Menu lock

Markets

May 9, 2011

Online retailing: the great Australian gouge

Australians are being charged far more for products than overseas consumers -- and not just by bricks-and-mortar outlets. Crikey examines the expensive goods and the retailers' hypocrisy.

Australians are paying far more than overseas consumers for an extensive range of products, despite the Australian dollar surging past parity with the US dollar. A Crikey analysis shows consumers sometimes pay more than twice as much for identical products sold in the United States, the United Kingdom and elsewhere.

The high comparative costs of books sold locally and the inexplicably higher prices at Apple’s iTunes store for Australians are well known. But the price differential extends across a number of products. The results further discredit the campaign by Australian retailers to target online shopping by demanding the government lower the GST threshold on goods purchased overseas.

In response to a Crikey piece showing the flawed maths behind the retailers’ campaign and claims wholesalers were stifling local online retailers, a number of readers pointed out alarming disparities between local prices and prices available online:

  • Pentax lenses costing nearly $850 locally are available for US$510 from a US site.
  • High-end audio equipment costs three times as much here as overseas.
  • Harley-Davidson rider Greg Bean sent extensive details of the remarkable lack of a price differential between Harleys sold in Australia and New Zealand, despite the different currency. Based on comparative dollar values, local Harley fans can expect to pay one-third more for the same bike here than in New Zealand, and for top-end models up to $9000-$11,000.
  • Cycling equipment: tyres costing $50-70 locally available online for less than $30; bike chains costing $50-60 available for under $40 from UK sites; cassettes costing up to $100 here are available for under $50 overseas.

A comparison of other goods using local and overseas sites readily yields more examples.

The same LG refrigerator costing $2500 at Harvey Norman — billionaire Gerry Harvey was the initial face of the retailers’ campaign against the internet — is available to American consumers from Amazon for just under US$1500. A Sharp microwave costing $199 at Harvey Norman is at US$85 from Amazon and US$74 at Walmart. A $150 drill at Bunnings is available for under US$130 at Amazon.

Even some cars are substantially cheaper. The same model Mazda6 costs under US$28,000 on the road in America compared to $47,000 here, a difference far in excess of the tariff of 5% still imposed on Australian consumers to prop up local manufacturing.

The one product Crikey examined that was competitive was television sets: large plasma TV sets cost about the same at Harvey Norman here as they cost in the US, and in fact may become slightly cheaper as the dollar rises.

The standard line from Australian retailers is that these price differentials are driven by the high cost of operating retail outlets in Australia — that they face high rent costs not faced by online retailers overseas, and they have to pay higher wages than US retailers.

That, however, doesn’t explain the differential in prices in niche products with minimal retail footprint like high-end audio or brand-name motorbikes. And it certainly doesn’t explain why online prices are higher in Australia.

Apple’s charging of Australians more for the same stream of 0s and 1s compared to Americans continues — the new Beastie Boys album currently costs Americans US$9.99 but more than twice as much, $20.99, via iTunes in Australia. And users of the game purchasing site Steam have long complained about price differentials on the site between Australian and US games, reflecting the pricing policies of distributors, with some popular games titles costing more than twice as much here as when downloaded in the US.

This “international price differentiation” is one of the issues under investigation by the Productivity Commission in its review of the retail industry. Katrina Lee, strategic policy adviser for Choice, says they want to see the PC inquiry focus more on the problems faced by consumers.

“The question is why bricks and mortar retailers can’t keep up and compete with online competitors,” she said. “Australians do want to buy locally, and there are successful local online retailers, both bricks-and-mortar operations and pure-play online operations. But the large retailers have relied on bricks-and-mortar outlets and offer limited sites and consumers are sick of it.

“Retailers blame the appreciation of the dollar but it should be reducing their costs too and we’re not seeing that.”

*Know of more examples of big price differences between the same product sourced locally and overseas? Crikey is compiling a list — send your tips to boss@crikey.com.au.

Correction: this article originally said the comparative data for Harley-Davidson motorbikes was between Australia, the US and New Zealand; the data only relates to Australia and New Zealand. Price differences between Australia and the US are greater still than those between Australia and New Zealand.

