# Apple officially gouging Canadians with iPad 2 pricing



## DrewNL (May 23, 2005)

Apple's press release today announcing availability for an additional 25 countries on Friday has me scratching my head. The release states the following

_"on March 25 for a suggested retail price of $499 (US) for the 16GB model, $599 (US) for the 32GB model, $699 (US) the 64GB model. iPad 2 with Wi-Fi + 3G will be available for a suggested retail price of $629 (US) for the 16GB model, $729 (US) for the 32GB model and $829 (US) for the 64GB model."_

Well guess what? It's nowhere near $499 US. They are charging Canadians a starting price of $529 US ($519 CAD per apple.ca). I called Apple and got an"It is what it is" response. They confirmed the $519 CAD price for the 16Gb wifi model. It should be somewhere around $488 CAD.

I've got emails out to his steveness as well as some Apple PR folks that were named at the end of the press release today. I invite you to join me in emailing and voicing the concerns of Canadians whose dollar has been above the value of the US dollar for an extended period of time, with no sign of it changing soon. 

It looks like Apple product pricing is going to continue climbing for Canadians.


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## [email protected] (Dec 26, 2010)

Cost of doing business in Canada is more expensive than the US, hence the higher price. It is reduced significantly from the original iPad.


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## ericlewis91 (Jul 12, 2007)

Im happy about $519, i was expecting $549... so thats a relief


Also Canada has a population of 33 million where states has 10x (330 million), the cost of marketing and selling iPads here costs more (aka business in general) hence the $20 increase

Everything from clothes to groceries to gas to cars is cheaper in the states.... get used to it!


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## DrewNL (May 23, 2005)

I know the reasons. I'm just annoyed that their US version of the press release flat out states that Canadians will pay $499 USD for the 16GB wi-fi. Then they go ahead and change it to $529 USD.

Cost of doing business doesn't really factor in to it when it ships from China directly to a user.

I am in Pennsylvania and already have mine. I'm just annoyed as a Canadian.


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## DrewNL (May 23, 2005)

ericlewis91 said:


> ... hence the $20 increase



You mean $31 increase?
I get what you're saying about things "being cheaper in the US", and that made all the sense in the world when a US dollar was $1.30 Canadian. But now that a US dollar only gets me $0.98 in Canada, something's got to give. 

If they were sticking by their word, Apple would be charging in the neighbourhood of $489 CAD for this product. I'll let them have an extra $10 to account for market fluctuation. I can't easily swallow an extra $31. Incidentally, the PlayBook 16GB wi-fi is retailing next month for $499 in both Canada and the US. Just saying...


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## [email protected] (Dec 26, 2010)

A lot of your argument relies on the fact that the Canadian dollar is currently stronger than the US... And really, as a cross border company, you have to look at averaging what the exchange rate will be over a whole product life cycle, plus, what your cost of doing business in said country is. You think we have it bad, look at New Zealand for significantly higher technology costs!!


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## dona83 (Jun 26, 2005)

Apple won't raise the cost of the iPad if the prices suddenly go up between now and next gen, so if the US dollar suddenly cost $1.20 CAD to buy, the iPad will be cheaper in Canada and Apple is going to eat the loss. I wouldn't fret because the iPad is about 6% more expensive than it should be *at the moment*.


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## Oakbridge (Mar 8, 2005)

The retail selling price for an item is NOT the price of the item in the US +/- the exchange rate. The retail selling price for an item is what it costs to market, distribute, sell and support the product in the country.

First thing that I can think of is that we have higher shipping costs here in Canada. You get free shipping if you buy an iPad don't you? That free shipping isn't coming out of Purolator or FedEx's pocket, Apple pays for that shipping and my guess is that the average shipping costs for Canadian sales is higher than it is for US sales.

Second thing is that the minimum wage here in Canada is higher than it is in the US.

If you want an equal playing field, find out what your job pays in the US, do the exchange and then let your employer pay you that. I don't think you'd be happy.


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## maximusbibicus (Feb 25, 2002)

Oakbridge said:


> The retail selling price for an item is NOT the price of the item in the US +/- the exchange rate. The retail selling price for an item is what it costs to market, distribute, sell and support the product in the country.
> 
> First thing that I can think of is that we have higher shipping costs here in Canada. You get free shipping if you buy an iPad don't you? That free shipping isn't coming out of Purolator or FedEx's pocket, Apple pays for that shipping and my guess is that the average shipping costs for Canadian sales is higher than it is for US sales.
> 
> ...


I really couldn't have said better. :clap:


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## ericlewis91 (Jul 12, 2007)

DrewNL said:


> You mean $31 increase?
> I get what you're saying about things "being cheaper in the US", and that made all the sense in the world when a US dollar was $1.30 Canadian. But now that a US dollar only gets me $0.98 in Canada, something's got to give.
> 
> If they were sticking by their word, Apple would be charging in the neighbourhood of $489 CAD for this product. I'll let them have an extra $10 to account for market fluctuation. I can't easily swallow an extra $31. Incidentally, the PlayBook 16GB wi-fi is retailing next month for $499 in both Canada and the US. Just saying...


its $519.. where do you get 31 dollar increase...


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## BigDL (Apr 16, 2003)

DNL the responses here explain the marketing of tech products by Apple and others.

The companies know they can gouge Canadians without very much noise or complaint.

The cell companies gouge us, ISP's gouge us, and Apple gouges us.

Perhaps one day Canadians will unite, in opposition this shoddy treatment.

North Africans are revolting and overthrowing despot governments. Perhaps Canadians will overcome their inherent belief in fairness and their faith in Corporations.

Corporations gouge Canadians, but do it with politeness and a smile, so I guess it's alright.


