With apologies to Robert Browning:
And out of the houses the retailers came tumbling.
Great retailers, small retailers, lean retailers, brawny retailers,
Brown retailers, black retailers, grey retailers, tawny retailers,
Grave old plodders, gay young friskers,
Fathers, mothers, uncles, cousins,
Cocking tails and pricking whiskers,
Families by tens and dozens,
Brothers, sisters, husbands, wives —
Followed the statistician for their lives.
Out they tumbled yesterday, after the Australian Bureau of Statistics revealed online purchases below the $1000 GST limit topped the $7 billion mark in 2012-13, and are a bit higher than the Bureau’s previous estimates of around $6.2 billion. It was a reaction so predictable that Fairfax’s Peter Martin forecast it, saying “retailers are certain to jump on the figure and say it shows how much they are being undermined by untaxed and unchecked parcels from overseas”.
Cue grave old plodder Gerry Harvey: “[i]t’s huge and it doesn’t surprise you because every second Australian buys something online overseas. Retailers have been going on about this for some years now, telling government what’s going to happen, but the government has just ignored it totally and it was always going to come back and bite.”
Cue young — OK, not so young — frisker Russell Zimmerman, executive director of the Australian Retailers Association: “The concern isn’t that people are spending money online — either locally or overseas. The concern is that it’s not a level-playing field. We believe that the firm of online [shopping] generally will grow, and as that figure grows, there will be a bigger loss of income to the states and territories if they don’t do something about the low-value threshold.”
As Barclay’s chief economist, Kieran Davies, noted, while offshore online transactions have been growing rapidly, they only form a tiny part of retail sales. That’s the way it’s been for the last couple of years.
The ABS has promised more detail on local online purchases by consumers in the November retail sales report (to be issued next January). But the statisticians at Belconnen in Canberra have already published a small amount of detail which hints at the way traditional retailers are being left behind in Australia and it’s not that they are being swamped by the pure online operations such as Gray’s or The Iconic, but the likes of fast food floggers, such as Pizza Hut and Domino’s, are doing it better as well
“The ‘pure-play online retailer’ accounted for around $160 million a month of retail sales, or close to $2 billion a year.”
The ABS said in its July retail sales report that around $4.6 billion a year was being spent on online purchases by consumers in Australia. Total domestic online sales were put at 1.8% of May’s $21.87 billion in sales, seasonally adjusted. That’s around $400 million. According to the ABS “[p]ure-play online retailers contributed approximately 40% of this estimate. Multi-channel retailers contributed the remaining 60%, of which half was food-related (i.e. derived from the food retailing and food services industries).”
So take away/home delivered food derived from online ordering, plus the home delivery of groceries and other items accounted for an estimated $120 million in May, or more than $1.2 billion a year. That will be an eye opener for a lot of online retailing enthusiasts and technology advocates. Domino’s and Pizza Hut are as much “bricks and clicks” retailers as Myer, Harvey Norman are — in fact their clicks are far stronger than the bricks, which are just storefronts in many cases. They have adapted far more quickly.
Multi-channel retailers refer to the likes of Myer, David Jones, Noni B, Specialty Fashion Group, Kathmandu and similar bricks and mortar operators who are slowly expanding their online offers. They account for another $120 million a month. or more than $1.2 billion a year. Speciality Fashion said its online sales jumped 50% in 2012-13 to $22 million and Noni B said its online sales reached $1 million in the year to June. Kathmandu has reported that its sales are growing quickly and were around $18 million in the year to July.
The “pure-play online retailer” accounted for around $160 million a month of retail sales, or close to $2 billion a year.
So if Harvey and his mates want to be really honest with themselves, they’d take a look at the success of Pizza Hut or Domino’s. These groups are competing for the consumer dollar online and winning because they understand about pricing low and order fulfillment (you have to aim high and stay there).
And this of course doesn’t include the growing pure online downloads, such as ebooks from Amazon, gambling, video games, software, and playing games online. Buying games online, registering on the New York Times, or the Financial Times, and a host of other goods and services are all part of the online world where Australian retailers can’t or won’t compete. And how do you find out? And how do you levy GST?
But don’t expect any of that to sink in to traditional retailers. Instead, expect them to come tumbling out again in January when the Pied Piper of Belconnen produces some more online retail data.
19 thoughts on “The surprise take away message for domestic online retailers”
Teresa Green
October 6, 2013 at 2:57 pmZimmerman?…Harvey??
Rais
October 6, 2013 at 9:24 pmI wanted to buy a computer item. Gerry Harvey had been complaining about the volume of online purchasing and its unfair advantages so I thought I’d give the local Harvey Norman store a go. I rang them and they said they’d put me through to the computer section. The phone rang and rang and eventually the original person came back on the line to say the obvious, the computer section wasn’t answering. She asked me if she could do anything else for me and I said no thanks and went and found the item I wanted on line. Cheaper.
Alex Milne
October 7, 2013 at 8:59 amThe figures are misleading, a big portion of the GST being missed is the supply of samples to the big retailers and wholesalers. They wouldn’t actually pay this GST instead input tax credit and deferral schemes kick in. The actual amount you would collect would not fund the cost of Customs building a new system, because they have proven they can’t do it.
If Aussie post were forced/allowed to put up the price of delivering these overseas parcels to profitable levels and were able/forced to drop domestic prices you would find domestic retailers in a much stronger position competitively.
Once upon a time you used to be able to park at a shopping centre without the threat of paying for the privilege.
