There’s been another bit of unfortunate news for the campaign by Gerry Harvey, Myer, Solomon Lew and other retailers to levy a GST on offshore internet purchases under $1000.

The retailers’ campaign has been based on the fallacious claim, especially from Harvey, that these purchases are costing Australian sales, jobs and profits.

In particular, Harvey and other retailers have been moaning about the impact of falling prices for TV sets, especially liquid crystal display (LCD), leaving the impression that these price falls are somehow part of the problem caused by Australians buying offshore.

They aren’t, of course, but the likes of Harvey, Lew and Myer aren’t going to let a few facts get in the way of their self interest.

Woolworths has also acknowledged the damage falling TV prices are having on its Dick Smith and Tandy chains as the strong Australian dollar drives down the cost of imports.

But this week, two of the world’s biggest consumer products companies, Panasonic and Sony, have  reported interim or quarterly profits, and blamed weak TV prices (especially LCDs).

That’s because intense price competition from LCD set makers in South Korea (Samsung and LG), plus China, are driving down prices, causing problems for the big producers in Japan. And to add to the downward pressure on prices in Australia, the dollar’s rise has left the likes of Harvey stuck with higher-priced inventory  on which he has to cut prices to shift. Add to that the reluctance of Australians to consume (instead they are saving) and we have a problem for Harvey Norman, Myer, Mr Lew and other slow moving bricks and mortar giants.

The other problem for the likes of Harvey Norman, as well as Sony, etc, is that big-screen TVs are now a mature consumer product in the developed world and the subject of growing price competition in emerging markets such as China, Brazil, India, etc.

The Financial Times reported overnight: “Sony president Sir Howard Stringer’s case for restructuring the Japanese group’s television business has been bolstered after Sony said tumbling prices for liquid-crystal displays dragged down earnings in the quarter to December.

“The 8.6% decline in third-quarter net profit was smaller than analysts had forecast, owing to strong sales of video game titles by Sony’s PlayStation games division. Profit at its ‘networked products’ unit, which includes PlayStation, more than doubled to ¥45.7 billion ($559.7 million), Sony said on Thursday.

“But the long-running price war in LCD TVs, combined with slowing growth in demand for flatscreen sets, helped drive down earnings at the group’s consumer products business by 47%, to ¥26.8 billion. Sony cut its forecast for TV sales in the financial year ending in March by 2 million units to 23 million.

“Before the change, Sony had been looking to increase production volume in TVs as a way to bring down costs and compete with more efficient producers such as Samsung and LG of South Korea. It had announced plans to invest up to $1 billion in an LCD factory being built by its rival Sharp in Japan, and to double capacity at its flagship European television factory in Slovakia.

“Since then, however, it has put the Sharp investment on hold — most likely for good — and sold off the Slovakia plant and another in Mexico to the contract electronics manufacturer Hon Hai of Taiwan. It has also closed TV assembly plants in Japan and the US.

“Weak television sales also held back earnings at Panasonic, which reported a smaller-than-expected rise in net profit on Wednesday. Shares in Panasonic dropped 3.2% on Thursday.”

And we don’t have to tell Harvey and other retailers that this is happening, they know and they also know it is a problem they can do little to solve.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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