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## maximusbibicus (Feb 25, 2002)

BigDL said:


> DNL the responses here explain the marketing of tech products by Apple and others.
> 
> The companies know they can gouge Canadians without very much noise or complaint.
> 
> ...


Stop buying the products. Stop buying the services. Done.


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## robert (Sep 26, 2002)

yawn, can't we just make this a sticky post so we don't have to go through it every time a new product is released.
I mean, it is a product not a necessity after all. Don't like what the company is charging, don't buy it.


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## mac_geek (May 14, 2005)

Just cross the border if you want it for $499. Cripes.


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## (( p g )) (Aug 17, 2002)

mac_geek said:


> Just cross the border if you want it for $499. Cripes.


I think we'd all like to see parity pricing, but as you said, shop in the States if the principle matters a lot to you. Of course you won't get market value for your dollar if you buy there...whether you use cash or credit. Both of those ding you on the dollar's exchange value.


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## Oakbridge (Mar 8, 2005)

BigDL said:


> DNL the responses here explain the marketing of tech products by Apple and others.
> 
> The companies know they can gouge Canadians without very much noise or complaint.
> 
> ...


I can't believe that you have the nerve to compare the situation in Northern Africa with the price of an iPad. 

One of the reasons why a product like an iPad is a few dollars more expensive is that Apple's costs to do business in Canada might be a little bit higher than it's costs in the US. 

Look at the quality of life we have. I'll be happy to pay an extra few bucks, and feel grateful for the quality of life we have in Canada.


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## Paul82 (Sep 19, 2007)

[email protected] said:


> Cost of doing business in Canada is more expensive than the US, hence the higher price. It is reduced significantly from the original iPad.


any numbers to back this up? it's not like they are designing/manufacturing the thing here, heck they generally ship directly from china via the same carrier... (for practically the same cost) so it's not a direct costs thing...

the only *somewhat* reasonable explanation I've heard is that it reflects the differences in tariffs on goods from china between the us and Canada. I don't really know enough about tariffs to comment on this though.

I suspect there is also a decent amount of hedging going on (in case the Canadian dollar drops).


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## [email protected] (Dec 26, 2010)

Paul82 said:


> any numbers to back this up? it's not like they are designing/manufacturing the thing here, heck they generally ship directly from china via the same carrier... (for practically the same cost) so it's not a direct costs thing...
> 
> the only *somewhat* reasonable explanation I've heard is that it reflects the differences in tariffs on goods from china between the us and Canada. I don't really know enough about tariffs to comment on this though.
> 
> I suspect there is also a decent amount of hedging going on (in case the Canadian dollar drops).


There's exchange rate hedging, there's tariffs and there's also the brick and mortar costs (more expensive in both rent and employees)... There's more, but those are some of the major issues that will be calculated into the cost.

I'll take paying a little more for an iPad and getting to live in Canada any day of the week!


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## Macfury (Feb 3, 2006)

BigDL said:


> North Africans are revolting and overthrowing despot governments. Perhaps Canadians will overcome their inherent belief in fairness and their faith in Corporations.


That's really a dreadful comparison.

If you hate Apple's "gouging" and continue to buy, then you're gouging yourself.


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## [email protected] (Dec 26, 2010)

Macfury said:


> That's really a dreadful comparison.
> 
> If you hate Apple's "gouging" and continue to buy, then you're gouging yourself.


LOL! :clap:


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## John Clay (Jun 25, 2006)

DrewNL said:


> Apple's press release today announcing availability for an additional 25 countries on Friday has me scratching my head. The release states the following
> 
> _"on March 25 for a suggested retail price of $499 (US) for the 16GB model, $599 (US) for the 32GB model, $699 (US) the 64GB model. iPad 2 with Wi-Fi + 3G will be available for a suggested retail price of $629 (US) for the 16GB model, $729 (US) for the 32GB model and $829 (US) for the 64GB model."_
> 
> ...


You really think $20 (or $30, if you want to factor in exchange) is gouging? Really?

Aside from being peanuts compared to the cost of the iPad (5.7%), there are increased costs of doing business in Canada. Shipping is more expensive, as they ship lower volume to Canada than they do to the US. Further, as it's their product, they're free to price it however they damn well please. If you don't agree, then don't buy it. They certainly won't care either way.

There are far bigger fish to fry if you're going to whinge about pricing parity. Take cars, for example...


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## andreww (Nov 20, 2002)

Paul82 said:


> any numbers to back this up? it's not like they are designing/manufacturing the thing here, heck they generally ship directly from china via the same carrier... (for practically the same cost) so it's not a direct costs thing...
> 
> the only *somewhat* reasonable explanation I've heard is that it reflects the differences in tariffs on goods from china between the us and Canada. I don't really know enough about tariffs to comment on this though.
> 
> I suspect there is also a decent amount of hedging going on (in case the Canadian dollar drops).


Do you think that Apple USA is going to pay for all the Canadian advertising and marketing that needs to be done? All that has to be paid for by us and because there is a lot fewer of us, it only stands to reason that we will likely have to pay more than our American friends. Also, remember that the Canadian dollar only caught the US dollar recently but the iPad2 has been in development for well over a year. Those development costs were incurred when the Canadian dollar was well under the US dollar, so why shouldn't we have to pay the difference. If the Cdn dollar stays strong I would expect to see some pricing parody in the next year or so.


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## BlackViper (Mar 2, 2008)

robert said:


> yawn, can't we just make this a sticky post so we don't have to go through it every time a new product is released.
> I mean, it is a product not a necessity after all. Don't like what the company is charging, don't buy it.


 I agree this comes up anytime there is a new product released, or a change in the exchange rate. Nobody ever credits companies when they err on our side; iTunes music was the same price, even when Canadian dollar was much lower than it is now, I believe app store pricing is also the same in most cases. 

