Why Your PC Costs So Much (Or So Little)

Why Your PC Costs So Much (Or So Little)

There’s a lot of factors that contribute to the price of computers and other tech gadgets. Some new figures from the Australian Taxation Office give an interesting insight into an area you probably don’t think about that often: rent, labour and other retailing costs.

Picture by wyrmworld

Each year, the ATO assembles a series of small business benchmarks which demonstrate the typical performance of businesses in a range of sectors. The figures are used by the ATO to identify companies with unusual patterns of activity (which could mean they’re not paying appropriate amounts of tax), but can also be used by business owners to assess how well they’re doing compared to their competitors — and by consumers to gain a little insight into what goes into the final price they pay when they slap down their hard-earned money for the latest technology.

The figures are very small business focused. There’s no comparable data for department stores or big-box retailers, so they don’t provide a complete picture of the Australian retail landscape. But they do offer some interesting insights.

There’s a specific benchmark for businesses selling computers, which the ATO singles out as one of the most boisterous spaces in retailing:

The industry is highly competitive because new businesses can be easily set up and consumers are often well informed about the products.

The key business measure in this sector, by the ATO’s reckoning, is cost of goods sold against turnover. What’s interesting, and somewhat unexpected, is that this ratio turns out to be higher for metropolitan businesses than for regional businesses — which suggests, in simple terms, that the profitability of regional computer sellers might actually be higher. This seems contrary to the general perception that physical goods are often more expensive in rural areas, but might reflect a relative lack of competition: metropolitan PC sellers have to compete more vigorously with large chains that can exercise bulk-buying power.

Interestingly, the same distinction doesn’t apply overall within the broader category of electrical and electronic retailing, where there was no measurable difference. The main differentiator for this sector was that labour costs were much higher overall than for pure computer retailing. (The computer figures exclude consultancies, where labour would presumably be a higher proportion.) The costs of goods sold/turnover ratio had a much wider range.

The other category of interest in the benchmarks was entertainment media. In this area, rental is a much higher cost, reflecting the need for more visible shopping locations to attract buyers for an impulse purchase.

Knowing all that information doesn’t eliminate the need to shop around the next time you’re buying a PC or a peripheral. But it does reinforce that there’s more factors involved than the RRP set by the manufacturer.

Lifehacker’s weekly Loaded column looks at better ways to manage (and stop worrying about) your money.


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