We recommend

From around the web

Powered by Taboola

78 comments

Leave a comment

78 thoughts on “Online retailing: the great Australian gouge

  1. wayne robinson

    I buy content for the Amazon Kindle App on my iPads (I have two) one linked to an Australian account, one to an American. For some eBooks, the Australian edition is cheaper. Usually, the American one is less expensive. The price is set by the respective publishers who have the e-Book rights in the different markets.

  2. JRAPQQ

    Comparing prices with prices in America can be tricky, as all US prices are before taxes. There can be State taxes, and local (ie municipal) taxes – this explains why in some areas there will be an abundance of shops and outlets on one side of a road, and nothing on the other. Nevertheless, almost everything is cheaper in America – except tipping!

  3. bally

    I looked at these economics with a curled lip firmly in place. When I returned to Oz from Europe I was aghast at the price of things here. A good example is The Economist itself: in Australian dollars, it is $117 in the US, $155 in the UK, and a whopping $365 here, all for a year’s subs. No, the difference isn’t postage, it’s just much cheaper in the US.

  4. (the other) HR Nicholls

    The bike parts one is always a bugbear for cyclists and local bike shops are taking a hammering from the amount of business that goes to the major British online shops. I’m assuming it’s more complicate than this, but on the surface the price differential certainly appears to be pronounced when importer/distributors are part of the supply chain – Specialized dropped their prices after establishing a local office and Giant might even be a shade cheaper than the US equivalent, but the majority of the other brands get marked up. Tyres are often double the prices available online!

  5. herben

    I was at the filming of the Australian “Top gear” TV show the other day, where they did a piece on some big fast 4 door jag. I just can’t remember which one it is. The presenters loved the car, but said it was ridiculous. The car is over $400,000 in Australia. Same car in the US? Just a smidge over $100,000.

  6. mentalist

    The difference in prices in camera gear can be remarkable at times. Someone’s gouging, whether it be the retailer or wholesaler.

  7. Peter Bayley

    Network Storage device: US$850.00 Australia $1300.00. Disintermediation rules!

  8. michael r james

    I’m not sure it is fair to compare prices with the largest unified single-currency market in the world, with >300 million consumers, to one of the smallest and geographically isolated–and thinly spread over the 6th largest country–in the developed world. (Actually, let me change that statement: I am sure it is unfair and unreasonable.) I haven’t done any comparisons recently but I am pretty sure most of Europe would compare equally unfavourably to the US. And then there is Japan where even Japanese goods cost more than in the US.

    But, ok, an impartial expert look at the issue would be welcome, even if I remain rather more sceptical than BK about PC reports especially following the one on PIR which completely ignored international copyright laws and shipping costs. Comparing like with like would be a start: so comparing US online book prices with bricks-and-mortar stores in Oz is not the correct comparison; US bricks-and-mortar bookstores are having all the same troubles surviving as here. And with such a tiny market Australian online stores can not possibly compete with the behemoths in the US.

    Incidentally Apple iTunes took forever for Apple to introduce to Australia, entirely due to prolonged negotiation with the big labels. Clearly for them to be bothered with such a small market they expect higher margins, and probably in the end it was not worth Apple’s effort to resist it for the same reason. (I believe the long delay shows that Apple did resist it.) Of course it is copyright law which divides the world into regional markets that prevents Apple selling us music etc over the internet from their US sites at US prices.

    Bally 2.00 pm: quite a bit of the difference is postage; our market is too small for it to be printed here so it is air-freighted in.

  9. swoof

    Intrepid Travel offers anomalous pricing for its holidays depending on what country you register as ‘your’ country when on their website. For example, for the ‘Spirit of New Zealand Northbound’ tour, if you are on their USA website, the displayed cost is US$3,715 while if you are on their Australian website, the displayed cost for the same tour is AU$4,225. Hmmm …

  10. Shane

    One thing I do wonder about is if the Australia / US free trade agreement has any effect on the US based companies like Apple and Valve/Steam being able to actively discriminate against Australian consumers?

    eg. does the FTA provide Australians with some right to the same price as US consumers for exactly the same packets of 1s and 0s probably delivered from the same server?

Leave a comment

Telling you what the others don't. FREE for 21 days.

  • This field is for validation purposes and should be left unchanged.