The fat margins of Australia’s few major consumer electronics retailers and product distributors are causing companies who actually make the products to tear their hair out in frustration after constant attacks from customers who compare local prices to those in the USA or UK and say they’re being rorted.
I’ve watched discussions amongst Australian customers for years on online forums such as Whirlpool and more recently on social media like Twitter and Facebook about how consumer electronics manufacturers are ripping them off compared to prices for the exact same product on Amazon USA or online retailers in Europe.
Recent comments by a group of big Australian retailers including billionaire retailer Gerry Harvey asking for GST to be applied to products imported into Australia worth less than $1000 to help protect them from overseas competition lit this slow burning anger into a firestorm of angry comments online.
Whirlpool forums member “-7-“ makes a very sensible point that:
It’s also hardly fair for the Australian taxpayer to essentially subsidise what is a protectionist measure for Australian retailers. The compliance costs will be high, the benefits marginal, the impact on shopping patterns negligible.
When I can purchase the exact same blu-ray movie for either $30 locally or $15 overseas, adding $1.50 to my purchase price won’t make me reconsider in the slightest. It will simply introduce an inefficient tax, which is the worst kind of tax.
People like Gerry Harvey only have a valid point if the difference between local and overseas prices was around 10-15%. Then a GST would make perfect sense and bring the overseas retailers in line with local ones. However currently the difference in prices is literally 50-100% in some cases, and this has nothing to do with the tax advantage for overseas retailers.
Indeed most of us already pay an extra 10% or so on overseas purchases on average… in the form of postage costs! The fact that GST+Postage+Overseas retail price is still sometimes 50% cheaper than local means there’s something very wrong with local retailer pricing.
Some of the price difference comes down to Australian retailers having to charge our 10% GST, high rents in popular retail store locations and Australian wholesaler companies who import products not buying in the same volume as the USA or Europe eg: puchasing 200 laptops to sell here compared to an American wholesaler who might buy 20000 laptops.
But it can’t account for prices for consumer items sold in Australia for 50-100% more than they do USA and Europe
The only way this can occur is because someone in the product supply chain from the factory to you buying the product at an Australian department store is making a massive profit.
The head of an Australian consumer electronics company told us that they’re “frustrated by customers telling us how expensive our products are at stores because Harvey Norman makes more than 60% margin from retail sales of our products”.
Despite the growing popularity of online shopping from Australian and overseas websites many customers still buy consumer electronics from traditional retailers where they can see the products and compare them in person.
Retailers like Harveys hold so much market share that manufacturers have no choice but to agree to high retail margins and kickbacks if they want their product ranged (stocked and displayed on shelves)
Business futurist and technology journalist Paul Wallbank recently analysed the broader situation in his ABC Unleashed article “The roar of the business dinosaur”:
This campaign started last year with Harvey Norman co-founder Gerry Harvey and Myer CEO Bernie Brooks threatening to setup Chinese-based online stores to overcome the claimed tax and tariff disadvantages of Australian retailers.
At the time there was little sympathy for this view and the latest campaign from the retailers has attracted even less support from consumers quickly pointing out the main reason for going online are the poor sales experiences and high prices on offer to from Australia’s larger shopping chains.
The “Fair Go for Retailers” alliance isn’t really about GST – it’s about middle-aged retailers clinging to a 1980s model of doing business while failing to understand how the economy, society and their markets are changing. Just their miscalculation in the public mood indicates how out of touch these folk are with their customers.
EDITOR: I forgot to mention Flexirent and other financing plans that sales people at many big chain retailers often pressure customers to take up, with long “interest free” periods so by the time they expire the customer ends up paying interest rates like 24% or more.
This *really* adds a lot to the retailers profit margin.
Paul Wallbank wrote a followup to his ABC article, noting that the loss of tax dollars from exempting sub $1000 imports from GST is politically smart at present but “should the porridge in Australia’s Goldilocks economy start going cold, then Treasury will start looking for those lost GST dollars“.