When one oligopoly screws another Australia’s retailers, led by high-profile Harvey Norman chairman Gerry Harvey, have shot themselves in the foot with a campaign demanding that the government apply its 10 per cent Goods and Services Tax to all internet purchases, and not only those over $1,000. The retailers, concerned that sales in the Christmas period were …
As an ex aussie, living overseas it's not surprising my knuckle dragging brethren have finally cottoned on to this.
There is almost no reason to use local retailers, as they gouge the hell out of you with no real benefit. With anything tech related, even the warranty is a RTM (return to manufacturer) so you may as well buy it from the source, and cut out the useless middleman.
Australian retailers need to get over the delusion that they matter to the market at all. They are a tiny market, at the arse end of nowhere, so will get treated accordingly.
Right, these anti-competitive whingeing bastards are trying to stuff it for everyone, but it's not a new an issue as everyone thinks.
Traditionally, this land-at-the-end-of-the-planet full of knuckle-draggers has had 3% of the world market so everyone--i.e.: retailers, importers and all of that ilk--have said that both distance/remoteness from markets and the lack of economies of scale are the main reasons why imported things are outrageously expensive here in Australia. And for eons we knuckle-draggers with our room-temperature IQs have actually believed* them.
Well, in the last decade or two it's turned out that some small operators in the IT industry (usually Chinese entrepreneurs) have imported computer components, peripherals--hard disk drives etc., and have been able to sell them about as cheap as anywhere else in the world. Clearly, the centuries-old 'necessary' 100% and 200% automatic mark-ups were looking very jaded and very artificial.
However, the brain-dead retail market hasn't really caught the message as yet, and now it's about to embarrass politicians into increasing prices for small items when really this tax discussion has stuff-all to do with the main issues.
Essentially, these are:
- the retail industry as currently structured is outdated and anti-competitive,
- it is moribund and stuck within a 19th Century model of thinking (but without good 19th C. service),
- it is very overpriced when compared to elsewhere in the world with similar standards of living,
- the retail industry in Australia notoriously doesn't offer sufficient choice of products (it brings in populist but not specialist items, even then it still complains about stock which doesn't move quickly enough),
- it provides stuff-all technical service--no one in the shops know anything about the products they're selling (although they're excellent at shrugging their shoulders),
- whose shop owners pay outrageous and exorbitant rents to shopping mall sharks (and like the rest of the knuckle-draggers, they're not organized in sufficient way to take on these overpriced monopolies),
- that retailers have totally failed to grasp the significance digital economy and adapt accordingly (the 19th C. is already over--so even is the 20th and they've not noticed it),
- not to mention their shops provide zilch in the way of customer experience and satisfaction,
yet they continue to blame everyone except themselves for their woes and ills.
Add to this shemozzle the ratbag industry lobby groups and carpetbaggers that have anything to do with so-called intellectual property, copyright, patents etc., and problems just multiply manifold. This mob of shysters always pulls rank by stopping the parallel importing of books, CDs, movies, pharmaceuticals, software etc., thus costs just become double or triple the price of anywhere else. Moreover, as they've the damn rights to this stuff, they bring in just what they want which usually means only popular stuff. Try getting a specialist techie book on any subject and you may as well ask the penguins in Antarctica for it. In the existing climate, even knuckle-draggers understand that getting stuff from the source is the only way to go.
Even more outrageous, these copyright Cretins want to stop parallel importing of books based on some strange logic that it will help local authors, performers and such--aren't these locals writing different stuff? I suppose this logic works if there are NO other imports. Damn them.
Well fuck them! If they want WAR then they now have it. For starters, we'll further boycott their stores, even if it's at our inconvenience. Right, even we knuckle-draggers understand such simple logic.
Although the high-profile Harvey Norman, chairman Gerry Harvey, (of this story), and his cronies have been shocked by our widespread vitriol, their continuing utterances still indicate that they've not yet gotten the message but they do so at their peril.
Revenge for any tax increase will be long and bitter. Even if it takes years, we will revel in every moment of Schadenfreude as they go under.
Whilst these retailers are true 19th C. dinosaurs, they nevertheless still have a T. Rex's bite and power to match. In the past, their influence on the establishment has been legendary; thus expect the end game to be messy and very bloody.
Nevertheless, eventually we consumers will prevail.
