Home Technology What goes into local graphics card pricing?

What goes into local graphics card pricing?

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GTX 1080 Price

If there’s one thing on everybody’s lips this year (besides Overwatch….sigh) it’s that the prices of things are seemingly increasing with every muttering of “listen properly” from our President’s mouth.

As South Africans we are in the unenviable position of being part of the most technologically developed economy in Africa (although not the most earning according to GDP) whilst being the farthest away from most of the high technology producing areas in the world, namely Asia, America and Europe. In all of Africa we seem to have the highest propensity to buy high-tech devices, yet we are very isolated from the tech world. Although the internet has annihilated space and time through instantaneous communication, the devices needed to do that still has to travel across that space and time; time and space equal money, and as consumers we often have to pay for that. Indeed, in a post-Nenegate world, that means we have to pay a lot more for it. In doing this article I’ll explore exchange rates, location and market size affecting the price of our pixel pushing components. To clarify certain points I went to ground and dug up the incredibly helpful and insightful perspective from Rune Ravnsborg, owner of local PC retailer Rebeltech.

gtx1080.0

After the announcement and local launch of the GTX 1080 on the 27th May, pricing has once again reared its head. Most often the question is asked “how can something that costs $699 cost over R14500 here?”. The common rationale most people flock to is the ZAR/Dollar exchange rate conversion (the “Caveman Rate” as Rune puts it), which at the time of writing (R15.82/1$) means $699 equates to R11 058. So, where does the rest actually go? Sure, a lot of it goes into maintaining local profitability for the suppliers (business is not charity), but there are also other costs that make it more expensive and puts the actual “PC Component Exchange Rate” at around R20/$—that’s an extra ~R4 above spot.

The first thing to note is that South African suppliers don’t get the same $ prices as their overseas counterparts. There are two reasons for this; firstly, we don’t get them through US distribution channels, and secondly, we also pay different levels of tax—our local prices include our 14% VAT, while US prices are listed excluding local sales tax, which differs from state to state. Regarding tax and customs, I’m not even going to delve into them since it seems like they change on a regular basis between 10-15% depending on whether the customs official had their breakfast that morning.

The price disparity between FE cards and non reference cards are also getting the locals up in arms. An example of this is the GTX 1080 STRIX, which being at $619 overseas you’d expect it to be cheaper than local “$699” FE counterparts. However, it’s actually more expensive here than the Asus GTX 1080 FE. According to Rune a large contributing factor for the price disparity has to do with enforced MSRP of the GTX FE cards, which yielded low margins for NVIDIA partners. However, even though NVIDIA has said MSRP for non-FE cards would be $599, that only covers a standard reference design with a blower styled cooler. For actual custom cards, there is no local MSRP which governs how much MSI, ASUS or Gigabyte can sell their cards at to local distributors. This means that non reference cards arrive on our shores at a higher than average price compared to overseas since the distributors that get those cards at a price that is determined based on laws of supply and demand–meaning they can set the price they want.

1080strix

Coupled to this, our local market is so small compared to many developed nations that our suppliers can’t really negotiate for better prices based on volume. According to Rune when they or suppliers want to even broach the topic of negotiating a better rate, they have to do multiples of “minimum order quantities” , which for the size of our market (Rune states we comprise about 1% for Nvidia’s total sales), is very hard to do without substantial risk. Our location also means we pay more for shipping compared to the rest of the developed markets, notably the US, adding around 3% to the cost of a product. This again feeds into our market size, which means providing support, marketing and after-sales service like RMAs or repairs requires that South African distributors support these services on smaller volumes than their overseas counterparts. Essentially the cost of doing business in a smaller market is higher, and this cost is passed on to the small volume market. This is without even adding in import tax, supplier or retailer mark-ups, mark-ups which are not simply to cover costs, but to cover costs and grow their businesses. This is why “growing” the local gaming scene is so important for distributors and retailers—with growth (i.e, more people spending money in that area) local prices should naturally drop as it becomes more feasible to import larger numbers of goods at reduced pricing. However, even local growth still falls prey to the winds of change, and a change in Finance Ministers was certainly a large calamity.

