Is Mr. Jobs Really Sure $1,000 Is a Fair Price for iPhone?

A week ago, last Friday, Russian carriers and retailers started to officially sell iPhone in Russia so Russian people have been able to officially and legally buy the much-hyped Apple’s device for a week now. But unfortunately Apple can hardly claim any significant success in Russia because of a few reasons with the most aggravating one being the price that seems to be far from fair when you compare to what people around the world pay for the gadget.

The problem is that Russia is one of the few countries where local carriers have not managed to negotiate agreeable conditions with Apple to sell iPhone under contract - hence the price of over $1,000. To be specific, the 8 Gb iPhone is sold for 23 thousand rubles (about $880) while the 16 Gb phone is priced at 27,000 rubles which equals $1,030.

One of the three major Russian carriers has actually offered some lower-priced options to its trusted subscribers that are more of renting a phone from the company and paying the full price during a year or two. This is not actually a contract as it is understood in the US since the phones are not locked and can be used with SIM cards from other carriers though this is not particularly reasonable as the user will have to pay for voice and data plan twice. But the cheaper options are only available to trusted and loyal subscribers of this carrier while everyone else will have to pay full price from the very beginning.

So predictably there was no extraordinary demand during the first day of iPhone in Russia - unlike in the US we have not seen any long lines near the local stores selling iPhones now. Despite of the usual buzz that surrounds releases of Apple products everywhere and in Russia these days as well combined with quite heavy advertising (TV, radio, online, outdoors), all the retailers and carriers have only managed to sell 2.5 thousand phones during the first day. You must understand this is an incredibly small number after opening many stores at midnight for the opening event and attracting customers with various giveaways and even shows.

There is another reason for the lack of success (well, to be honest, collapse) of initial official iPhone selling in Russia - and that is the fact that almost everyone dreaming of the device have already bought one. For quite a while it has been possible to buy an illegal iPhone right in Russia or bring an unlocked device from abroad. Retailers complained about it a lot since they could not sell the popular device to people when the demand was huge. Even the Russian government has not received all the custom duties and taxes involved since the phones were imported and sold via unofficial channels.

Retailers claimed that almost every flight from the US brought in at least one suitcase full of iPhones, hence enormous number of unofficial iPhones sold in Russia. The numbers here vary - some analysts report 250 thousand owners of iPhones in Russia while others mention as many as 400 thousand devices in Russia before the official shipping date. Any of these figures make Russia the country with the third largest number of iPhones after the US and China - and that with no official phones.

Russians are famous for our love to luxury items and iPhone is certainly marketed like one here with everyone caring about social status including the president Medvedev already owning one. iPhone has quickly become something of a symbol of status here and people eagerly purchased the unlocked devices for around $1,000 and higher. I myself witnessed a few months ago husband of my best friend bringing her from his trip to the US an unlocked iPhone instead of some designer hand-bag she actually asked him to bring. To my surprise, she was more than happy about the replacement.

and probably it is quite right for Apple to set the price for officially sold iPhone at around $1,000 - after all, why making less profit when you can still make more with the same expenses? Besides, people here often replace their cell phones and usually the next model is more expensive than the previous one with cell phones often demonstrating social status of a person. So it is probably logical for Apple but unfortunately when you already know that the device is much cheaper than what you are supposed to pay for it, paying a thousand dollars does not seem like a particularly reasonable decision.

I do know that Russian market is a strange one with all the electronics sold here for twice as much as they cost in the US and the majority of other countries as well. But this is also why many people who travel a lot prefer to buy both clothes and electronics abroad - not because we can not afford buying it here but because we know what fair prices are and want to pay exactly that instead of the ridiculous twice or trice the price in Russia. And it would have been good if at least some companies realized we are no third-world country, Russia is a huge market for both luxury goods and the latest technology products. And acting wisely on this market will be a better key for success than earning your 500% profit and damaging the image of your brand.