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Jun 8, 2011

Are we being gouged on delivery as well?

Not merely are Australians being ripped off by local retailers for internationally available goods, it costs more to deliver them.

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Australians aren’t merely being gouged by bricks-and-mortar retailers, they’re paying more than American and British consumers for delivery when they order products online, according to eBay.

The online retailing company’s submission to the Productivity Commission’s retail inquiry, put together by Allen Consulting Group, includes data on shipping costs within and outside Australia. Prompted by shipping costs being the most frequent issue of concern to local online retailers, eBay compared the cost of posting typical online-purchased products — shoes and DVDs — from Auckland to Sydney and Melbourne to Sydney, and found dispatching items from Auckland cheaper for both. The company also used data from eBay websites in Australia, the US and UK to check domestic shipping rates across the same range of products in the three countries, and found that Australian domestic shipping rates, at 2.7% of purchase price, were consistently much higher than those in the US – 1.5% – or the UK – 1.7%. EBay has said it is working with Australia Post to try to overcome online retailers’ concerns.

Australia’s parcel delivery market is dominated by Australia Post, which recently stated that it controlled two-thirds of the Australian market, Australia Post relies on growth in parcel delivery driven by online retailing (and delivering junk mail) to offset the decline in traditional letter writing. Criticism of delivery services also emerged from the submission by Choice, which found “common complaints from members included the cost and delivery times of products ordered from Australia online retailers, with some noting that it would be faster and/or cheaper being sent from overseas”.

Australia Post rejected the criticism. “We believe that Australia Post’s parcel service is price competitive and best value for money for the average user, compared to alternative offerings in the domestic market,” an Australia Post spokesperson told Crikey.

“There are obviously differences between shipping domestically if you compare the US, UK and Australia, but these are driven by numerous factors and are not always a clear comparison. For example, the UK is a much smaller and densely populated country, which makes comparisons very difficult. Also, both the US and the UK are much further advanced in their eCommerce market growth and therefore benefit from economies of scale. Of course, as the eCommerce market continues to grow in Australia, we too will be better positioned to take advantage of economies of scale. In the mean time, we continue to look at ways that we can keep the costs of delivering parcels low, as well as providing greater choice and convenience for our customers. For example, at St Leonards Delivery Centre we are currently trialling 24/7 parcel pick up.”

The eBay submission (not yet online at the PC site) also discredits claims by the National Retail Association that further growth in online shopping would cost jobs. The NRA claimed recently that online retailing threatened 88,000 retail jobs, and has been backed by the reactionary Shop Distributive and Allied union. But the Allen report details expected growth in transport, domestic online retail and other domestic industries, and provides modelling suggesting a decrease in the $1000 GST threshold would see low-value imports face an effective 5% tariff due to customs charges, and a marginal net fall in employment.

The inquiry has also been used by an obscure “AstroTurf ” campaign funded by Microsoft to attack Google. The “Initiative for a Competitive Online Marketplace” provided a submission entirely aimed at attacking Google, and demands legislative action to reduce Google’s market share.

It is ICOMP’s view that where there is a single dominant search engine the current framework in the digital economy requires scrutiny, especially given the dependency of so many businesses on the services of a single search provider and online advertising network ICOMP believes that in light of the growing importance of online platforms in Australia, the existing legal and regulatory framework should be applied with the aim of maintaining and restoring the balance in the system and providing online retailers and consumers with greater choice. Where the pre‐existing framework proves to be inadequate, it will be necessary for the legislator to step in and make the necessary changes.

Who is ICOMP? It’s essentially a front group for Microsoft, dedicated to attacking Google at every opportunity. it was first unmasked in 2007, and continues to operate, primarily in Europe. Journalist Richard Chirgwin has more detail about the local version of ICOMP here. Microsoft is of course keen to promote its own search engine, Bing, ahead of Google. But according to the ICOMP submission, Bing only attracts 4% of searches in Australia, compared to Google’s 92%.

Microsoft might need more than a legislator to “step in”.

Bernard Keane — Politics Editor

Bernard Keane

Politics Editor

Bernard Keane is Crikey’s political editor. Before that he was Crikey’s Canberra press gallery correspondent, covering politics, national security and economics.

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