Exchange Rate

A big discussion point as of late has been the effect of the exchange rate on local tech pricing—since most tech is imported, we pay dollar rates, which for a weaker currency, means we often end up paying more. One thing not readily discussed in many circles is how the volatility (i.e, the percent of change over time) of the exchange rate affects local pricing structures. When we briefly touched R18/$ for a time in January, the end times seemed near and R20/$ inevitable. Volatility in our exchange rates means that often the big suppliers and retailers have their hands tied when it comes to pricing. The prevailing wisdom is that prices should go down as exchange rates get better. Usually this happens as old stock clears out and newer stock arrives, but once your currency value starts bouncing around like a Gupta securing a state Tender, it gets harder and harder to continually sell at prices in line with exchange rates suppliers bought at, especially in a low volume market such as South Africa. According to Rune “They don’t work on spot price but instead on replacement value coupled with required margin.” Not every supplier does it this way, but essentially it means the local price of PC hardware is sold on the basis of how much it will cost to restock a similar item while employing risk reducing measures to maintain their margin of profit. They work this method when the value of the Rand goes up and down, so that if a supplier buys something and the Rand strengthens, they still employ some risk reducing to “higher” cheaper prices to offset future increases in price. This is why even though you are buying a graphics card that’s been sitting on a supplier shelf since September 2015, they will most likely sell it at the cost to ensure they can replace it profitably, which means current or higher exchange rates.

So, when you need to understand why the price of a GTX 1080 is R14500 or the estimated price of a GTX 1070 is probably around R9500, just remember to think about how many factors (besides exchange rate or dastardly presidents) come into play to determine local pricing. With a looming decision on our credit-rating status, this obvious placeholder pricing from Evetech could be telling of further astronomical price increases.

Last Updated: June 2, 2016

57 Comments

  1. Even knowing all that, it doesn’t soften the blow for consumers who are earning only maybe 5% more per annum, while prices increase by 30-50% for a given tech bracket in gaming.

    The 980 was and still is around R10k. To replace that, we now have to pay 50% more. On a 5% more per annum budget. This is where the actual problem lies. We already understand import duties and rising exchange rate issues. But our salaries are not increasing proportionately to the tech pricing, because that’s not how it works.

    Reply

    • Hammersteyn_hates_Raid0

      June 2, 2016 at 10:45

      We’re getting left behind. Console subscription prices went up a lot. PS Now is a streaming service we just can’t handle on our internet. Not even fibre I bet.

      Reply

      • Darren Peach

        June 2, 2016 at 10:48

        I am still waiting for a definitive verdict on fibre.

        Reply

      • BakedBagel

        June 2, 2016 at 11:02

        Those steam sales look more and more appealing :^)

        But dont worry guys. Consoles will always be cheaper. amirite :^)

        Reply

        • Hammersteyn_hates_Raid0

          June 2, 2016 at 11:05

          With game sharing it might just be. In the end Overwatch cost me $30

          Reply

          • BakedBagel

            June 2, 2016 at 11:08

            Overwatch costed me a bag of some fine 420 grass hahahaha :D:D:D:D

            but seriously. With GOG Connect showing its head, And competing PC part companies, PC gaming looks more appealing. :^) [Bias tho :P]

            What happened to a new console every 4 years. New Ps4 next year lmao.

          • Hammersteyn_hates_Raid0

            June 2, 2016 at 11:11

            I love GOG more than Steam. PS4 Neo wont have exclusive games meaning I can hang on to my console, but we’ll see where they go with this. Lots of confusion atm

          • Yondaime

            June 2, 2016 at 13:35

            Brother, you and I must converse.

          • BakedBagel

            June 2, 2016 at 17:20

            o_O i sold him a bag of this

            I can get more :D? this shit is lit af.

            https://uploads.disquscdn.com/images/30d46301e0dc420cb67bfa0cb8dacbcf8d07d3e8bfd55e9bc1a7df1ce91a5c11.jpg

          • Yondaime

            June 3, 2016 at 10:38

            toranokai is my steam ID

    • Darren Peach

      June 2, 2016 at 10:47

      Feelz your painz. I need a serious upgrade for work purposes and It aint cheap.

      Reply

    • b1nd3r

      June 2, 2016 at 10:47

      You can actually pick up the 980 for about 7-8k on a new one prices crashed on the 970-980 within the last 2 weeks.

      Regarding thisarticle, just wait until Galax releases its 1080/70, Locally it sells about R1000 off on average compared to other manufacturers

      Reply

      • Pariah

        June 2, 2016 at 10:52

        You’re missing the point. Brand new the 980, even with the exchange rate – was R9k-R10k for enthusiast cards. Now, those cards will be sitting at R14k-R15k. For almost the same dollar priced card (there’s a $49 increase in price – that’s 10%). Now, my math says that’s around a 50% increase in price for cards locally, that cost only 10% more internationally.