___
* In Australia, a significant majority, without question, believes all those with some seeming authority, especially radio shock-jocks. Words such as 'logic', 'truth', 'reason', 'question', 'disbelief' etc. are either not understood or are easily warped by shock-jocks or the sun, or they're morphed into a confused meaningless jumble by too much of the only things that really matter in Oz--sport and liquid amber.
I can simply summarise your inciteful posting as thus:
Australian retailers screw Australian customers because they can. That's the way it's always been and they don't want it to change.
When I first moved here I never believed the "small market, big distance" argument for the pricing as it always seemed they were gouging because they could. A perfect example from Harvey Norman was a Harmony One multi-controller that was priced at $399. I told my mate he could pick one up in Australia for around $200 online. He approached the sales guy and got a deal of $220 (he didn't buy it). That's a $180 discount for just asking and knowing the internet prices to force the deal. Mom and Pop would be tooled for the extra $180 though. Bastards.
Quite often, software is priced in the UK by changing the dollar sign to a pound sign (I'm looking at you, Microsoft, with your $99 = £99 attitude). How is this permitted without anti-competition laws coming into place, or is this another area where the colonies have the legal advantage over us poor Brits and we are missing the relevant anti-competition laws here?
Seems odd to quote transport costs, when a lot of those items would be built in a country that is much closer to Australia than the USA!
If they wanted to really save costs, they wouldn't ship them to the USA and then to Australia.
Whilst quantities can make a difference, IF the product is identical then the only difference seems to be the shipping address.
1. Have you removed the GST from the Australian price ?
There is no GST in the USA, local sales taxes are not payable by buyers from other states.
e.g Amazon outside Washington state.
2. The Acer 23" monitor is easily available from many shops for around AUD $150 ex. GST
3. The reason for the high prices in Australian retail is the retailers.
They hold oligopoly power over vendors & distributors.
There is only 4 major retailers in Australia & their margin & rebate demands are astronomical.
A typical deal for them is 30% margin & 10% rebate...on external hard-drives ???
4. ...but they have the stores & customers, Harvey Norman 400 stores, millions of customers.
5. The sooner Australian consumers learn how to spend their money properly the better for everyone...except the retailers ;)
Having worked in big box retail for years, I can tell you 30% is not a huge margin. Our average maintained margin across all products was around 27%, which resulted in around 2-3% percent net margin at the end of the year. And we benefited from doing about 60 million a year in sales, which most retailers do not do, so most would need to maintain a higher margin than that in order to run their business.
And consistently fail, ending up online (though like most online shopping in Aust. at Australian online shops - so the GST is paid anyway). The problem is that the corpreal shops are not interested in stocking what I want to buy. And the numpties* they hire as staff don't know or care as long as they get their pay for standing around all day chewing their cud. I would not be surprised if that was a significant portion of the case with the market as a whole, not just price (some of the freight costs are rediculous too).
*I know from personal experience that major retailers with a CE section (like good 'ol "Hardly Normal" - not my expression, it is part of the linguistic culture here) won't hire you if you can spell 'technical' let alone know something about the products beyond what it says in the brochure.
A lot of it seems to be just retail giants whining because people are waking up to the fact they are just having crap dumped on them for a premium and are refusing to play anymore.
I should also point out that there /are/ good stores around here too. I have a shortlist. It is very short. But those stores get a lot of business from me and I get good value for money, even at a higher price, as the service and convenience they offer is worth the extra.
Even speaking of Australia, Canada has seen the same thing happen. The dollar goes up, exporters aren't happy and yet we haven't seen a decrease in comparable prices. I find it frustrating because me as a common consumer is left wondering why we don't see better prices when the dollar is high.
When the Reserve raises interest rates, the banks are 'forced' to raise theirs immediately, but when the Reserve lowers them, the banks can take months to follow suit. And then they whine in the press about how put-upon their industry is because hopelessly-bad decisions might (but probably won't) cost their managers their bonuses.
"...a campaign demanding that the government apply its 10 per cent Goods and Services Tax to all internet purchases, and not only those over $1,000."
There should be the words 'overseas' between 'all' and 'purchases'. We cricket loooosers [*] already have to pay GST on any Australian internet purchases.
Mr G Harvey is just having another throw-the-toys-out-of-the-pram moment. As described in the article, what he's sucessfully done is show lots of otherwise unknowing Australians that they can shop cheaper via the Inner Tubes, and that we're getting right royally screwed by local retailers.
An item for the comparison grid:
A set of macro bellows for my DSLR (same make/model/etc) - Hong Kong = AUD$34.00 inc postage; Local Photo Warehouse = $340.00
Delete the word 'markup' and insert the word 'ripoff'.
