Retailers say analog era government is hurting business

The Australian government's reluctance to lower the GST threshold for online goods and an inability to keep up with the times is costing Australian retailers dearly, according to the Australian National Retailers Association.
Written by Spandas Lui, Contributor on

The Australian government has been sitting on its hands when it comes to mitigating local consumers' exodus to overseas online retail stores, according to the Australian National Retailers Association CEO Margy Osmond. Not only that, the government's inability to change laws as the retail landscape becomes increasingly digital is hurting Australian retailers, she said.

Australian retailers are cottoning on to the idea that they need to up their game in providing personalised in-store experiences for customers and ramp up their use of technology to do so. This includes targeted marketing to mobile devices and complementing their in-store offering with a robust online shopping experience as well.

"Retailers want to turn shoppers into advotaces," IBM's global business services retail industry leader for Australia and New Zealand Ian Wong said at the launch of the vendor's 2013 Smarter Consumer Study report.

"Our research in the past has shown advocates, on average, will spend up to 15 percent more with the retailer."

Customer data collected through loyalty cards and big data collected through outlets like social networking help these retailers create personalised experiences for customers.

But all this talk about connecting more to the customer doesn't tackle the bigger issue at hand. Australians have to pay more for their goods that may cost half as much in other countries. Price is a major driver for locals to purchase overseas goods online, and real-time comparison websites are facilitating this behaviour, according to The Retail Doctor Group strategic branding and consumer insight director Katharina Kuehn.

Osmond said that while price isn’t everything, the government has done little to level the playing-field for local retailers.

The legislative issue that has garnered the most airtime is the GST threshold. Currently, the 10 percent GST rate does not apply to goods purchased overseas that cost less than AU$1,000. Retailers in Australia have been vocal in trying to get the government to either scrap that law or lower the threshold significantly.

"We calculate that, at this point in time, there's AU$997 million that could be going to state governments in GST revenue that isn't," Osmond said. "If we want to talk about levelling the playing-field for Australian retailers, changing that threshold is a critical issue — but that's just one issue."

While lowering the GST threshold may benefit local retailers, at the end of the day, the consumers would end up paying more.

"What we are talking about here is less about an extreme cost on households, but more about closing a loophole in the tax law that was born in a time when people didn't shop online," Osmond told ZDNet. "At a time when the states are crying out for additional resources that translates to doctors, teachers, police, hospitals, roads, and benefits to consumers and households, we think it's a legitimate move for governments."

But there is a whole range of other government-related issues that are affecting the Australian retail space, she said. These include penalty rates, rents on properties, and the need for all levels of governments to evolve as technology changes the retail landscape.

"Governments haven't come to the party; this is in the context of ordinary legislation that affects us every day," Osmond said.

One example she brought up was the ramification of click-and-pick-up business models, which is now being used by grocery giant Woolworths. These kinds of services can be made available to facilitate shopping at all hours of the day, Osmond said.

"Think about the implications there might be for the design of your average shopping centre," she said. "What kind of security and lighting do you have if you're going to let people pick things up around the clock? What are the implications for penalty rates? Do you need parking or would you just have drive through?

"There is an endless number of issues that will be affected, and unfortunately, governments are still thinking analog, not digital."

According to the IBM 2013 Smart Consumer Study report, despite all the hurdles facing Australian retailers, consumer sentiment is generally positive.

In a survey of nearly 2,000 Australians, only 5 percent of the respondents had made their last purchase online, while 94 percent did so in a store. For their next purchase, 4 percent of the respondents said that they are set to buy online, 58 percent said they will buy in-store, while 38 percent remained undecided.

The stats, however, must be taken with a grain of salt as they include non-grocery items and electronics, but omitted categories such as software, music, and books.

The Australian National Retailers Association also had a bone to pick with the government in regards to book imports.

"You can buy a book at the same price here as the Book Depository (a popular online bookstore based in the UK) if the government removed parallel book importation laws, which have been recommended for removal several times by the Productivity Commission," she said.

Osmond also took aim at international suppliers treating Australia like a "cash cow", charging local retailers more for stock that would cost less for retailers in other regions.

"We have a good economy and they figure that we can pay more, so they charge more to local retailers for goods," she said.

The situation has resulted in the Federal government launching a pricing inquiry to explore why IT vendors are charging Australians a premium for IT goods like software, which require very little effort in distributing. Apple, Microsoft, and Adobe have all fronted a parliamentary hearing on this topic, but it appears that there is little hope for change.

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