Parallel imports

Products shipped in from abroad without the permission of the local trademark or intellectual property owner.
 
 
 
 
 
 

01 .Introduction

Parallel-import-toothpaste-elise_LEAD_JUN2012_WEB

We take a look at parallel importing and whether it's a good thing for Australian consumers.

Parallel importation can help level the playing field for Australian consumers who are routinely slugged with higher prices for goods produced by multinational companies. 

But despite injecting much-needed competition into the local market, parallel importation should also comply with Australian safety and labelling and requires a strong regulatory framework so that it can work in the best interest of consumers.

For more information about shopping, see Shopping and Legal.

What are parallel imports?

How can some products look, taste and function the same, yet vary so markedly in price from their mainstream, retail counterparts?

Parallel imports are shipped in from abroad without the permission of the local trademark or intellectual property owner. Essentially, they’re legitimate products that dodge standard distribution channels and, as a result, can arrive in our shopping basket for a fraction of the local recommended retail price (RRP).

For years, multinational companies have set different retail prices for the same product in different countries. That was, at least, until the boom in online shopping. For the consumer, this has meant one thing: markets have merged, and this sort of price discrimination – on everything from Mars Bars to digital cameras and even French champagne – is being put to the test.

Tips for buying parallel imports

  • Watch out for incompatible plugs with electrical products purchased overseas. While it is illegal to sell a product in Australia without an appropriate electrical plug, this often happens when individuals decide to purchase the product alone, rather than through an importer, such as Kogan or JB Hi-Fi.
  • Be sure you have access to an English language manual for electronic parallel products – not all include one.
  • Check the ingredients lists and keep an eye out for any allergens with food products.
  • Avoid food and grocery products with non-English language labels if you don’t understand them.

Is it legal?

The 2011 Productivity Commission's retail inquiry found the arguments made by multinationals in defending price discrimination were not persuasive.

Intellectual property legislation allows most parallel importers to bring products freely into Australia. The 2011 Productivity Commission’s retail inquiry found the arguments made by multinationals in defending price discrimination were not persuasive.

Treating consumers in one region as willing or able to tolerate significantly higher prices than those in other countries was a key reason listed by the Productivity Commission for growth in parallel imports, and formed a basis of their recommendation to government to reconsider the restrictions relating to the parallel importation of clothing.

Governments and consumers are eager to talk about parallel importation, but CHOICE found companies involved on both sides of the fence were less so. 

Mars Incorporated told us it was unable to provide a list of its RRPs around the world, despite the fact an Australian Mars Bar costs almost double that of the same product in the UK. JB Hi-Fi also declined to comment.

Australian Consumer Law provides welcome protection for buyers, as local manufacturers can be hesitant to uphold warranties for imported products. All consumers are entitled to a guarantee of acceptable quality, fitness for purpose andright to repair on all products purchased from an Australian retailer. Kogan and JB Hi-Fi’s Direct Import both also offer in-house warranties.

Price discrimination

The world’s biggest companies are some of the worst offenders when it comes to price discrimination. Amazon sells its Kindle e-reader for US$79 in the US, but Australians must pay $109 for the same product. In the US iTunes store, the Beatles No. 1 album sells for US$12.99, yet Australians fork out almost 60% more to buy this album from an Australian IP address. The latest Apple iPad 32GB Wi-Fi model retails for $649 in Australian stores, but sells for US$599 in the US.

The experts we spoke with all agree on one thing – the online world is moving fast, and large companies will need to minimise price discrimination and become more competitive sooner rather than later in order to stay afloat.

Later this year, a parliamentary inquiry will question Apple, Microsoft and other multinational tech companies that participate in geographic price discrimination. Federal MP Ed Husic, who’s been lobbying in this area for more than a year, hopes the inquiry will bring an end to the unfair pricing burden placed on Australians.

 
 

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02.Electronic products

 
Australians have been getting ripped off by big retailers for far too long and we're here to change that.
- Ruslan Kogan

Mention Hong Kong, Taiwan or Tokyo to an electronics aficionado and their eyes light up. These cities have giant malls dedicated to all things electronic. TVs, digital cameras, mobile phones – the list goes on, and thanks to the internet, they’re closer to us than ever before.

Ruslan Kogan, a pioneer of parallel imports in the electronics market, saw business sense in bringing these products to Australians at a discounted price years ago. Seeing a gap in the market, in 2006 he started up a business to fill it, and just five years later was listed on BRW’s Young Rich List with a reported fortune of $62m.

Kogan hopes the growth of online retailing will make large manufacturers more accountable for price discrimination. 

“Australians have been getting ripped off by big retailers for far too long and we’re here to change that,” he says.

Kogan’s prices sit anywhere between 15-40% below the local RRP on a range of electronic goods, he claims. Canon’s newest entry-level digital SLR camera, the 600D twin lens package, is available on his site for $809 plus $39 delivery, yet retails in shops for up to 30% more.

JB Hi-Fi joining in

Retailer JB Hi-Fi launched its Direct Import camera e-tailer earlier this year in response to the growth of online shopping. The website provides consumers with the opportunity to purchase goods for less than their bricks-and-mortar stores are able to offer.

Its import price for the same camera is similar to Kogan’s – $835 plus delivery. This is noticeably cheaper than its bricks-and-mortar stores, which sell the same camera, imported through conventional supply channels, for $258 more.

JN Hi-Fi states on its website: “Global consumer electronic brands provide lower wholesale prices in emerging mark ets such as China and India than mature economic countries… These emerging markets also have much lower supply chain costs due to lower local wages, consumer protection standards and weaker regulation. This allows wholesalers in those emerging markets to offer these prices to overseas buyers at lower prices than a local importer in a mature market is able to achieve.”


ParallelImports_Pantene_products

Consumer items that have a quick turnover, including chocolates, soft drinks and personal care products, can be found in bargain basements and local corner stores around the country. Demand for cheaper groceries is fuelling the growing movement of parallel products into this sector, boosting competition and bringing prices down.

But Tony Mahar, director of sustainable development and trade at the Australian Food and Grocery Council (AFGC), suggests this may not all be good news for consumers. Manufacturing processes overseas are not always as stringent as Australian standards, particularly when it comes to allergens, and Mahar believes a proportion of parallel imports aren’t correctly labelled with ingredients or allergen warnings before they hit the shelves.

CHOICE shopped at a number of discount stores, and the parallel products we found complied with local labelling regulations. But some retailers haven’t always been so compliant. In the past two years, the NSW Food Authority has issued a number of fines to businesses that have failed to provide consumers with adequate labelling information on parallel imported products.

The AFGC says product recall and quality control mechanisms are also questionable for some parallel products. This year alone, the ACCC has recalled more than 20 food and grocery products for posing a risk to consumers. But recalling a product that has entered the country through the unconventional channels may not be so straightforward.

Bubbling up

It’s not only $2 shops that have tapped into the parallel import movement. A growing number of local retailers have developed a taste for parallel-imported French champagne – and few consumers will complain about a half-price bottle of Bollinger. After all, Australians drank 4.86 million bottles of French champagne in 2011, up 25% on the previous year, according to champagne expert Tyson Stelzer.

In a recent blind taste test conducted by Stelzer, a panel of experts preferred parallel-imported champagne on four out of seven occasions. He believes concerns raised by traditional importers about inadequate refrigeration and handling during the shipping of parallel imports are largely unfounded.

“From the consumer’s perspective, parallel importing can be a positive thing,” says Stelzer. “It helps to stimulate positive competition in the market”.