[*] Laugh it up, there's always next season.
Paris, obviously for the 'You're screwed' angle...
Mr Harvey shot himself in the foot again by conveniently missing the fact that GST is levied on all goods imported to Australia (with certain special exemptions which need not detain us here).
What he is really challenging is the *administrative ruling* by Customs Australia (the appointed agent for collection of GST on imports) that they find it uneconomic to collect any amount less than $A100 - which includes customs charges, duty, tariffs and GST.
By skipping all the other things, and scaling up from a 10% rate for GST, he gets to the only partially correct figure of goods valued for import at up to $A1000.
For the boss of a billion dollar retail business, he really stuffed it up big-time with a total fail on his research!
The farcical nature of their claim the GST is the reason for the rise in purchase of items overseas can be easily shot out the water by the rise of grey/parallel importer businesses. As you say they would do better to talk to their official distributors about their pricing discrepancy than banging on about international Internet purchases lacking a GST mark-up.
For example, I happen to buy a lot of camera gear from a place that generally imports from the North American market and their prices are anywhere from 20-40% cheaper than the traditional retailers sourcing from Canon/Nikon Australia all while paying GST on every sale.
well written and from my experience, correct.
The oligopolies here do try hard to pretend that two "suppliers" is not a monopoly situation.
The words "price leader" and oligopoly are unknown outside of Economics 101 classes.
I assume the firms which fund what passes for political parties prefer it that way and the "clever people" like high priced consumer goods so they can berate the citizens for being wasteful.
They opened some stores in Ireland (North & South) a while back. I remember looking in the Belfast one when it opened a couple of years ago, it struck me as an odd mix of MFI and Dixons.
Around that time (mid-2009) the Belfast Telegraph had an article which noted:
"Sales at Harvey Norman's Irish stores have slumped by between 20% and 40% and all of the outlets are unprofitable" but they still seem to be there...
If anyone cares to compare prices, you can try http://www.harveynorman.ie/ A quick check on one item, a PS3 250GB, shows it at 349euros, or around A$450, about half-way between US & Aus prices in the article's table.
...but far too slowly, and even then not by a fair amount.
For example: my wife bought a major kitchen appliance for AUD$1075 which costs AUD$650 in the USA, and that was after the retailer dropped the price by about $100 "because of the strong aussie dollar" -- but for months before that there had been no shift in the price here...
It wasn't so long ago that the pound was worth twice what the dollar was, yet in many tech areas what sold in the USA for $X sold in the UK for the same number of pounds - or more - PLUS VAT.
It still happens, especially when american companies are foolish enough to lock themselves into exclusive distribution agreements, then wonder why international sales are so slow.
When approx 1 GBP=2 USD I wanted to buy CS3, Adobe currency conversion involved no more than changing the currency symbol. I tried buying from Amazon US - sale blocked. I ended up getting a friend in US to buy it and bring the CD on his next UK visit, saved hundreds.
Maybe some kind soul like to create a blacklist website of all the companies that do this kind of rip-off.
Typically companies justify the difference by allegedly funding "local support" (usually turns out to be in India anyway) and "localisation" (change the spelling of color to colour).
This has been an ongoing problem in the UK and Europe for more than a few years. As yet, no logical reason has been provided, there's been plenty of fact twisting in an attempt to make us see something the way it isn't. For the UK, even the new VAT rate doesn't account for the difference, and as for shipping, I would expect the whole cost to be spread across the entire shipment, (not as it seems to be), applied to each and every unit shipped.
I guess it all boils down to how much money the retailers believe they can squeeze from the consumer. You have already provided one solution, buy direct from the US and get it shipped over for the postage, surely a short wait for delivery is worth the massive potential $ savings.
"... buy direct from the US and get it shipped over for the postage,.."
Nice, but remember to declare it to HM Customs and pay the import duty. If you don't, and they intercept it, then you have to go to them to collect it and pay the import duty. For small packages of low priced consumer goods, most people get away with it because HM Customs have more important things to do with their time (or they're lazy/understaffed/whatever).
I was advised last time I had to pay import duty that there is no process for paying the import duty on small to medium items and that you just have to take the chance that you may get an extra bill when the goods are shipped. Personally I'd prefer to have a known price with import duty rather than a random extra levy but it seems that is not possible.
