5 reasons the big retailers are wrong

Australia’s biggest retailers are set to step up their campaign to force the Federal Government to drop the GST exemption on goods purchased from overseas websites that are worth less than $1,000, with a new $200,000 advertising campaign that claims thousands of jobs are at stake.

It’s a dumb move. And it is also one that throws up lots of ironies.

Here is a group of retailers – led by Myer’s Bernie Brookes and Harvey Norman chief Gerry Harvey – that would normally bristle at the very suggestion of government intervention in industry suddenly calling for government protection.

Here is a man – Gerry Harvey – who just two years ago declared online retailing was a “dead end” suddenly spending big dollars to say that e-tailing is now a dire threat to his business and his employees’ livelihoods.

And here is a group of retailers that are effectively telling their customers – and remember, those online shoppers are almost certainly also customers of Harvey Norman, David Jones or Myer – that they should be slugged with extra taxes and made to pay more for the stuff they buy online.

Brookes acknowledged today that the strategy won’t go over well with consumers. He’s right there, but he and Harvey should also realise that this is a futile campaign.

Here are five reasons why:

1. Cutting the threshold won’t work

Myer, Harvey Norman and David Jones presumably want the GST-exempt threshold removed entirely, but the noises coming from Government suggest there is no way that’s going to happen – probably the best they can hope for is a reduction from the current level of $1,000.

But research conducted by SmartCompany suggests that even drastically cutting the threshold in half would have a limited impact, as the majority of purchases made from overseas sites are well under $4,000, and the most popular purchases – books, CDs and DVDs – well under $100.

2. Online sales aren’t that high

As Assistant Treasurer Bill Shorten has been quick to point out, online retail sales are simply not high enough to pose the sort of threat the big retailers are claiming. Just 3% of total retail sales are conducted online and at the most, half of these are made by overseas websites. While this percentage is clearly growing, a bit of context is important. In the worst case, just 1.5% of total retail sales are being made by overseas websites – hardly enough to cause the “reduction in hours and shifts for casual and part-time workers and ultimately cost Australian jobs in retail, manufacturing, logistics and related services” that the retailers’ ads claim.

3. GST is not the reason people shop on overseas websites

Suggestions that Australian consumers are drawn to overseas websites because it allows them to dodge the GST are silly – as various commentators have pointed out, what a shopper saves on the GST is usually eaten up in shipping costs.

In reality, shoppers are turning to overseas sites to capitalise on cheaper prices (a particularly strong factor given the strength of the Australian dollar in recent months), better range and better customer service. Cutting the GST threshold won’t change these trends.

4. Just because the big retailers have struggled with selling online, doesn’t mean everyone else has

Harvey Norman doesn’t sell through its website. David Jones only relaunched its online store last November. Myer’s online sales are a tiny percentage of their overall sales. In other words, these are not companies that have spent time or money creating a globally-competitive online presence. To complain that they are now losing sales to companies who have consistently shown innovation and leadership in the online retail sector looks like sour grapes, and it is.

5. The consumer won’t stand for it

Harvey Norman, Myer and David Jones would do well to remember who will actually be hit by a push to reduce or eliminate the GST threshold – their customers.

As we’ve argued above, a change to the GST threshold won’t stop consumers shopping overseas. But if it was to happen, you can rest assured that these consumers will long remember the companies that forced the price of goods from overseas up – and let their wallets do the talking by turning away from these dinosaur retailers.