Target has joined a score of other retailers after announcing it will start sourcing products directly from China in an attempt to bypass wholesalers, save on GST and pass the savings on to consumers.
The move – designed, in part, to compete with online retailers – accompanies similar announcements by Myer, Harvey Norman and JB Hi-Fi, although retail experts are warning smaller copycats that it’s not as easy as it seems.
“There are a lot of things to consider. You’re not close to product production, so you can’t just go down the road and see what’s going on. Quality control is something to consider,” says Brian Walker, chief executive of retail consultancy Retail Doctor Group.
Target managing director Dene Rogers has told The Australian the company has begun setting up facilities in China where shoppers can import directly in order to save on GST.
“We want to be able to offer a broad range of products with competitive pricing, and by locating in Asia we can do that… Typically we would have imported everything into Melbourne and sent it out from our main distribution centre, but that was relatively uneconomic,” he said.
Rogers also said the company had already increased the number of products on its website from 6,000 to 31,000, and that online product ranges will continue to be expanded.
“We want to have everything we sell online, and then get into areas like fine jewellery, furniture, and a broader selection of cosmetics, skincare and fragrances, expanding into areas like camping over the longer term, areas that require square footage we just don’t have,” he said.
JB Hi-Fi began importing product late last year when it started sourcing camera equipment directly from China. Harvey Norman and Myer quickly followed suit.
But while smaller retailers may be tempted to source their products from offshore suppliers and bypass local buyers, Walker says there are plenty of factors they need to keep in mind.
“Quality control is something to consider and, of course, speed of supply is going to be a consideration as well.”
Other experts also say businesses need to keep on top of warranty considerations, as consumers will still be entitled to refunds and repairs. Businesses need to make it clear the products being sold have been imported directly, not from a wholesaler.
“You also really need to do the math on this and see if the net saving is greater than 10%.”
“If everything is considered and taken into account, and you’re still saving money, then you should go ahead. But you have to do the math first and figure all that out.”
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
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