People don't understand the cost of doing business in various countries, they look at a single figure like the exchange rate and extrapolate that to the whole industry. What about employee compensation, environmental fees, corporate taxes, real estate, advertising, all the factors that have to be factored in to the retail price of any item. Any international business persons here that can provide a little more insight?


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## Niteshooter (Aug 8, 2008)

I noticed something interesting on the latest Sear flyer....

"U.S. Price Match! We will match U.S. prices on thousands of items throughout our store!" Granted the fine print has a lot of exclusions...

Not sure I really buy the arguments of those defending Apple since a lot of computer parts are actually cheaper in Canada. I compare Canada Computers to Newegg and some other US retailers and I find our prices on memory and hard drives to be lower in a lot of instances.

In terms of shipping..... well considering all the products originate in China and not the US in Apple's case I'm not sure that is a valid argument either. My iPod shipped out of China a couple of months ago...

Taxes and Tariffs that would be more logical as we do get gouged there but that is not Apple's fault...

If I happened to be in the US I would buy down there but to make a special trip to do so wouldn't save you anything once you factored in the time and cost of fuel to get there....


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## Garry (Jan 27, 2002)

Niteshooter said:


> In terms of shipping..... well considering all the products originate in China and not the US in Apple's case I'm not sure that is a valid argument either. My iPod shipped out of China a couple of months ago...
> 
> Taxes and Tariffs that would be more logical as we do get gouged there but that is not Apple's fault...
> 
> If I happened to be in the US I would buy down there but to make a special trip to do so wouldn't save you anything once you factored in the time and cost of fuel to get there....


so, you don't think shipping from China factors into the cost of a product (because we know fuel from China to Canada doesn't cost anything, just like ups or fedex doesn't charge for shipping either), but your time and and cost of fuel doesn't make it worthwhile?


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## johnnyspade (Aug 24, 2007)

I recall reading a similar debate on this forum before, and I'm encouraged to see that the majority of posters know that the exchange rate isn't the only factor considered when companies price their products. As a consumer you have the ability to vote with your wallet when it comes to supporting, or not supporting, a product. If you don't like it, don't buy it. Besides, this isn't the last few drops of water on the planet that Apple is selling here.


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## jimbotelecom (May 29, 2009)

The Apple gouge is minor. When it gets too much simply cross the border. You should take a look at car prices between Kanuckistan and the USA. I'll never buy another car in Canada until this problem is corrected. Even cars produced in Kanuckistan are more expensive in Kanuckistan than in the USA. Try to explain that.


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## cap10subtext (Oct 13, 2005)

mac_geek said:


> Just cross the border if you want it for $499. Cripes.


+1

...And with Gas at $1.21/L you'll see just how much that'll save you.

"let me do the math here -- nothing into nothing, carry the nothing -- still nothing" -- Jayne Cobb


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## gordoon (Jan 31, 2009)

Be thankful you don't live in the UK. The price of the 16GB Wi-Fi is £399 equivalent to C$636.65.


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## Oakbridge (Mar 8, 2005)

cap10subtext said:


> +1
> 
> ...And with Gas at $1.21/L you'll see just how much that'll save you.
> 
> "let me do the math here -- nothing into nothing, carry the nothing -- still nothing" -- Jayne Cobb


But if I can time it so that by the time I drive from Oakville to Niagara Falls (closest point of crossing) my tank is on empty and fill up my tank in the US...

And I get my car washed for $20 inside and out at Delta Sonic...

And I get a round of golf in on the US side for $50 including cart...

And I pay $20 for a double (20 large) order of wings and a beer at the Anchor Bar...

And I pay $135 for a first row ticket to see the Sabres play...

Or I pay $12 for a ticket right behind the dugout to see the Buffalo Bisons play outdoors, on real grass...

And I pay $20 for a case of Michelob Beer...

Or I decide to fly to somewhere from Buffalo Airport...

Yeah. Apple is such a horrible company because the iPads are the only thing that is more expensive in Canada than it is in the US.

Can we please end this and all future discussions of how terrible it is that Apple gouges Canadians?


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## Guest (Mar 23, 2011)

For the OP: If you want to really explore this in a "real world" scenario then try this. Buy the iPad from somewhere in the US for $499 USD and have it shipped to you here in Canada. Oh btw ... you'll probably pay more than the current "gouge" with just the fee for currency conversion on your credit card, never mind the shipping costs, duty, and any potential brokerage fees. If you are really really lucky, do a ton of research, and choose the exact correct options you might be lucky to get it to your door at the same price as what you would pay for it here in Canada, but I doubt it


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## eMacMan (Nov 27, 2006)

Sheesh just buy one on your next trip to Buffalo and pay the 5% GST. Oops forgot all those NY taxes about $41. 

OK how about your next trip to Montana, as a bonus go ahead and visit Yellowstone and Glacier National Parks. Best wait till July for Glacier Park as the snow pack is horrendous this year and getting worse as I type. 

Might even save the 5% GST if you stay down long enough.


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## Atroz (Aug 7, 2005)

gordoon said:


> Be thankful you don't live in the UK. The price of the 16GB Wi-Fi is £399 equivalent to C$636.65.


Wouldn't that price include their VAT? If you include our HST, it would be about $587 CDN vs the $637. Still $50 more, but not a bad as the $118 difference.


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## Atroz (Aug 7, 2005)

As a close point of comparison, it appears that the other tablets (Playbook, Xoom) are the same price in the US as Canada. They match the US iPad 2 prices. That means the Canadian comparison come out in favour of the other companies. 

Thinking marketing: XOOM available under $500! Apple, over $500.


