2010 9:28 am

Iíve always wondered how gadgets (or electronic appliances) are priced when they land in the Philippines. Been asking around and doing some research and hereís what I got from various sources.

Thereís the basic computation and thereís the more complex computation but basically it all boils down to taxes, profit margins, taxes and more taxes.



Hereís the basic formula:{ Landed Cost + (3% to 50%) Import Tax } * 12% Value Added Tax = Net Landed CostThe net landed cost is between 15% to 62% on top of the basic cost. This is just the cost to the manufacturer when they bring their products to the Philippines (or the distributor if theyíre the ones bringing it in). This also applies if you bought an iPhone 4 in Hong Kong and carry it thru the NAIA airport customs (unless you hide it inside your jacket pocket).Now the distributor has to make a profit from the cost of the product and the taxes involved in importing the goods. Some sources say the median figure is around 25%.

Resellers get their inventory from the distributors and also need to make a small profit. That figure is around 15%.Between the distributor and the reseller (retail stores), thatís already 40% mark-up. Those mark-ups may already be inclusive of business tax and VAT as well (although thatís already passed on from the net landed cost above). Thereís also marketing cost, advertising and general operating costs.

By the time the gadget reaches the hands of the customer, an additional of at least 50% on top of the base cost is added to the product.

How about certain products that are sold almost the same price worldwide? An example would be the Nokia N8 which is selling in Amazon at around 24k and Php23.7k in the Philippines. In this case, the manufacturer absorbs the differences in taxes and all to make sure local distributors get the same net landed cost and not affect their margins. This usually happens with big name brands only.

How about online sellers and some stores offering below SRP? In some cases, these stores donít do the VAT computation nor provide an OR (thatís why most manufacturers require an official receipt to claim warranty). Online stores avoid rent of physical stores so theyíre able to pass that savings to customers.

Computations vary from country to country. That is why gadgets in Singapore and Hong Kong are generally cheaper compared to the Philippines. Thatís not always the case though.

The next time you say the MacBook Pro is cheaper in Singapore by 20%, just remember that the Honda City 2010 that costs Php800k in the Philippines is being sold in Singapore for Php2.6 million.
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