Seeing REDgroup – Part 2 – The Face Of Things To Come

8 03 2011

The Face Of Things To Come

I started ‘blazing’ the online consumer trail in 1997 – 14 years ago – when I bought books from Amazon.com, and a nice but obscure brand of chocolates for my chocaholic sister for Christmas that same year – which I thought was pretty nifty, but she thought was a little odd, gingerly tasting the first chocolate as though it might be poison.

Despite all the posturing to the contrary (by retailers & luddite consumers alike), there’s a heap of stuff you can confidently buy from reputable online retailers, Australian & overseas, many of whom DO offer genuinely good service, without needing to actually see, touch, try on, or spend any time whatsoever in mind-numbingly sterile malls offering the same narrow set of brands everywhere.

Until the early 2000s, Australian Customs *did* levy import duties on some stuff I bought overseas.  I don’t know what the dollar amount threshold was, but when combined with the cost of shipping from overseas, and the exchange rate below $0.60 to the US1$, it usually made it a more expensive proposition than shopping locally, and thus relegated offshore retail to stuff you just couldn’t get locally.

But that world is gone.  For unrelated reasons the US & AU dollar are virtually parity, international shipping can often be quite reasonable, and there’s now no import duty or GST applied to imported goods totalling less than au$1000.  Now I can go on a clothes or sneaker shopping spree – online – and have several hundred dollars worth of stuff (which would cost anything up to double from Australian bricks-n-mortar retailers) and have it all shipped to me for $20-50, still making it a clear financial win.

Is it wrong that overseas retailers don’t have GST applied to their sales?  Absolutely.  I mean c’mon!  In this globalised age where anyone can buy stuff from anywhere else on the planet so easily, why shouldn’t the Government apply GST?  A better question is why don’t they.  My theory is in the ideology of the GST itself.  The GST forced nearly every Australian business to become a tax collector for the Government.  It spread the administrative burden far wider (though about the same thickness for all), whereas the previous Wholesale Sales Tax regime involved at least an order of magnitude fewer Australian businesses and virtually no individuals.  Clearly corralling retailers across the planet into becoming GST collectors for the Australian government would be Mission Impossible (even if legal), so having it levied by Australian Customs at the import waypoint is the only practical option, basically slapping an invoice on every box before local delivery.  With such a cavalier attitude to turning every Tom, Dick and Harriet businessperson into a GST collector for the Government, it’s no surprise that the (Howard) Government wanted to divest itself of the administrative burden of applying and chasing import duties from a strongly growing citizen import tendency.  A decade ago Amazon was just a distant blip on the radar.  Now, with zero import duty/GST and a steadily strengthening AU$, it’s a serious bite out of not just local retailers’ income, but Government’s too.

But lets not make the mistake of thinking the lack of GST applied to consumer importation accounts for the attraction of buying from offshore eretailers.  It doesn’t.  As I said above, the price of much of the stuff I buy offshore can be nearly half that of local retailers.  Even the addition of 10% GST, or more, wouldn’t level that ‘playing field’.

In any nationally competitive industry, prices stabilise at a value that lets all the links in the retail chain make at least a workable profit.  Australia is a small population, spread out over a massive continent.  Out retail prices reflect primarily the ‘economy of scale’ of our comparatively tiny population, and often the cost of shipping product over our vast distances to tiny towns.  So when Europeans and Americans come here and bitch about the price of everything, well, that’s in large part because they come from a country/region with a much higher population, and population density, among other factors.  Get over it.

Maybe you’re more a Readings type of bookworm, one of the few who likes to go to a bookshop who actually reads through several pages of a book, shake hands with the author, AND then buys it from the shop at whatever price they decide to charge.I’m not.  I buy books based on recommendations from my social network, reviews, and occasionally author reputation, in which case I don’t need a physical shop to visit.  Seems I’m in good – or at least voluminous – company.

The reality is that so much of what we buy has become so commoditised, we don’t care where we buy it, “value adding” is often irrelevant, we just want it for a fair price, and we’d especially prefer not to pay the inflated price of faux-discount retailers who use expensive TV advertising.  How can all the existing bricks-n-mortar retailers with expensive mall rents, extensive multi-site IT & POS infrastructures, and a vast staff with structured management spanning a state or country ever compete with a website operated from an ‘invisible’ office-with-warehouse out in a cheap suburb with no public shareholders to please?  Ruslan Kogan is laughing all the way to the bank on this business model!


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