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## DrewNL (May 23, 2005)

Well, time to wrap this thread it....it seems that far too many people can talk but can't read. I'll clarify my intentions for you people, but before I do, while we're on a topic that was brought up by someone else, not me, even though I am getting blamed for it: the USD vs the CAD has been declining at a reasonable rate for more than a year. How long before you folks see that as real and sustainable? it's not like we achieved parity yesterday and it'll be gone tomorrow.

Now, on to my clarification: I don't have a problem. I live in Philadelphia and have already bought 4 of these things at the price Apple promised. My issue - for which I created this thread - was that on Apple's own website they stated that in the 25 countries added this week, the prices would be..... and then the listed the prices in USD. That's the problem. They lied. That's it. That's unfair to faithful consumers in 25 countries, not just Canada.

I don't think this falls into the category of "make it a sticky so this idiot won't post on every product Apple releases". You'll notice that I don't make currency comparisons often. It's just that Apple said publicly that this was the price in Canada, and it's not. To me, this doesn't compare to the usual price differences.


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## DrewNL (May 23, 2005)

Atroz said:


> As a close point of comparison, it appears that the other tablets (Playbook, Xoom) are the same price in the US as Canada. They match the US iPad 2 prices. That means the Canadian comparison come out in favour of the other companies.
> 
> Thinking marketing: XOOM available under $500! Apple, over $500.


This is more along the lines of the point I was trying to make.


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## DrewNL (May 23, 2005)

ericlewis91 said:


> its $519.. where do you get 31 dollar increase...


You just need to start paying attention to posts before you start responding to them. Allow me to explain: 

$499 USD is $488 CAD. Price in Canada is $519 CAD. $31 CAD difference.


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## robert (Sep 26, 2002)

If YOU reread your original post maybe YOU will learn something.
It states "suggested retail price..."
Last time I checked, suggested doesn't mean final/absolute/etc.
I'm pretty sure Apple Canada took it into consideration and added a bit to cover costs of running a business in Canada and put out their final price. Simple once you get past the Apple is screwing us again train of thought.
Later.


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## DrewNL (May 23, 2005)

robert said:


> If YOU reread your original post maybe YOU will learn something.
> It states "suggested retail price..."
> Last time I checked, suggested doesn't mean final/absolute/etc.
> I'm pretty sure Apple Canada took it into consideration and added a bit to cover costs of running a business in Canada and put out their final price. Simple once you get past the Apple is screwing us again train of thought.
> Later.



So Apple is suggesting a price that Apple is not subscribing to? That's a new one on me. Usually the price on the gas pump matches what you pay when you go inside.


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## jhuynh (Mar 21, 2011)

DrewNL said:


> This is more along the lines of the point I was trying to make.


Neither Motorola nor RIM have a retail presence in Canada so they don't need to take that into consideration when pricing their products.


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## DrewNL (May 23, 2005)

Three of us sent emails to Apple on Tuesday. A friend of mine just got a voicemail on his iPhone from the office of Steve Jobs. He didn't even give them a phone number.


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## DrewNL (May 23, 2005)

jhuynh said:


> Neither Motorola nor RIM have a retail presence in Canada so they don't need to take that into consideration when pricing their products.


...and misrepresenting iPad prices publicly is the only way to pay for the brick and mortar stores....

Because it's their only product.


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## robert (Sep 26, 2002)

Wow, I guess I should have said Apple USA. I thought that was a given, guess not.


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## DrewNL (May 23, 2005)

robert said:


> Wow, I guess I should have said Apple USA. I thought that was a given, guess not.


I understand what you're saying. It's still not the point though. 

There was a press release that stated (I am paraphrasing here): the iPad 2 goes on sale in Canada (and 24 other countries) on 25 March 2011 and the suggested retail prices are: $499 USD, $599 USD, $699USD, $629 USD, $729 USD, $829 USD.

The fact is that the above statement is not true. Not in ANY of the 25 countries.

I understand MSRPs. So I would be cool with Futureshop, Best Buy, Johnny Retail...whatever charging what they see fit. But the M in MSRP is Apple. A release from the Apple mothership said this is what the price is (In USD).

Since then, they have adjusted this press release internationally and the prices are now listed in local currencies instead of USD.


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## robert (Sep 26, 2002)

No you don't understand.
Apple USA stated that the ipad2 will go on sale on the 25th FOR THE SUGGESTED retail price of ...
Now, this means that Apple USA IS NOT setting the price for each country. 
Apple Canada looks at the currency exchange AND cost of doing business IN Canada and creates a price to cover costs AND turn a profit. 
So, if you don't like it, there are stores close to the border on the USA side.


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## krs (Mar 18, 2005)

Throughout this thread people keep making the assumption that the price of an item is determined by the cost of the item and other associated and related costs.
That is just not true.
Price is based on competitive pressures, perceived value, strategic importance and target market penetration and sales volume - cost only enters the equation when the financials (ROI, ROS, IRR etc.) are calculated.
There are lots of obvious examples for that, or do people think a $30.- inkjet printer can really be manufactures for $30.- and shipped and distributed in North America or that Apple needs to charge more for RAM than the average Canadian retailer because their cost is that high?
The price is what it is - Apple could have priced the iPads at the same dollar level in Canadian dollars than the dollar level in US dollars.
What DrewNL is saying right in the first post is that Apple apparently promised in some press release that the pricing of the iPad in the next 25 countries would be the equivalent of the US pricing and according to him (?) they haven't kept that promise.

Well, I'm not sure I agree but not for any of the reasons posted. 
Cost of doing business in Canada or transportation costs or any other costs are totally irrelevant - we are talking a product price, not costs or profit margins.
Where the error is in DrewNL's thinking (I think since I can't read his thoughts) is in the assumption of the exchange rate.
If I go on the net right now and look at the exchange rate on x-rates.com I see a rate of 1.02258, so I could assume that for 1 Cdn dollar I get 1.02 (and a bit) US Dollars.
But what happens when you go to the bank and give them 1 Cdn dollar?
They will sell you US dollars at a 1.0005 rate and they will buy US dollars at a 0.9496 rate.
With large dollar amounts, the spread will be less, but the mid-point is still below a dollar.

