Consumers lose under "internet tax"

[wbosher]

Even with the GST, a lot of items will still be considerably cheaper to buy from overseas online. I'm speaking from an NZ perspective as the same argument is going on here, but I would imagine it's all the same anyway.

I often see items in bricks and mortar shops for twice the price that I can get something online overseas, and that includes GST and shipping. I would like to support local businesses, but if they are selling items for twice (or more) the price, then it's a no brainer.

 

[pk.sax]

I have very little sympathy for checkout chicks.

Do some work. FFS.

 

[real_beer]

I have very little sympathy for checkout chicks.

Do some work. FFS.

pf your outlook is very outdated for these modern times. Next visit to the supermarket have a good look & you'll see that a lot of your so called chicks are really old boilers.

 

[nu_brew]

pf your outlook is very outdated for these modern times. Next visit to the supermarket have a good look & you'll see that a lot of your so called chicks are really old boilers.
You'll notice colesworth would rather you do you own check out chicking.

 

[Not For Horses]

asshattery

And the award for word of the year goes to...

 

[Spiesy]

Apologies to those who work in wholesale but the local wholesaler is a dead business model. Get out while you can. In fact the wholesaler business model is dead globally. If I ran a retail outlet, why would I go to a wholesaler when I can buy direct from the manufacturer and cut out the middle man? Except of course where restrictive terms of trade force me to? Wholesalers are a throwback to a time when shipping was unreliable and expensive (the days of sail) and when consumers couldn't contact manufacturers directly. They add zero value these days and will be gone within a decade.

Sorry mate, but I find that to be a pretty ignorant comment.

The only retailers able to withstand the model you are suggesting, and still provide reasonable service and pricing are HUGE retailers. "Warehouse" chain retailers like Bunnings, Chemist Warehouse and Dan Murphy's. If you're cool for the majority of independent, "mum and dad" retail stores to go by the wayside then I think that's a really sad point of view, and a sad future. And look around... mum and dads and independents are being squeezed out everywhere... sure, there's still a spot for niche/boutique stores, but it ain't what it used to be since Globalisation came knocking (BTW, there should NEVER be an excuse for poor service, that is just bad/lazy business).

Wholesalers/distributors provide a lot more than you may think...
They buy in bulk, usually (in Australia) for the demands of a nation (something a retailer cannot really do). They hold bulk amounts of large amounts of SKU's in stock. They provide financial assistance (credit) to retailers. They provide training to retailers. They provide marketing and promotions for the products. They provide support, servicing and warranty repairs.

All of these things cost money, and these days - a distributor is probably only making 30-35% on top of their cost... sometimes a lot less, sometimes more. The discount they're getting for buying in bulk offsets this margin somewhat, as does the services outlined above.

The fact is we enjoy a pretty awesome standard of living here in Australia. We're continually rated as one of the most liveable places in the world.
We enjoy a decent minimum and average wage, good quality public health, education and welfare and a pretty stable social environment... all of these things COST.
Employers (retail, wholesale, everyone) have pretty high costs compared to other countries (high wages, super, taxes, utilities, insurance etc). And we have a small market compared to the rest of the world, our buying power is not as strong as the US market - for example.

When small business fails, and it is failing - that standard of living will drop, it has to.

Changing the GST threshold certainly will not solve the pricing disparity, but it will help. And really, I think it's only fair that the GST should apply to all.

 

[labels]

I find the pricing disparity between me buying an item online to buying an identical article from a retail outlet can be quite alarming. Recently, an online article was four for $12.00 plus free delivery. Local retail is $18.00 for one. The online store is Australian.

I run a small manufacturing business but I don't mark stuff up to that extent or anywhere near it. Protecting jobs or protecting greed?

A better model would be the first $100,00 is GST free and you pay after that no matter what the cost. The retailers are asking for $25.00 which is getting silly in my opinion.

 

[Ducatiboy stu]

Airgead...sadly you are on money. Local wholesalers are a dying breed.

 

[Spiesy]

Airgead...sadly you are on money. Local wholesalers are a dying breed.

Well, it's the retailers who are dying right now. Not wholesalers.

