CHOICE weighs in on retail inquiry

Submission to Productivity Commission focuses on inflated markups.
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01.CHOICE weighs in on retail inquiry

By now the fact that Australians pay a lot more for a wide range of products than shoppers in the US, UK or Asia is not news to most consumers. But when this continues to be the case despite the Aussie dollar reaching parity with the US greenback last October and hitting $1.10 earlier this month, it’s time to take a closer look.

The Productivity Commission (PC) is doing just that with its inquiry into the retail sector and will report its findings in November. In our Submission to the Productivity Commission, lodged today, CHOICE calls on importers, distributors and retailers to pass some of the savings they are enjoying thanks to the strong Aussie dollar on to Australian consumers. We are already seeing the results of their failing to do so – a massive uptick in Australian consumers shopping on overseas websites.

Who can blame them when Xbox 360 and PlayStation 3 games, for instance, cost 91% more from a major Australian online retailer than from an overseas online website based in Asia? Or when a pair of Nike running shoes cost $240 at a major Australian sports retailer while the same product can be bought online for $134 from a US sports store?

Digital disparity

The disparity when it comes to digital goods is even more jarring. For example, the top 12 music albums recently cost, on average, 73% more on the Australian iTunes store than the US iTunes store. What’s worse, some companies use technologies that block international IP addresses and push consumers to ‘local’ websites, even though parallel importing is legal in many cases.

CHOICE director of campaigns and communications, Christopher Zinn, says the explosion in overseas online shopping is an overdue comeuppance for Australian retail as a whole.

“The pressure from overseas online competition is a much needed wake up for Australian retailers to be more competitive. We need to move beyond a complacent culture of high prices, high margins and poor service,” says Mr Zinn.

He adds that the price differential runs from white goods to motorcycles to TVs and many points in between. “It’s up to those in the supply chain here in Australia to justify why this is the case. Importers and retailers should not cry foul if consumers chase better prices, wherever they may be.”

Red herring

The retail industry’s argument that the overseas online boom is the result of the GST-free threshold for products under a $1000 does not hold up to the facts. Simply put, adding 10% to the cost of a product that is 91% cheaper is not an effective deterrent. CHOICE argues that this is a distraction from the real issue of excessive mark-ups and challenges the industry to offer realistic explanations on why prices are so high or – better yet – begin offering better deals for Australian consumers. The imposition of a GST on overseas purchases will not make the threat of far better deals overseas go away.

Stayed tuned for a full investigation in the July issue of CHOICE magazine.



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