Regardless,no matter how one looks at that - I certainly wouldn't call it gouging by any stretch of the imagination.


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## andreww (Nov 20, 2002)

DrewNL said:


> Three of us sent emails to Apple on Tuesday. A friend of mine just got a voicemail on his iPhone from the office of Steve Jobs. He didn't even give them a phone number.


It'd be nice to know exactly what they said!


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## MannyP Design (Jun 8, 2000)

Maybe this is something that is better in an offshoot thread, but I've seen comments from those "in the know" about how this is all Economics 101. MacDoc and The Mayor have mentioned that it's not as simple as simply adjusting the exchange rate.

Could someone please explain it to me, then? I really want to know.

Why is it that prices have dropped considerably on things like magazines, books and comics? Most (if not all) comic shops are selling at parity (or better) and have been doing it for some time. LCD TV prices have dropped like rocks as well.

Perhaps explain why the Apple store utilizes fuzzy math that pits the iMac and MacPro (base models) at exactly $100 more than their American counterpart and why the MacMini, MacBooks and most of the consumer devices at only $50? Is it a matter of what they think the local Canadian economy will bear? Simply saying 'just because' doesn't cut it.

Is it no surprise that prices for video games haven't budged a lick? Maybe it's because developers are losing money…*why would they cut prices on something that's allowing them a premium to supplement their bottom line? Even Americans were shocked at how much we pay for games (and that was when our dollar was _tanking_). Could it be due to the fact that EA and the like were banking on our cheap dollar now find themselves in unenviable position where they're actually paying MORE to staff their Canadian offices?

Hey, maybe I'm crazy… and maybe I'm not. But due to the climate, it makes a helluva lot of sense to me.


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## Oakbridge (Mar 8, 2005)

krs said:


> Throughout this thread people keep making the assumption that the price of an item is determined by the cost of the item and other associated and related costs.
> That is just not true.
> Price is based on competitive pressures, perceived value, strategic importance and target market penetration and sales volume - cost only enters the equation when the financials (ROI, ROS, IRR etc.) are calculated.
> There are lots of obvious examples for that, or do people think a $30.- inkjet printer can really be manufactures for $30.- and shipped and distributed in North America or that Apple needs to charge more for RAM than the average Canadian retailer because their cost is that high?


I disagree. Cost can be and typically is a very important component in the calculation of the selling price of an item.

Your example of a $30 inkjet printer is a perfect example but you didn't tell the entire story. Companies factor in the average life of a printer, the average use of a printer, the number of replacement cartridges for a printer and the TOTAL cost of ownership of that printer is used to determine the respective prices for the original product and the required consumables. Another type of product that is similar is a cell phone. Both have used the razor and blades business model. 

Same with the price of a mail-in rebate. Companies have it calculated down to the dollar, or perhaps even penny, the actual final revenue for a product, based on the number of products that they expect to sell, the amount of the rebate, and the average redemption rate. They have analysts whose job it is to study these things.

Companies have a good idea ahead of time what the average warranty costs are going to be, number of units, costs for repairs, revenue received from selling refurbished, etc. 

There are always going to be exceptions. A grocery store puts Orange Juice on sale this week, because they know that for every carton that they sell on sale, the average purchaser will also spend $xx.xx on other items. A company like Rogers will price Bluejay tickets at a price that with the 10-12 thousand crowds they will likely get for April, May and June, will be losing money. But guess what, the Bluejays are on Roger's Sportsnet and the Fan590, media that are both owned by Rogers. Commercial time, revenue from satellite providers and other cable companies, etc. is collected. 

No different than when Labatt's was a majority owner. They used the association between baseball and beer. There is a hockey team in Montreal that for most of it's existence has followed the same approach. Heck the Winnipeg Blue Bombers helped name a brand of beer. 

So some companies will run at a loss, simply to assist in other areas, including being used as a tax write-off. 

Finally there is the costs for R&D. I've often said that I would love to get to see what is on the desk of Jonathan Ives or Steve Jobs. I can only imagine the number of prototypes that are currently floating around inside the walls of 1 Cupertino. It costs thousands if not tens or hundreds of thousands of dollars to produce a single prototype. Many times the prototype never reaches the hands of the consumer, so the costs are never directly recovered. 

And yes there are other instances where a company will look at their costs and determine that they could still get a premium for a product over and above what the actual costs for the product will be. Yes they will at times ignore what the costs are and look at what the market will bear.

If Apple followed your argument of "Price is based on competitive pressures, perceived value, strategic importance and target market penetration and sales volume", we'd have $299 MacBooks, $500 iMacs, $0 iPhones with a 3 year contract, etc.


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## Oakbridge (Mar 8, 2005)

MannyP Design said:


> Maybe this is something that is better in an offshoot thread, but I've seen comments from those "in the know" about how this is all Economics 101. MacDoc and The Mayor have mentioned that it's not as simple as simply adjusting the exchange rate.
> 
> Could someone please explain it to me, then? I really want to know.
> 
> ...


I bought my first CD player in November of 1986. Throughout the latter part of the 80's and early part of the 90's, I built up a pretty sizeable CD collection. I was also travelling for business to the US, New York, LA, etc. I was shocked to find out that the prices we were paying back then for CD's were cheaper than what I could find at major record stores in the US, before the dollar conversion! While at the same time I was paying less for almost everything else. When iTunes came online, we paid the same price for our music as the US did, so with the exchange rate, we were paying much less per song. My guess is that the licensing costs in Canada are cheaper than they are in the US. The only time I paid more here was for imported products. 