 

[wide eyed and legless]

I agree with you Spiesy the retailers are suffering world wide but on the other hand the wholesalers are feeding the retailers, if the retailers are finding it tough the wholesalers will be suffering as well. The only wholesalers who would be safe from the current trend of buying on line would be importers of big items such as furniture etc
.
What I noticed started to happen when things got tough globally post 2008 was that a lot of manufacturers in China, as they would be the first to feel the pinch started selling on line.

I was buying an article which cost me about 45 cents another 20 cents for shipping (I am to embarrassed to say what I was retailing these items for) average sales around a thousand a month world wide went on for almost 2 years then started slowing right down, the manufacture was selling them on eBay for $4.00 each.

Now I notice a lot of manufacturers in China of goods easily shipped are retailing themselves, they don't care who's gravy they are dipping their bread in, and retailers can't do anything about it, and with so many goods coming in through the post how can the customs police each article, they can't.

They might be better off putting a levy on overseas credit card purchases, I don't know the answer.

 

[spudfarmerboy]

I have very little sympathy for checkout chicks.

Do some work. FFS.

Yeah, know what you mean.
I feel the same way about engineers.

 

[Airgead]

Sorry mate, but I find that to be a pretty ignorant comment.

The only retailers able to withstand the model you are suggesting, and still provide reasonable service and pricing are HUGE retailers. "Warehouse" chain retailers like Bunnings, Chemist Warehouse and Dan Murphy's. If you're cool for the majority of independent, "mum and dad" retail stores to go by the wayside then I think that's a really sad point of view, and a sad future. And look around... mum and dads and independents are being squeezed out everywhere... sure, there's still a spot for niche/boutique stores, but it ain't what it used to be since Globalisation came knocking (BTW, there should NEVER be an excuse for poor service, that is just bad/lazy business).

Wholesalers/distributors provide a lot more than you may think...
They buy in bulk, usually (in Australia) for the demands of a nation (something a retailer cannot really do). They hold bulk amounts of large amounts of SKU's in stock. They provide financial assistance (credit) to retailers. They provide training to retailers. They provide marketing and promotions for the products. They provide support, servicing and warranty repairs.

Nahh... that's pre-internet thinking. Ubiquitous communication has changed the marketplace completely. Wholesalers had value when retailers (and consumers) either could not contact a manufacturer directly or it was not economical to buy in small lots direct from the manufacturer. That situation no longer exists.

The entry barrier to setting up a shop and selling direct to a worldwide market is exactly zero these days ie: the cost of an ebay account. Mum & Dad retailers may be suffering in brick&mortar shops but are booming online. Brick&mortar will end up being exclusively premium shopping experience (and premium price - high end boutique, jewelry, etc) or service type industries that need physical presence (physical services, cafes, restaurants, etc). These days someone can set up an online presence in minutes in a nice niche market and make a very good living selling direct from the manufacturer to the public. No wholesaler required.

On the other side, as a manufacturer its now easy to sell direct to retailers or even direct to consumers. Wholesalers used to take that communication and shipping burden away from manufacturers. Now those burdens don't exist any more. An online portal to sell stuff direct takes 5 minutes to set up and hooks direct into your manufacturing control system to regulate production. I don't need wholesalers. They no longer add any value to me.

A lot of the services you mention wholesaler providing again are no longer required - manufacturers can train retailers direct via video or a training provider can do that for a flat one off fee without having to stick a wholesale markup on everything the retailer buys. Freight aggregation is still needed to reduce cost but freight aggregation companies offer that service again without putting a markup on everything. In these days of just in time delivery, holding inventory is considered waste. Retailers can now easily promote direct to consumers in very targeted ways. And so on.

There will be some wholesalers that survive but they will offer a service that a retailer (and eventually consumer) is prepared to pay a premium for. Warranty repair may be one but sadly we are a disposable society and people will chuck it away and buy a new on as its less hassle. Sourcing a particular class of product and certifying that it meets particular specs may be another as it moves a regulatory burden from the retailer (certified fair trade/organic/sustainable/gluten free/meets standards/whatever). I honestly can't think of many others.

There will be space in the market for information brokers - putting specialist (and hard to find) manufacturers in touch with retailers and consumers. Famers direct is one example - it lets consumers find and buy direct from farmers in their area who would otherwise be very hard to locate. This again completely eliminates the wholesaler. The information broker model could also eliminate the need for the certification type of wholesaler as well as they could do that sort of vetting as well.

