Apple iPhone UK Sales Have Slowed In Q1, Price Slashed To Clear Space For 3G
Perhaps in response, UK mobile operator O2 and retailer Carphone Warehouse are slashing the price of the basic 8-gig iPhone, presumably to clear inventory before the the arrival of the 3G. The carriers are maintaing the price of the high-end 16-gig iPhone, and we expect that, when the 3G version arrives, the current high-end model will become the "low-priced" version.
LONDON (Reuters) - Mobile phone groups O2 and Carphone Warehouse (CPW.L) have cut the price for the most basic version of Apple's iPhone in Britain by 100 pounds ($197) ahead of the expected launch of a new model.
The two groups said the 8 gigabyte phone would be available for 169 pounds until June 1, while the 16GB phone will remain priced at 329 pounds.
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Is that your jailbird paw, Henry?
If customers buying iPhones at Carphone Warehouse are not required to sign a contract in-store, I expect UK supplies of iPhone to run low fairly soon now that they cost less than the US price.
A lucrative price arbitrage may develop because the £169 price includes a 17.5% value-added tax (VAT) that is refundable for foreigners leaving the EU. The relevant detail of the Customs refund can be found under The VAT Retail Export Scheme. Of course, nothing like this really exists in America because there's no VAT here.
Basically, a Russian or Thai (or Swiss) person walks into Carphone Warehouse, pays £ 169 and gets a refund of £ 29 at the airport from UK Customs. At a net price of £ 140 ($277), this is a sweet deal for "exporters" that is sure to clear any excess stock of 8GB iPhones in the UK in no time.
Again, it depends on the ease with which people can buy iPhones from Carphone Warehouse.
EU residents can't participate in this scheme but can use the Swiss, Norwegians and Icelanders flying out of the UK directly back to their countries to effectively exploit a loophole to get a much cheaper iPhone. A Swiss citizen buys an iPhone in London for £ 169, gets a refund of £ 29 as he/she leaves the country by air headed back to Switzerland. Upon entry, they may pay no tax if the iPhone is opened as it is very difficult to prove that a phone isn't a personal possession or just a 7.6% tax otherwise. Assuming tax is paid, the phone costs $298 all-in if handed to a neighboring German or French citizen to unlock for their home use.
I expect that this is very much an inventory clearing exercise and demand will soon exceed supply. People now have a channel structure in Europe that supports a grey market on economics that are better than the US.