We have had some products that were higher because of the costs to bring those products into the country. Duties and other import costs. Brokerage fees, etc. When you are bringing in a million units to the US, even if the import costs were the same, you'd be able to split those costs over a million units. Using the 10% rule (our population is roughly 10% of the US population), if you brought a million units into the US, you'd be bringing 100,000 units into Canada. Again even if the import costs were the same as the US, you're now splitting those import costs over 100,000 units, not 1,000,000 so the import cost per unit would be higher. Other things that are going to be cheaper when the volumes are higher (i.e. warehousing) will affect the per unit costs in the US where the volumes are higher. 

Many people believe that the price of an item in one country should be based on the price of an item in another country, plus/minus the exchange rate between those two countries. The exchange rate can factor into the equation, but only from the perspective of the calculation of the landed costs for an item. 

One of the biggest factors is the costs for wages and benefits. Our wages tend to be higher in Canada than they are in the US. I'm not sure about the comparisons between other employee costs (UI, CPP, etc.) Another factor is the costs of transportation. We pay more for gas here in Canada (due mainly to taxes) so it costs more to transport items. 

Even for service based industries like my own business, the price of transportation is important. It is one of my biggest expenses. I see approximately 75-80% of my customers in person at least once. I'm based in Oakville, I have customers from Ajax to Markham to Waterloo to Sarnia to St. Catherines that I have all seen in person. I drive to the majority of those clients. If there was an equivalent region in the US, my transportation costs would be lower because of the price of gas. 

From Wikipedia: "In Canada total tax and non-tax revenue for every level of government equals about 38.4% of GDP, compared to the U.S. rate of 28.2%."

Much of this higher percentage of tax affects the costs of goods sold in Canada. The obvious is transportation, we pay more for gas. But we also pay more on average for things like airline tickets. But I think we pay less for bus and train travel.

Because our population is so spread out, it costs more to just do business in general. In the past, we'd quite often see regional pricing. Now with the internet, regional pricing seems to have disappeared for many items, especially those that can be bought online. But it still costs money to get that online purchase to the consumer, and with most online retailers covering the costs for shipping, those costs are buried into the retail price of the product. 

Also with anything that is packaged, it must have both languages on the packaging and any printed materials included. That adds to the costs. 

I disagree that books and magazines have dropped that much. I purchase two printed magazines regularly, Golf Digest and Golf Magazine. Both are around $6 per issue on the stands in Canada. They are $3-4 in the US. A lot of publishers have taken off the US price for the issues sold in Canada so we can't compare. Hardcover books are still priced at a higher price in Canada than they are in the US.


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## Rujiroj (Apr 6, 2011)

*Reply from Apple*

The Canadian dollar has consistently risen from par to today's 4.5% above the US dollar. The price has remained the same. In my neighbourhood, this is called price gouging. Here is the reply I received to my fax sent to Apple Canada. Empty platitudes....


Dear Mr. XXX,

Thank you for your recent correspondence to Apple.

Apple is excited to bring iPad 2 to Canada. We understand you have a concern about iPad 2 pricing in your country.

We determine a suggested retail price for all our products; however, due to issues beyond Apple's control, such as import laws, duties, and transport, the local prices in each country may be different.

We apologize for any frustration this causes.

Apple is committed to providing a positive experience for our customers through the use of our hardware, software, and Internet offerings. Feedback such as yours helps us determine areas of opportunity as we continue to grow our business.

We appreciate the efforts you've made to share your opinion with us. Your concern has been documented in Apple case number XXX.

Thank you again for taking the time to write.

Best regards,

Matt
Apple Customer Care


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## Dr_AL (Apr 29, 2007)

If you don't like the iPad 2 pricing then there are two options. 

A - Don't support Apple by buying one. This probably won't matter to Apple though. 

B - Drive down to the states to buy one. If you pay duties on the iPad 2 then the price will be equal or more that the Canadian price. You also have to pay for transportation and the time.

All in all Apple can charge what they like. If the cost of doing business in a different country is higher then the price of the product will reflect that. So yes we do have slightly higher prices. Either deal with it and buy the product or don't buy the product. 

Sent from my iPhone


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## Guest (Apr 6, 2011)

Here we go again ... 

@Rujiroj: This argument has been played out, please read the thread.


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## jeepguy (Apr 4, 2008)

Rujiroj said:


> The Canadian dollar has consistently risen from par to today's 4.5% above the US dollar. The price has remained the same. In my neighbourhood, this is called price gouging. Here is the reply I received to my fax sent to Apple Canada. Empty platitudes....


You should be glad that they don't charge double since the iPad 2 is in such demand.


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## lang (Jun 9, 2010)

I'll feed the 1-post troll...

Thanks for sharing, Rujiroj. At least you got a response from Apple.

But imagine what you could have done with the time it took for you to write the fax, send it then create/authorize an account and post here. Not to mention the cost of toner, LD charges (if any) and the money your employer lost for paying you to waste time on this trivial matter.

...like be an advocate for the higher costs Canadians have to pay for gas and food?


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## mgmitchell (Apr 4, 2008)

What the hell, I didn't figure it to be cheap. My total came to $740-something with the 32G Wiki, cover, the cord, and the Apple Care. I was thinking of going cheap and getting a refurbed '1', but it didn't seem to make sense.


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## [email protected] (Dec 26, 2010)

mgmitchell said:


> What the hell, I didn't figure it to be cheap. My total came to $740-something with the 32G Wiki, cover, the cord, and the Apple Care. I was thinking of going cheap and getting a refurbed '1', but it didn't seem to make sense.


