LG reply to $300 retail premium for Google Nexus 5

Google and LG recently released the Nexus 5 direct from the Google Play store earlier this month. This afternoon we received the press release announcing retail availability and price...

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Google and LG recently released the Nexus 5 direct from the Google Play store earlier this month. This afternoon we received the press release announcing retail availability and price in Australian and the news isn’t great. 

The Nexus 5 will be available through Telstra stores from Tuesday 26th of November, with pre-orders online starting today. As a launch promotion, customers that pre-order will receive a $100 Google Play voucher with their handset compliments of LG and Telstra.

Now the good news is out of the way, here’s the bad news on pricing.

Consumer’s will be able to purchase the Nexus 5 from Telstra on the $60 Every Day Connect Plan with a $9 handset repayment per month (when you stay connected for 24 months), with $600 worth of included calls and MMS, unlimited SMS and 1GB of data, all to standard Australian numbers (excluding use overseas) each month. Min cost over 24 months is $1656 ($69/month) and 2 minute standard call is $2.38, excess data $0.10/MB.

Business customers can purchase the Nexus 5 on the $60 Business Performance Plan with $9 per month handset repayment for 24 months when you stay connected for 24 months, with $600 worth of included calls and MMS, unlimited SMS and 1GB of data, all too standard Australian numbers (excludes use overseas) each month.

This plan also offers $2.50 flat rate standard voice calls (drawn from your $800 monthly call allowance) made within Australian between 9am and 5pm local time (Mon-Fri), including public holidays. Min cost $1656 ($69/month) and 2 minute standard call is $2.38, excess data $0.10/MB.

All that is a pretty standard affair with new release smartphones, but the outrage comes with the outright price. The Nexus 5 will also be available to be purchased outright in Telstra stores for $696. We’re talking about the 16GB version that comes in black or white here and retailers like Harvey Norman will have it late November for $699.

The $699 price is a huge $300 increase over the outright price if you buy the phone directly from the Google Play Store. From Google directly it costs just A$399.00 so I asked for an explanation of how they justify the massive inflation in price. Below is the response.  

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“Nexus 5 handsets sold through the Play Store are done so by Google and are subject to pricing decisions made by Google.

Offline and retail sales through local Australian retail outlets and sales channels are the subject of a completely separate pricing structure that provides for a different support and service model for consumers.

To this end, this provides for a range of different cost elements, including transport and logistics, local service and support costs associated with retail sales staff, physical stores, live sample devices for demonstration, and many other services functions that consumers can access when a device is purchased at a physical store location. “

Those pricing decisions made by Google go one of two ways. Either Google are prepared to make losses on the hardware with the knowledge they’ll make it up in the software, or their business doesn’t require them to make profit from devices, so the price is closer to the actual cost of the hardware.

Regardless of the reason Google can offer the Nexus 5 at the price they do, it’s pretty ignorant for retailers to still ask a massive $300 premium for exactly the same device. I encourage you to spread the word to all friends, family and colleagues consider the Nexus 5, buy from Google and don’t encourage or reward this price gouging.

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