You don't need to collect it from HMRC, if it's coming in via Royal Mail or Parcel Force you just wait for the letter with the extra special number on it allowing you to pay the charges (and their extortionate fee for the pleasure), when you pay you get it the next day.
WIth other couriers they deliver it when it clears customs and you get an invoice attached, or shortly after in the post.
From what I've heard, the "official importers" are a large part of the problem. I've had this discussion several times with shopkeepers who sell mostly imported goods. The story is that they are forced to buy through these "official" sources who charge a massive markup for their services.
In one case, on a visit to England, I bought a pair of reasonably good handmade shoes for 80 pounds (around AU$125) - not cheap, but not exorbitant. A few months later, I took them to my local specialist shoe shop in Melbourne to get the heels fixed. He immediately remarked on my "$500 shoes", and asked where I had got them from. When I told him what I'd paid, he almost cried. He was paying much more than that wholesale. I immediately asked him why he didn't bypass the wholesaler and buy direct - he'd make a good profit even if he paid retail prices. His reply was that he wasn't allowed to. He'd be put out of business if he got caught, and so would the supplier who sold to him. Apparently, the manufacturers appoint a legally-enforcible "official distribution channel" for each country they export to, which must be used.
I had a similar experience with engine spares. I needed a new magneto for a small American-made agricultural engine (Briggs & Stratton). The best price I could get here was around $200. I got the part from an American online supplier for $30 plus $30 shipping. I then went back to my local shop to ask why they didn't use this supplier, and I got the same story. If they were caught, they'd be stripped of their dealership rights and forbidden to sell anything carrying the Briggs & Stratton logo (basically, just about all Australian agricultural equipment). The risk was too great.
This is not the only problem. In many cases Australia imposes stringent type-approval rules, which are deliberately kept out of step with the rest of the world (mostly to protect the local manufacturers - who are largely non-existent). This partly explains why imported cars in Australia are so late arriving and so expensive - it's not worth the manufacturers' efforts to make a special "Australian" version of everything.
However, I think a start could be made by outlawing the draconian practices of the manufacturers with their "official importer" rules, and their penalties for trying to bypass them.
The bigger the capatalist, the louder they scream for government protection when someone starts out-competing them in a fair market?
Thanks Harvey et.al. for the full-page adverts for where to get stuff cheaper than at your own stores. You can't write comedy that good!
The truth may shock, but any 'Capitalist' who petitions government for protection, is in reality Socialist corporatist gangster scum; they had a more obvious example of this corporatism in Nazi Germany.
Read Adam Smith and visit http:\\mises.org, and get an education in economics and Capitalism!
I asked an Oz Apple reseller why the mac mini is $900 - $200 more than in the US and he said (with a straight face) "GST".
I can see why Amazon may not be here. but this isn't really about economies of scale. Does ebuyer really have a larger customer base than Australia could support?
Harvey Norman was selling a mouse (Logitech G5) for $75 which I got online in Oz for $45 from a tiny owner-manager store. This is not about economies of scale. A motherboard I got for £78 ($121) in the UK two years ago is selling for $241 now. You can buy this stuff retail in the UK, air freight it to Oz and still come out well ahead. This is about charging whatever you think you can get away with. Historically this was easy as transport and communications are difficult all the way to Oz.
It isn't just in IT kit. Molasses sugar (89p in Sainsburys) is sold for $5.25. Bendicks chocolate box (3.99 in the UK) going cheap at $42. Gruyere cheese - £10 ($16) in Sainsburys - $50 in Australia. Even allowing for shorter shelf-life and more expensive shipping, this seems excessive. Belgian waffles from Belgium are sold at the same price as the same thing made down the road in Melbourne. I got BlackOps in the UK for £30 - you're still looking at £56 over here.
Showing it can be done is Costco which recently came to Melbourne. If anyone needs to be able to stack 'em high and sell lots it's Costco. They've already got plans for a second store, less than 50km from the first. Economies of scale are not the limiting factor.
So yes, it is a case of one oligopoly against another. However, there is a distinct failure in the willingness to compete which may be cultural. As internet shopping ramps up, Harvey Norman is going to wish for the good old days. 10% is nothing.
Writing from AU here...retail gross margins here are typically of the order of 100% yet most small business people I know are not rolling in money. Who gets it then?
--Their landlords--robbers like Westfield and other assorted gangsters aka property developers, the scum of the earth. Commercial rents here are mental, mainly to prop up many years of property speculation and uncontrolled land banking. This is a huge country but remember, there are only seven things in it: the capital cities (Darwin and Canberra = 0.5 each)
With all this space we have nonetheless managed to create overcrowded cities with enormous pressure on real estate prices. It's an epic policy fail at all levels of government, and it's getting worse.