And it's gouging how?? You bought it all...


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## hayesk (Mar 5, 2000)

Dr_AL said:


> If you don't like the iPad 2 pricing then there are two options.
> 
> A - Don't support Apple by buying one. This probably won't matter to Apple though.
> 
> B - Drive down to the states to buy one. If you pay duties on the iPad 2 then the price will be equal or more that the Canadian price. You also have to pay for transportation and the time.


I agree with your post. However, there are no duties on iPads - you'll only have to pay GST. So yes, the OP should just go down to the US and buy one if he doesn't like it.


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## krs (Mar 18, 2005)

Oakbridge said:


> I disagree. Cost can be and typically is a very important component in the calculation of the selling price of an item.
> 
> Your example of a $30 inkjet printer is a perfect example but you didn't tell the entire story. Companies factor in the average life of a printer, the average use of a printer, the number of replacement cartridges for a printer and the TOTAL cost of ownership of that printer is used to determine the respective prices for the original product and the required consumables. Another type of product that is similar is a cell phone. Both have used the razor and blades business model.


Sorry, but do you do pricing at the manufacturer level?
I do and my department does and I can assure you that the price is not determined by the cost plus some magic multiplier (or mark-up). I'm not saying that the manufacturer doesn't know all the attracted the costs and what the final profitability of the product is, he obviously does but even at the cost side one can rationalize different ways of calculating fixed and variable costs and overhead.
On the printer example, total cost of ownership is a consideration for the person BUYING it, not the person/company SELLING it. If I manufacture a $30.- printer at street price, that means the price to my wholesaler is $15.- at best since he needs to make a profit and so does the retailer (both profits would be extremely slim) and yes - the printer manufacturer is trying to make up the loss on the printer sale with the profit margin selling ink cartridges. Except that the price/value proposition of ink cartridges is so badly skewed that consumers look for alternate sources and printer manufacturers try all sorts of electronic and legal ways to prevent consumers using the much lower cost 3rd party cartridges.
Cell phones is a totally different kettle of fish - the manufacturer gets a price that provides a suitable profit margin, here the cell phone provider subsidizes the cost of the phone and gets a healthy return with the multi-year contract the consumer signs with some pretty substantial penalty clauses for early termination.



> If Apple followed your argument of "Price is based on competitive pressures, perceived value, strategic importance and target market penetration and sales volume", we'd have $299 MacBooks, $500 iMacs, $0 iPhones with a 3 year contract, etc.


Actually just the opposite.
Apple can barely keep up with the demand for most of their products, as long as that continues you are not going to see any reduction in prices. At present they are increasing market penetration at a reasonable rate, their profit margin is higher than the other PC manufacturers, volume increases year after year - what possible incentive would they have to lower their prices?

This whole discussion about pricing being somehow tied to exchange rate (or cost for that matter) is a red herring.
Look at another current example - the spike in the price of gas.
The cost of a barrel of oil goes up and the next day the price at the pump takes a jump. 
Did the cost of the gasoline in the service stations storage tanks suddenly increase? Or even the next delivery? Takes many, many days to transport the oil to us and refine it before it ends up in our gas tanks.


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## Oakbridge (Mar 8, 2005)

krs said:


> Sorry, but do you do pricing at the manufacturer level?
> I do and my department does and I can assure you that the price is not determined by the cost plus some magic multiplier (or mark-up). I'm not saying that the manufacturer doesn't know all the attracted the costs and what the final profitability of the product is, he obviously does but even at the cost side one can rationalize different ways of calculating fixed and variable costs and overhead.
> On the printer example, total cost of ownership is a consideration for the person BUYING it, not the person/company SELLING it. If I manufacture a $30.- printer at street price, that means the price to my wholesaler is $15.- at best since he needs to make a profit and so does the retailer (both profits would be extremely slim) and yes - the printer manufacturer is trying to make up the loss on the printer sale with the profit margin selling ink cartridges. Except that the price/value proposition of ink cartridges is so badly skewed that consumers look for alternate sources and printer manufacturers try all sorts of electronic and legal ways to prevent consumers using the much lower cost 3rd party cartridges.
> Cell phones is a totally different kettle of fish - the manufacturer gets a price that provides a suitable profit margin, here the cell phone provider subsidizes the cost of the phone and gets a healthy return with the multi-year contract the consumer signs with some pretty substantial penalty clauses for early termination.
> ...


At any point in the chain, the price being set has to be costs plus profit. It is just common sense. If you don't sell for at least the total of your costs plus a value to provide a profit, you're losing money on each sale and will eventually go bankrupt. 

The razor and blades business model does factor in losses to 3rd party alternatives. And as you suggest yourself they do whatever they can to prevent people buying anything but their own consumables. But the majority of consumers don't buy alternatives, especially the commercial clients many of which are not spending 'their own' money. I once had a discussion with someone who even though he saw the logic in using a laser printer vs. an inkjet, he said "I can expense as many smaller priced ink jet cartridges as I need, but I'd have trouble expensing the price of a laser cartridge simply because of the dollar amount." 

My point about Apple was that based on following your argument of "Price is based on competitive pressures, perceived value, strategic importance and target market penetration and sales volume", that Apple should be pricing their products at the levels of the competition because that is what everyone else seems to be doing. 

Another factor is that at the _simplest_ level, you could say that their are two types of companies. In reality there are many than 2 levels, but this is for sake of argument. 

The first type is your standard manufacturer that is producing your average type of product. Think of Ford, Mazda, HP, Pentax, Holiday Inn, Air Canada, LG, etc. While they do have R&D departments, they know that their target market will be the average consumer. Their products are good quality (at least the intent is), and they try for higher volumes but have little in any innovation. Quite often they are the volume leaders in their respective categories. Another way of looking at them is 'safe'. 

