December 8, 2010: The Myer announcement (or more correctly, bluff) flagging its intention to open an online store with goods shipped from a warehouse in China, followed by a ‘me-too’ from Harvey Norman, has had the unintended consequence of unleashing a maelstrom of consumer ill-will towards Australian retailers.
A story on the Fairfax Business Day website (December 6) quoting a typically hairy-chested Gerry Harvey as intending to open a similar operation before Myer, revealed more in the comments which followed than in the dubious substance of the announcement itself.
The threat by Myer and Harveys to go offshore to circumvent GST on goods under $1000 appears to be prime, 100 percent, unadulterated nonsense – a point many readers were quick to point out. The level of ill-feeling in the comments directed towards those dreadful ‘gouging’ Australian retailers needs to be noted at the head offices of suppliers who practice severe price differentiation from one country to the next. And this was just one of many platforms since the GST-free story broke in which consumers made it patently clear that they perceive they have been cheated by local retailers. (Many readers of Photo Counter, however, won’t be overly crestfallen to know that Gerry Harvey in particular has come in for a bit of a monstering!)
But if Australian retailers aren’t in fact gouging their customers, then their suppliers are making Australian retailing as an industry look bad – very bad. Not only are Australian retailers copping high prices from their suppliers, they are being blamed by their customers for those high prices! That would have to hurt. Camera retailers are among those most impacted because the price differential between local retailers and offshore sellers – of some camera brands, not all – is one of the most extreme.
Something is going to give.How long will it be before one of the larger retailers begins sourcing products from someone other than the authorised channel? Or someone aggressive young entrepreneur ‘does a Kogan’ in the camera business?
If a relatively small operation like Cameras Direct can overcome the challenges of supplying its own local warranties, etc, a retailer with national scale would have no problems ‘going parallel’. By no means does Photo Counter encourage such an initiative, but it would be foolish to ignore the possibility that it might happen.
With price differentials at 30 percent or more on some brands, an aggressive marketer like Gerry Harvey could bring in a container load of a popular camera models from a supplier in Hong Kong or the US, run a ‘WE’LL PAY YOUR GST FOR YOU!!!’ ad campaign and still come out well in front!
The Business Day story was followed by well over 100 comments from readers, the vast majority along these lines:
‘Australian retailers should stop price gouging Australian consumers. People complain about the banks, but the retailers are 100 times worse. A Sony PS3 costs $350 in the US but here costs $500 and numerous other examples about TVs, books, cameras, etc. Like many people have said, the price difference is more than 10 percent – we are talking about a 50 percent price difference here.’
Keeping in mind that Business Day readers are presumably somewhat less naïve about how business works than the general population, the assumption by most of those who made comments that inflated Australian prices are due to greedy retailers should ring alarm bells for businesspeople and politicians alike. Reputation is such a valuable thing, and what’s at stake here is the reputation of Australian retailing – the largest employer of Australians.
If ‘Australian Retailing’ was a corporate brand, the crisis management team would have been called in by now. Retailer representative associations like the ARA need to push back with the real story – that it’s often cheaper for the retailers to buy from B&H or Amazon or whomever than some of their authorised distributors.
The message has to get back to camera manufacturers’ head offices that the Australian market will now bare only a small premium on the best price on the internet, and adjust global pricing strategies accordingly.
Of the 130-odd comments, advocates for local retailing were thin on the ground. However, these two comments will have resonance with the Photo Counter readership:
– My husband has had retail businesses for the last 12 years, in the sporting goods arena. He can generally buy RETAIL from overseas cheaper than he can buy WHOLESALE in Australia. So what does he do? Respect the authorised Australian distributor and purchase from them? Even if he only adds a small margin, he is now way behind the overseas prices. Or buy things online as a retail customer, and then onsell them to Australian customers? Or close his stores? He has sold one, and is seriously thinking about what to do with the other.
People do not value the relationship with the retailer, the after sales service, etc etc. He will do anything for a good customer, but people don’t care anymore. So we will all end up with what we deserve – cheap prices but a lack of a local retail community (the bookstores spring to mind) and a lack of service.
– Wonderful to hear from all the experts in retail here. Local retailers will never compete with online orders as they are responsible for charges that you do not face. ie import duties, taxes, transport costs, handling fees and yes the dreaded GST! I have found that the initial purchase price from overseas manfacturers, can double by the time it arrives in-store. Add to this is the fact that Australia is a minnow in world trade and we pay accordingly.
If you are all so good at purchasing and feel that you are being had, why aren’t you out there setting up your own shop? It must be so easy to undercut everyone else in retail and make a killing!
Where does the money come from to pay your wages? Keep white-anting Australian retail and you will find your wages will drop to that of the countries that manufacture your cheap goods.
– Well said! But more voices in defence of local retailing will be needed now that the genie is out of the bottle.
– Keith Shipton