        And our salaries don’t increase by 50% all of a sudden. The exchange rate didn’t increase by 50% over the last month. So why are the cards 50% more expensive locally?

        Reply

  2. Pariah

    June 2, 2016 at 10:54

    Also the 1080 founder’s edition Evetech pricing is R16k.

    Reply

    • Pariah

      June 2, 2016 at 11:02

      Funny. Rebeltech has better 1080 pricing on the MSI card, but much worse pricing on the 900 series of cards.

      Reply

  3. BakedBagel

    June 2, 2016 at 10:56

    AMD’s Radeon RX 480 just announced it will be selling for $200.

    Ive never been more inclined to move ships.

    Reply

    • Pariah

      June 2, 2016 at 10:57

      This is exactly where I’m at. For my gaming needs, that $200 looks mighty attractive. If current Nvidia prices are anything to go by, that’ll hit the R6k-R7k bracket locally, but as long as it beats the 970 and R9 390 in performance it’s still about current pricing and worth every cent.

      Reply

      • BakedBagel

        June 2, 2016 at 10:59

        Completely agree.

        I mean if you purchase two of the RX 480’s it just about beats the 1080. according to this http://imgur.com/ktWdhNF

        The current pricing is really really hurting my damn wallet.

        Reply

      • Hammersteyn_hates_Raid0

        June 2, 2016 at 10:59

        • BakedBagel

          June 2, 2016 at 11:00

          lmao that happens whenever my friends show me something new 😀

          Reply

          • Hammersteyn_hates_Raid0

            June 2, 2016 at 11:02

            Hopefully it doesn’t apply to newborns 😛

          • BakedBagel

            June 2, 2016 at 11:03

            Between me and you.

            Its happened once before, but luckily the baba was on the bed. Huehuehue. Baby is fine tho. naughty shit.

          • Hammersteyn_hates_Raid0

            June 2, 2016 at 11:05

            XD

          • Pariah

            June 2, 2016 at 11:03

            After a week, babies heads are hard as rocks… Seriously. Once you’ve had your chin annihilated a few times you learn to respect those heads.

          • Yondaime

            June 2, 2016 at 13:38

            Lol I was left bleeding by my friends baby, and that was just play play XD

      • Alien Emperor Trevor

        June 2, 2016 at 11:04

        My rule of thumb on $ prices of imported items is times by the exchange rate & add 50% to get R.

        Reply

        • Pariah

          June 2, 2016 at 11:05

          Yeah but the current gen cards don’t apply that rule. Current 980 $549. New 1080 $599. Strix $619. So. Why such a huge disparity in pricing?

          Reply

          • Alien Emperor Trevor

            June 2, 2016 at 11:08

            Because they’re new, so they sell at a premium. Also, if they were sold at basically the same price everyone in the market for a card in that price range would buy the newer one, leading to them having a big stock of older cards sitting in their warehouse gathering dust because they don’t want to sell them any cheaper because of margins.

          • Pariah

            June 2, 2016 at 11:08

            Ah so finally someone says something I believe in its entirety.

          • Alien Emperor Trevor

            June 2, 2016 at 11:18

            Plus there’s no direct real competition from AMD to these cards right now, so they can get away with charging a premium for the performance.

            It was really obvious a few years back when Nvidia released the 900 series, they were damn expensive, but as soon as AMD released competing cards their prices dropped by a few R1ks.

          • Alien Emperor Trevor

            June 2, 2016 at 11:19

            Or was it the 700 series. I’m old.

    • Raptor Rants

      June 2, 2016 at 11:05

      ^ this

      Reply

    • Hammersteyn_hates_Raid0

      June 2, 2016 at 11:06

      That’s halve the price of a console O_o

      Reply

      • Pariah

        June 2, 2016 at 11:06

        With better performance. 😉

        Reply

        • Hammersteyn_hates_Raid0

          June 2, 2016 at 11:08

          Oh sure, because all you need for PC gaming is just a graphics card 😛

          Reply

          • Pariah

            June 2, 2016 at 11:08

            YES. >_>

          • BakedBagel

            June 2, 2016 at 11:11

            Dont listen to anyone else but Pariah and myself.