The other type is the company that is an innovator and/or industry leader, not necessarily sales leader but leader in terms of reputation. Apple is obviously one in the computer industry. Rolex, Bang & Olufsen, Porsche, Fairmont Hotels, Cathay Pacific, Waterford Crystal, NY Times. They continue to bring out innovative products and/or maintain standards higher than their competitors, in part because they have higher prices for their products, which gives them better profit margins, which allows them to have the brightest and most creative people working in their R&D departments, which allows them to bring out innovative products, and so on. Their market share is normally smaller, but they have a very very dedicated and loyal customers. 

In some cases, a larger company may have two or more divisions, one that sells the the general consumer population, another that sells to the early adopters or more discerning consumer who wants and can afford a better product. Think GM and their Cadillac vs. Chevy brands. 

So while a company at the minimum must sell it's products and/or services for more than it costs to produce, there is no limit to the level of margin they charge on top of their costs. That is where the idea of whatever the market will bear comes into play.


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## Rujiroj (Apr 6, 2011)

lang said:


> I'll feed the 1-post troll...
> 
> Thanks for sharing, Rujiroj. At least you got a response from Apple.
> 
> ...


Way to make a newcomer to the board feel welcome!
I don't care that this has already been discussed. I'm discussing it again. 
Also, stupid comments like "well, then don't buy it" miss the point. This is about principles. As a Canadian, I'm sick and tired of being taken advantage of or treated like s**t by American companies. When something is wrong, it's wrong.
Also, everyone's comments about pricing, costs in Canada, etc, etc is all crap. My point is that Apple was satisfied to make X profit when the dollar was at par. It is now at 104.65, the highest level in 3.5 years! Anything Apple Canada is making now is pure additional profit.

My second point is, and none of you self-styled economists have been able to answer is: last year, Apple Canada was pricing it's devices based on the currency rate. When the dollar was at par, so were the prices. We are now at 4.5% above, why is there no change this time? Explain to me why this year is different from last (other than greed has increased.)

For a board called ehmac, a lot of you seem to be Yank-apologists.


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## Joker Eh (Jan 22, 2008)

Rujiroj said:


> Way to make a newcomer to the board feel welcome!
> I don't care that this has already been discussed. I'm discussing it again.
> Also, stupid comments like "well, then don't buy it" miss the point. This is about principles. As a Canadian, I'm sick and tired of being taken advantage of or treated like s**t by American companies. When something is wrong, it's wrong.
> Also, everyone's comments about pricing, costs in Canada, etc, etc is all crap. My point is that Apple was satisfied to make X profit when the dollar was at par. It is now at 104.65, the highest level in 3.5 years! Anything Apple Canada is making now is pure additional profit.
> ...


So Apple must adjust their pricing daily because of currency fluctuations? Not going to happen. 

And nice of you first time on and start calling names, not very Canadian of you, eh?


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## Guest (Apr 8, 2011)

Rujiroj said:


> Way to make a newcomer to the board feel welcome!
> I don't care that this has already been discussed. I'm discussing it again.
> Also, stupid comments like "well, then don't buy it" miss the point. This is about principles. As a Canadian, I'm sick and tired of being taken advantage of or treated like s**t by American companies. When something is wrong, it's wrong.
> Also, everyone's comments about pricing, costs in Canada, etc, etc is all crap. My point is that Apple was satisfied to make X profit when the dollar was at par. It is now at 104.65, the highest level in 3.5 years! Anything Apple Canada is making now is pure additional profit.
> ...


And an excellent second post to you too  You call us all Yank-apologists and you don't care that there is already a HUGE discussion about this topic because YOU feel the need to discuss it again ... but you're doing it in the same thread as the previous discussion and completely ignoring it. You also think that everything all of us "self-styled economists" has to say is crap it seems.

You have 2 choices here .... buy an iPad or don't. Sending a fax (really? a fax?) to Apple and then resurrecting a dead thread on a forum complaining about price gouging is going to get you exactly nowhere.

If you choose not to actually read some of the more-credible reasons for the pricing in this thread then move on. If you continue spouting out all kinds of FUD then be prepared to have people call you on it. Here's a question for you, for an example of calling you out. Show me one single example of a major electronics brand reducing their price in canada due to the value of the canadian dollar. Please ensure to include adequate proof that this is exactly why they have reduced their price. If you can find a single instance of this from a major electronics company and a "hot" piece of electronics I'll congratulate you, but until then you are just spouting out mis-information with nothing to back it up.


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## Digikid (Jun 22, 2010)

[email protected] said:


> And it's gouging how?? You bought it all...


ZING!!!!:lmao:


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## Rounder (Aug 9, 2008)

Rujiroj said:


> Way to make a newcomer to the board feel welcome!
> I don't care that this has already been discussed. I'm discussing it again.
> Also, stupid comments like "well, then don't buy it" miss the point. This is about principles. As a Canadian, I'm sick and tired of being taken advantage of or treated like s**t by American companies. When something is wrong, it's wrong.
> Also, everyone's comments about pricing, costs in Canada, etc, etc is all crap. My point is that Apple was satisfied to make X profit when the dollar was at par. It is now at 104.65, the highest level in 3.5 years! Anything Apple Canada is making now is pure additional profit.
> ...


LOL :clap: Nice job on making friends! 

But your argument holds no logic. Why would we pay less than Americans, when other countries in Europe and paying WAY more than we are for the same product. Everything still gets shipped out from China, so why do they pay more than we do? The Euro is much stronger than the CDN dollar or US Dollar for that fact. Exactly, your point makes no sense.

The price for an iPad 2 in Canada is VERY reasonable, it's cheaper than the original iPad was! I don't get why your panties are all in a twist?


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