Via CRRC Caucasus, Marginal Revolution looks at the price of an Apple iPod in various countries and suggests comparing the cost of one unit as some kind of economic indicator. CRRC Caucasus introduces the concept better, though.

Half-serious, half-joking, the Economist put forward the Big Mac Index as a comparative tool to measure purchasing power and currency valuation. The idea was that McDonald’s, wherever it is, has standardized procedures for doing identical Big Macs — consequently price differences should be fairly indicative of discrepancies in purchasing power. […]

Recently an Australian bank suggested a similar comparison of iPods. Arguably this is more of an indicator for smart predatory pricing, since iPods sell for much more than their production costs. So what does this mean for our region of the world? You probably would expect sales price in the South Caucasus to be fairly homogenous.

Well, it isn’t. Taking the 2 GB Nano iPod for comparison, the newly opened Apple shop in Yerevan asks its customers for a cool 288 US dollars. In Tbilisi, the same iPod will set you back 224 US dollars, whereas in Baku, the Apple website lists its price as 199 US dollars.

Interestingly, the newly opened Apple Store franchise in Yerevan said that its prices won’t be more than 5-7 percent of what customers pay in the U.S., but that doesn’t seem to be case for the iPod Nano. In the U.S. it costs $149 which means it should theoretically cost under $160 here.

In the nearest future we intend to cover the level of 30-40% of the market - this is a very serious index. It is reasoned by the quality of the production and the pricing policy of “Apple”. So, in Yerevan the “Apple” equipment cost only 5-7% more expensive than in the USA.

The prices of the “Apple” computers in the Armenian Center start from $1700. We also realize credit sales with 20% pre-pay and 6-12 months credit term.

Anyway, CRRC Caucasus asks why there is such a difference in prices between the three South Caucasus republics. However, I’d say that youngsters in Armenia are reportedly less hip than their counterparts in Baku or Tbilisi and so the market is potentially smaller. On the other hand, more and more adverts for MP3 players are appearing on billboards, and a few people can be seen with headphones on the streets more frequently than they used to.

Azerbaijan may have a larger local customer base, allowing them to charge less for the individual item. Armenia may have higher transport costs, or simply a dealer that can keep a very straight face. It is also possible that many Armenian customers actually shop abroad, and those that are left locally are prepared to pay the premium.

Still, one guesses that having two borders out of four closed doesn’t help, and it’s not uncommon to discover that most electronic goods are actually brought in as hand luggage from Moscow or Dubai by traders that then stick a 50-100 percent markup on the original price. As a result, it’s not uncommon to find that stores don’t have sufficient stocks of items, or that many people do indeed tend to purchase items from abroad through friends and contacts that come and go.

Makes you wonder why anyone would open a shop in Yerevan if that’s the case, but this seems to be the case with everything foreign that we take for granted in the West. The Armenian capital is now apparently the 21st most expensive city in the world to live in.

Yerevan is 21 expensive city among the most expensive cities of the world for the foreigners. saint-petersburg.ru informs about it alluding to the results of ECA International consulting company’s research. It has taken into consideration about 125 different economic factors of about 250 cities such as the price of luxury and everyday use things, restaurant
menus etc.

Still, I’d like to see some research into the number of units sold by such shops, although some shops might be reluctant to release such details in case the tax office sees. Sometimes I think that’s actually how they operate. Stick up the price a whopping 100 or 200 percent, pay your sales assistant next to nothing for sitting in the window looking bored and hope you sell at least a few items to pay salaries, and don’t issue receipts.

Actually, it always amuses me to see the signs on all the shops downtown advertising sales of up to 70 percent off. Still makes the items a rip-off and more expensive than the original cost of the unit purchased abroad. Sure, that’s capitalism, but it doesn’t really make sense. Sell more at a lower place, or far less at a higher price. Still, some Armenians actually like boasting of how much they paid for an item and look down on anyone who talks of bargain hunting.

Probably, they’ll feel encouraged by the iPod PPP and feel comfortable that they’re paying far more for the same item than their counterparts in Azerbaijan and Georgia. Incidently, the same is true for cellphones, although we know another issue here is that the son of a high-ranking official reportedly controls their import and sale. The opposition press says that person is Kocharian’s son, but who knows?

That’s the way things are, and the way they’ll probably stay for some time to come. When Mc Donalds finally get here 8-10 years after they opened up in Azerbaijan and Georgia, we’ll probably find we’re being ripped off there as well. I’m still pissed that an ADSL connection costs $35 per month in Tbilisi — less than a dialup here!

Anyway.