--Their banks--the four large banks here have a very cosy setup here since they are big enough to have bullied successive governments for decades. Real interest margins (lending rate - deposit rate) and bank fees are the highest in the world. If you can get a loan at all. The other scum of the earth, and another epic policy fail.
--Other overheads--staff, energy, council rates and charges etc etc, which everybody has.
The internet exposes worldwide pricing to Australian consumers, who have been ripped off forever. Long live the grey market and to hell with distribution chains that add cost and no value.
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I run a company that distributes in Australia, Canada and the UK. I charge more in Australia because while freight from China is cheaper, the port fees in Sydney and Melbourne are astronomical compared to Canada and the people that work there are LAZY. It takes me twice as long to get a shipment off the docks in Australia and into my warehouse in Sydney than it takes me to get it off the boat in Vancouver AND across the rails to my warehouse in Toronto.
Fulfillment costs are at least 40% higher because of high labour costs and land costs in Australia (and I have shopped around extensively).
Petrol is more expensive.
What Australia needs is Wal Mart. I hate Wal Mart, but they get everyone into line on consumer pricing and supply chain as well. Big W just doesn't cut it. Imagine if a case of 24 Pepsi/Coke was $20 like it is in Australia in the US or Canada!
Australia is more expensive because the inputs are more expensive. IT's simple math.
These various arguments about local costs and taxes being higher in AU and the market being small only hold for some goods. Software is an obvious exception. There's no excuse for, say, MS Office being any more than 10% (GST) more expensive - never mind $354. Localisation just means adding the Macquarie dictionary to Word.
I'm constantly amazed at the software price differentials whenever I go back to AU. Games released at £30 in the UK are released at $99 (£66) in AU. Localisation for AU on COD? Don't make me laugh :).
cphi's example of Steam price changes is a classic case. Why should the price of software delivered completely online vary because your ip address changes?
These retailers really are daft. Do they not have a PR team? Why not at least attempt to window-dress their greed as something else. Perhaps a "Buy Australian Made" could stir some patriotic feelings. Anything's got to be better than out-and-out whinging about not making as much money as they'd like.
The retailers are dreaming if they think GST is the culprit. I'd happily buy goods from a local Aussie store (online or bricks-and-mortar) for warranty and return reasons if the price difference was only about 10%. The fact is that it's (almost) always a lot more.
I do believe the government itself has estimated that it'd cost more money policing the GST on imports than they would earn from it. In the end, then, it's naught but protectionism.
Keep whining retailers. The more consumers know shopping online is an option, the better.
Australia is a market characterised by:
A low population density
Extreme logistics challenges
A market that is not really all that attractive to business. Risks such as litigation and industrial action are similar to those inthe UK and the USA.
The workforce is overentitled and of generally poor quality. There ate exceptions, but most of them left the cointry years ago.
If there really is gross profiteering going on, then vendors will appear who are able to.undercut exiating retailers. If they *don't* appear, that tells you that gross margins may be good, but that nett margins aren't.
1. 90%+ of the population lives in the major cities - population density is only true if you average across the whole continent. You're just being disingenuous
2. Litigation levels are low and really only apply where companies have been grossly negligent
3. They're correctly saying it's the wholesalers more than the retailers gouging us, maybe you should brush up on your reading comprehension as well as your spell checking before you criticise others for being over-entitled and of poor quality.
4. A trucking monopoly does not qualify as an 'Extreme logistical challenge'
With this level of disinformation I'm curious as to what is your motivation?
"If there really is gross profiteering going on, then vendors will appear who are able to.undercut exiating retailers. If they *don't* appear, that tells you that gross margins may be good, but that nett margins aren't."
Part of the problem seems to be that parallel imports by retailers are either illegal or otherwise prevented, probably through some perversion of IP law (Remember Lik-Sang in the UK anyone?)
So if the wholesalers are gouging, and if you try to buy from another country you get the law pointed at you.... what is there you can do?
the new apple mac app store shows just how obvious this regional uplift is:
aperture 3: AU$99.99 US$79.99
keynote: AU$23.99 US$19.99
graphic converter: AU$46.99 US$38.99
BBEdit: AU$119.99 AU$99.99
...all more than a 10% difference.
remember, electronic delivery means there's not even any shipping charge!
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