There will be room for companies that provide services that cater to retailers and consumers - card payment gateways for payment aggregation, online marketplaces that provide pre-made online shops with merchant facilities to reduce the barrier to entry (like ebay only more specialised). They will be a "clip the ticket" kind of model where they take a small fee from a large number of transactions.

What there won't be space for is traditional wholesalers. The market has changed and the traditional wholesale business model, has gone away. Your whole value proposition is now either no longer of value or can be provided by others at lower cost.

If you work for a wholesaler, I would seriously be looking at your business model and working out whether it is still sustainable (and if not how to change it) rather than whinging about GST on imported goods under $1000. That won't save you. It might prolong things a little but a business with a dead business model is a dead business. You need to move either down the value stream and start manufacturing or up the value chain and start retailing, or find a service that people will pay the premium for.

Cheers
Dave

 

[Ducatiboy stu]

In the mean time Austpost ( and couriers companies to a point ) is reaping the benefits of the online boom

 

[bum]

Some food for thought from the NAB's chief economist (and former Treasury economist): http://www.theregister.co.uk/2013/12/02/online_shopping_tax_slug_not_worth_the_effort_nab/

 

[tavas]

Interesting comment about geographic price discrimination. Software being the recent example.

Also, if bricks and mortar are doing it tough, why is it I can negotiate price on things like whitegoods and TV's? Surely if they are cut to the bone then there would be no margin to play with. What about every sale that is not negotiated (i.e old mate just wants a TV now). Obviously I'm not tarring every business with the same brush.

HN is typically more expensive than say Good Guys/Dick Smith/JB for the same item. I would assume they have similar buying power.

edit: fixed up some spelling

 

[wide eyed and legless]

White goods are a different kettle of fish, I am not sure about t.v's, bonuses are paid by white goods wholesalers at the end of the year for the amount of items sold.
As for HN there is a 9% extra mark up to cover the intrest free which they give, I am astounded by the amount of people who really believe that anything can be intrest free, imagine walking into your bank and saying ,Give us a loan and by the way make it intrest free.

 

[Airgead]

Yeah... software. MS Visual Studio Ultimate. You can pick it up retail in the US for $5K. Here under a "gold partner' license they sting you $25K. And if you go and buy copies from the US and Microsoft find out, goodbye gold partner agreement and hello lawyers.

That's a $20K tax for living in Australia.

Same on itunes. Australian itunes is double the price of the US version. for the same bucket o bits downloaded from the same server. That's BS.

The situation is so bad that the federal government held an enquiry and one of their recommendations was to use VPN services to circumvent restrictive geoblocks. That's the government telling people to technically break intellectual property law...

 

[pk.sax]

Yeah, know what you mean.
I feel the same way about engineers.

Why thanks, that's a compliment.

PS: noticed the increasing age of checkout chicks. I wonder what today's wannabe checkout chicks are doing?!

Srsly tho, I wish the government made up their mind one way or another, impose punitive taxes that make it worthwhile for local manufacturers or leave the duty free alone.

 

[tavas]

My guess is they will sit on it and do nothing, but say they are looking into it. Much like the previous govt and probably like the next govt. Its a political hot potato.
There was something like 138 recommendations coming out of the Henry tax review. Maybe they should review them again (as in review for suitability and implementation, not redo the review).

 

[punkin]

Do we expect the manufacturers or the retailers to do product development? Or do we just skip that in the new world without wholesalers?

I have a wholesaler and wouldn't swap at all. They do quality control and communicate with the many factories (as many as 5) that are used to make a single product like a sightglass kit while the goods are still in China. I don't speak Chinese and there is just not enough hours in the day for me to organise the many different orders and shipping etc that makes up my stock. Let alone wait until it gets here on a boat to find out it's the wrong thread (notoriously hard to communicate thread pitch with the little factories) and then have to send it back and order more (especially if i'm running just in time).

Just in time is one stock system, it's certainly not the only one and not in all cases the best one.

I think your proposed model is well and truely simplified and if a retailer worked with a single product then it would work just fine. But that would be a very rare case. Imagine the poor ******* at the local corner store having to deal with 200 companies to keep lollies, chips, drinks and magazines etc on his shelf. They already deal with a dozen wholesalers and that's time consuming enough.