Nov 20, 2012

Click frenzy, profit wait for local retailers

Australia’s big retailers are trying to jump on the Click Frenzy bandwagon, while Target is still fighting to make a profit online. The numbers for many simply don't add up.

Target We'll be watching the start of Click Frenzy -- the Australian retail sector's attempt to steal a little limelight away from the Black Friday and Cyber Monday shopping events in the United States -- very closely tonight. It's a good concept and a valiant attempt to grab a few of the retail dollars that will be speeding around the internet in the lead-up to Christmas. We don't have a sense of the scale of discounts on offer in Australia, but the promotion has certainly built a bit of hype and it's a good test for the attractiveness of the offerings of Australia's big retailers like Myer, Kathmandu and Target who have got on board. Those retailers will be hoping for a good response. But some may have to wait a little longer than you might think to turn a profit. Late last week I spoke at the Victorian Country Press Association's 102nd annual conference in Geelong. Speaking before me was Dene Rogers, the managing director of Target, which is headquartered in the Victorian regional centre. Rogers gave a fascinating presentation on the challenges facing Australia's retail sector and how Target is meeting them. One thing he did was provide a great breakdown on the economics of selling into Australia if you are a large overseas retailer like Amazon, Asos or any one of the major overseas department stores. Take a product that costs $100. If you are an Australian retailer selling online, you add up to $10 for customs duties and excises, $11 for GST and $9 for delivery to take the product’s price to $120-130. If you are an overseas retailer selling that same $100 product, you pay no customs or GST, you pay the same $9 in delivery, such that the goods cost $109. Then you take away a 30% swing on the Australian dollar and the price falls as low as $72. The result, as Rogers says, is that many retailers stayed away from online because they simply couldn't turn a dollar. Of course, Australian retailers know they need to follow the crowd and they're doing it in droves. At Target, for example, the number of products online has been increased from 15,000 to 60,000 and sales are growing at 25% a month, albeit from a low base. The improved sales have helped Target go from losing 40% in its online business to breaking even. Rogers has done well to turns things around and he expects profit to flow from online sales in the next few years. But the data underlines why Australia's big retailers have been relatively slow to start selling online, and the size of the challenge in front of them. Click frenzy or not. *This article was first published at SmartCompany

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5 thoughts on “Click frenzy, profit wait for local retailers

  1. tinman_au

    Pretty well all my online buying is done through Australian companies (like Kogan and UMart). The only stuff I buy online from overseas is stuff that I don’t seem to be able to source here, so while a lot of Australian retail looks for excuses, some of them are actually doing it right…

  2. JamesK

    Agreed, tinman. There are also people who don’t live within driving distance who would probably like to shop online.

  3. Shaniq'ua Shardonn'ay

    And the DJ’s site has crashed.
    It seems that digital incompetence is alive and well in Australian senior management.

  4. michael pascoe

    Oh please. James was either enjoying journalistic hospitality in a big way and didn’t quite get the details down, or Dene was pulling an almighty swifty on an audience not much good with numbers.

    “Then you take away a 30% swing on the Australian dollar and the price falls as low as $72.” WTF?

    This is nonsense. It suggests overseas online retailers magically source product 30 per cent below Australian retailers because we somehow have a strong currency.

    On the broader question, I somehow can’t see too many OS retailers make a big effort to sell Target brand stuff online.

    Michael Pascoe

  5. Xoanon

    Like Michael P, I can’t see the use of this story without firm numbers for us to assess. All sorts of questions occur, eg:

    – Why does postage cost the same for local and overseas retailers? Is this correct?

    – Is excise payable on all these goods, and how much is it?

    – Wouldn’t overseas retailers be paying their own version of excise and taxes?

    – Wouldn’t a rising $A make these goods cheaper for the Australian retailer to import?

    If local retailers want to impresss us or government with numbers, they have to make sense. Which is not to say that Rogers’ didn’t, but we do need more detail. Could Crikey invite Rogers to supply that speech for republication?

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