Domestic retailers have always been slow to innovate, some are catching up. Levelling the playing field has many facets, fiddling with GST is probably the hardest and most expensive, starting with the easy and cheap options would be wise.
Hamis Hill
October 7, 2013 at 10:47 amUltimately any increased B&M revenue only goes towards servicing the mortgages on said premises, the valuation of which and the mortgage on which rises along with profitability, Win, win for some. Lose, lose for all the others.
And that is the real problem; the “idle rich”, who at the receiving end of the process, neither work nor pay tax, because they also own the major political parties, who tout their services to the highest bidder, and that isn’t the ordinary taxpayer.
Ask Adam Smith.
He’ll tell you!
All the other minutiae based arguments are just empty, meaningless noise; the noise of “useful” idiocy.
Simon Mansfield
October 7, 2013 at 12:06 pmThey need to build a better system to speed up imports above 1000 dollars. Which currently get stuck in the ancient system Customs runs and makes it customs agents use. Rebuilding this system to work more efficiently would then allow GST to be charged for next to nothing in processing costs.
The whole anti GST on imports meme is just what it is. Consumers thinking it’s a nice little lurk and let’s ignore the consequences. Most countries have a far lower threshold for GST/VAT free imports. Some are as low as 20 euro. It will be changed in Australia eventually. But not before billions in lost GST collections are made up for through either reduced services and or higher taxes elsewhere in the system.
Asking a govt departments to do something like is always going to be a tall ask. It’s work, it’s change, it’s all just a hassle when all I want is my RDO approved. But change it will and the middle classes will bleat as usual.
Teresa Green
October 7, 2013 at 12:50 pm@Hamis Hill”And that is the real problem; the “idle rich”, who at the receiving end of the process, neither work nor pay tax, because they also own the major political parties, who tout their services to the highest bidder, and that isn’t the ordinary taxpayer.”
I like a man who navigates their way around all the commentary.
But even this statement remains an italic in the bigger picture. Even so, I am quite happy to latte-marry you for thinking outside the square.
Hamis Hill
October 8, 2013 at 9:25 amWhy, thankyou, Teresa, and I hope that your “approval” encourages other men to think outside the square.
Adam Smith in his Wealth of Nations “articles’ was constantly scathing of the partisan, obsfuscatory arguments indulged in by proponents in the economic debate, and was always at pains to ensure at the end of his articles that his readers understood the ultimate control and domination of the economic processes by the lenders who sought in everything higher interest rates, which Smith contended, and indeed demonstrated, must always come from lower wages.
The ancient recipe for economic destruction.
If we look at the subject under discussion, the complaints of retailers concerning their dearth of customers, never is there any complaint about the interest they pay to remain in business, and always is there an ambition to reduce the wages of their staff.
Forgetting that it us not the “idle rich” who provide them with their profits but people with employment whose wages create the market for their goods.
Retailers, generally remain a spavined pack of snivelling, self-interested, economic frauds who would doom themselves to their own destruction were they allowed to totally indulge their greedy stupidity.
Perhaps they will allowed the requisite leeway to affect their own demise by “their” new government, with contracting wages contracting the market, propelling their business down the tubes, and while cash strapped (underpaid?) customers seek and find the bargains enjoyed by the world market, outside the petty kingdoms of Westpaddock retail monopolies.
Then watch the bricks and mortar empires of the idle rich collapse into dust.
Proving greed is actually a deadly sin, bequeathing the “Idle Rich” a hell of their own creation, considering that such are denied entry to any promised “Heaven on Earth”?
That “Heaven on Earth” the idle rich misrepresent as their “Sundays in The Mall”, worshipping Mammon with credit cards?
They are very religious, these “conservatives”.
That latte-marriage ?
Still holding out in this “bigger picture”?
Those “Idle Rich” utopias of “money for nothing and your chicks for free” always collapse in the face of reality, at least history tell us so.
And we may thank Adam Smith for introducing the historical method into economics, part of the bigger picture that some wish would just go away.
Pardon the intensity and the Dire Straits lyric.
Teresa Green
October 10, 2013 at 6:44 pmHi Hamis
Why do I always get the feeling I’ve wasted my life when I read your posts?.( Big Grin )
I am going off to do some research on Adam Smith. You’ve only quoted him 100 times in the last 6 months but he must have at least something going for him..hehehaha.
Love your intensity.
Hamis Hill
October 11, 2013 at 4:45 pmTeresa, you won’t be sorry, once you get past Smith’s lecturing style of writing which turns some away, but is intended to eliminate any ambiguity in his arguments.
And, besides, why wouldn’t you read political economy delivered by Smith’s historical methods, especially when there are so many who do not appreciate his attempt’s to “understand commercial society and better it”.
Certain conservative types would prefer that the underlings not understand how “their conservative commercial society works”, or their “political economy” or see through history exactly how they came to be entrenched in their positions of relative power, which couldn’t possibly be any better than they already are, thank you very much.
“We have no need of your betterment Mr Smith!!”
But, Teresa, be prepared to be branded a Marxist if you begin sprouting Smith’s words of wisdom.
Here’s a quote from an article on Smith. “…his ideas are not all that conservatives might suppose…Smith’s system of economic liberty entailed more than limited, cheap government, it also required the constant intervention of government to check the sectional interests of capital.
Though no conservative would want to disown Smith, many may have good reason to make little use of his ideas.”
All that is evil fears “The Enlightenment”?
There’s one reason for the neglect of Smith’s works.