PayPal, which currently has 3.8 million Australia account holders, said that the service had seen a 74% increase in overseas online spending in 2010 and that in September last year “a staggering 1.2 million Australians bought online from overseas retailers”.
Australian retailers have long argued that Nike shoes cost $100 in the US and $239 in Australia (for example), because of shipping costs, the exchange rate, the smaller Aussie market, higher store rents, and higher wages. But does that justify an average 142% mark-up for clothes and shoes or 97% for other manufactured goods? It’s hard to say which part of the retail sector is responsible for inflated prices, but what is clear is that things cost a lot more here than in markets such as the US and UK.
What is the industry saying?
National Retail Association (NRA) head Gary Black told CHOICE the costs of getting products to consumers are still comparatively high in Australia but added that dramatic price differences may be isolated cases. “We have a lot of concerns about selective examples. We need to make sure it’s the norm and not some kind of selective comparison.” As for the exchange rate, he says “retailers may have inventory that was purchased under pre-existing exchange rate conditions”.
For a growing number of consumers, the industry’s arguments have worn thin, particularly because many popular products are made in Asia and then shipped to the US as well as Australia.
With the dollar at or above parity with the US greenback since October last year, even the government has started asking questions. The Productivity Commission’s (PC) inquiry into the retail sector is due to report this November on “issues contributing to the increase in online purchasing by Australian consumers” among other things. CHOICE has made a submission to the inquiry, calling for retailers to pass on some of the savings they are enjoying due to the strong Aussie dollar to consumers and to bring the price of digital music and software down to a level comparable with overseas prices.
One outraged consumer has launched his own examination of pricing. Peter Prysten from Melbourne told us, “I am not privy to the inner workings of the retail industry, but I’ve been looking at this issue closely and keeping track of price differences. I haven’t come across any plausible explanation for why products cost twice as much here as in US and UK”.
The debate over GST
Prysten points out in his PC submission that even if the retail industry manages to convince government to impose a 10% tax on overseas online purchases under $1000 – as it has tried to do since late last year – Australians shopping at overseas sites would still come out well ahead.
The NRA’s submission, on the other hand, is all about the GST, and focuses on lost tax and customs revenue – arguably the first time a major business sector has been mobilised by concern that the government is not collecting enough taxes. The NRA says the tax exemption is costing some stores as much as $100,000 a year in lost sales, has led to the loss of at least 2000 jobs so far, and has the government missing out on about $500 million a year.
Briefing notes from the Treasury Department to Treasurer Wayne Swan obtained through Freedom of Information laws and published in late May reveal the government is not inclined to buy the retail industry’s story. Treasury officials argue that the favourable exchange rate is driving overseas sales, not the GST exemption.
Top of the online shops
In an informal survey of CHOICE members, staff, friends and industry reps the following websites emerged as top picks, however some may require use of a third-party shipping service. (Sites with an asterisk also made our CHOICE Awards top 10 online retailer list in April.)