            All you need is a gfx card. Okay >_>

          • Hammersteyn_hates_Raid0

            June 2, 2016 at 11:17

            >_>

          • Ir0nseraph

            June 2, 2016 at 11:26

            XD

          • Raptor Rants

            June 2, 2016 at 11:29

            Weeeeel. No. BUT you can get away with a system with slower CPU and less RAM and still come in shy of $600 total and run all the games well

          • Ir0nseraph

            June 2, 2016 at 11:31

            Really can it run Uncharted 4 ? , best game I played this year.
            I get PC will always look better , and nothing beats the mouse and keyboard, but PC just don’t have the exclusives I want at the moment.

          • Raptor Rants

            June 2, 2016 at 11:35

            hehe. Well naturally everyone choses platform based on price, game availability and well simply preference.

            Was just pointing out PC isn’t always more expensive.

            That being said, I’d love to see Uncharted ported to PC to see how a same priced PC would run it. It really slooks so very very good.

          • Ir0nseraph

            June 2, 2016 at 11:40

            Yeah you’re missing out, but the day Sony gives up exclusives to go to PC will be the day the console dies for real this time :).

            I get your point that you can spec a pc to preform as good close to the PS4’s price, but that shouldn’t be the only reason you buy a PC.

          • Raptor Rants

            June 2, 2016 at 12:39

            Absolutely not. But It’s more of a thing of trying to state that price should be very last on the list of choice making as they are all pretty much even stevens when it comes down to it. Only enthusiasts require all that extra muscle and epeen bragging about graphics

          • Hammersteyn_hates_Raid0

            June 2, 2016 at 11:45

            Just like a console, no assembly required or software/driver installation required

          • Matthew Holliday

            June 2, 2016 at 13:37

            Master race all the way.

            but theres something to be said by not having to worry about performance, upgrading or having to deal with faulty components etc. (its been a nightmare of a year sofar with work PCs and reliability issues)
            and with the price of new PC games being comparable to console and PSN putting some pretty decent specials up, the argument of saving in the long run due to game prices, has sorta gone out the window.
            console has been starting to look more appealing…
            especially since the prices, although they havent exactly dropped like we hoped/expected, they atleast haven’t increased like PC tech has.

    • chimera_85

      June 2, 2016 at 11:59

      Same here BUT we will probably pay 5-6k for it anyway.

      Reply

  4. Raptor Rants

    June 2, 2016 at 11:04

  5. Anon A Mouse

    June 2, 2016 at 11:35

    And here I thought PC gaming was so much cheaper than consoles. Heuheuheu

    Reply

  6. Peet Luckhoff

    June 2, 2016 at 11:40

    OF COURSE IT IS ZUMA’S FAULT!!!!! The exchange rate is the biggest culprit.

    Reply

  7. chimera_85

    June 2, 2016 at 11:57

    I have family in murica and friends in Europe and Canada. If they send me something via DHL for example, does anyone know if or what kind of tax they would put on it here in customs?

    Reply

    • Raptor Rants

      June 2, 2016 at 12:21

      lots of Zumatellos

      Reply

    • BraaiVibes

      June 2, 2016 at 14:32

      I wonder if you ask them to wrap in birthday wrapping, put a bow on it with a bday card in the DHL bag, if they will charge import duties 😛

      Reply

      • Chris Summers

        June 2, 2016 at 14:36

        Attach an Invoice from your family member to you (private capacity) for USD 50.00, state non-commercial shipment, value for customs purposes only plus maybe personal gift, with a card, and you’re a for away. I wouldn’t do it for 10 cards or whatever, but it’s no issue on 1 card for personal use.

        Reply

        • BraaiVibes

          June 2, 2016 at 14:55

          Shot! Could also label it as a storage device (it is temporary storage albeit) as it apparently attracts the least amount of duties – I bought an Avermedia LGP off eBay couple years back, sender labeled as storage media ‘cuz it has an SD card slot 😛 and I was only charged about 2% at Durban Post Office.

          Reply

          • Chris Summers

            June 2, 2016 at 18:36

            I wouldn’t mis-declare goods intentionally, as in case of a customs stop, you’ll be on the hook for penalties and so on. If you’re using the Post office it’s one thing maybe, but certainly wouldn’t do it if using a courier such as DHL.

      • chimera_85

        June 2, 2016 at 16:21

        Hahahaha good idea.

        Reply

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