Australians love engaging in debates so fraught with misinformation they make Today Tonight look like a peer-reviewed journal. Vested political and economic interests are so ingrained in ‘independent’ reportage that it’s difficult to tell where lobby group spin ends and journalism begins – if indeed it does.
So goes the ‘debate’ around retailing in Australia. Retailers are struggling, or so we’re told, with online shopping apparently destroying “local jobs”. Unless the government steps in to “do something”, battling retail workers will not only lose their jobs, but be hit with great big new taxes that will cause fewer sunny days, undermine the sanctity of the family and destroy Australian competitiveness once and for all.
The retailers’ scare campaign centres around the Low Value Threshold which allows overseas purchases under $1,000 to be imported tax free. Local retailers see this as an unfair tax loophole. A report commissioned by the National Retail Association states “118,000 retail jobs” will be lost if the LVT is not abolished. Really? Impose a 10 per cent tax on a tiny fraction of all retail sales and save “118,000 retail jobs”? Can it truly be that easy?
Deep breath. Some facts: Online retailing is estimated to represent only 6 per cent of total Australian retail sales, or about $12.6 billion. Big money to a struggling arts student; peanuts to the overall economy. Even more revealing is that overseas online sales are worth only 2 per cent of Australian retail sales.
While these figures will increase over the coming years, it is difficult to imagine how taxing a fraction of sales will save 118,000 jobs. Besides, most online sales are already subject to the GST as they are domestic purchases. As anyone with a credit card and a Book Depository account knows, the disparity in Australian retail pricing and online pricing is usually greater than 10 per cent.
The Government has repeatedly refused to abolish the LVT because, they argue, it would raise less revenue than it would cost to implement the change. Many more parcels entering Australia would have to be examined – either X-rayed or hand inspected – requiring thousands more staff while obstructing international postage.
Harvey Norman’s Gerry Harvey claims he wants the threshold abolished to save local jobs. Rubbish. Harvey showed no concern for “local jobs” in the 1990s when his new megastores helped kill his competition. Nor was he concerned about local employment in 2007 when he argued for the creation of a “two-tier” wage system to employ foreign labour at a cheaper rate. Local jobs? Crocodile tears, Gerry.
Harvey, like other retailers, is facing the reality of lower margins after enjoying years of price gouging. They’ve had it too good for too long. Instead of suffering under the tyranny of distance, Australian consumers now have comparable buying power to those in the US and Europe. Myer can no longer sell a pair of jeans for double or triple international prices and still expect customers through the door.
So, why the high prices? One link that is usually overlooked in the retail chain is the local distributor. The distributor imports a product and then on-sells it to local retailers. While the retailer ultimately decides the selling price of a product, it is the local distributor that sets the cost price retailers must pay for the goods.
International distributors routinely discriminate between regions on price, usually for the exact same product. This concept is ridiculous in an age when we are apparently part of a ‘global’ economy. One example: I purchased a Blu-ray from the UK only to find the disc had classification markings for both the UK and Australia printed on its face. These identical disks – in a different case – at JB HI-FI sell for 250 per cent more than in the UK. They’re obviously shipped First Class via British Airways, sipping Bollinger the entire flight.
This discrimination is more farcical when it is applied to online content. Australians end up paying more for the same bits and bytes downloaded from the same offshore data servers because we pay using an Australian credit card. Additionally, no physical item shipped through the post means no customs check and no GST. Any abolition of the LVT would become less than useless on digital goods.
There are few solutions to this problem that will preserve the status quo. Old-style retailers have failed to adjust to fundamental changes. They see no fault with their business models, blaming everyone from government to their customers for their woes.
Retailers are instead lobbying for increased “flexibility”, meaning already lowly-paid retail staff will get paid less and lose penalty rates. Retailers also want “flexibility” with store opening hours, believing the ability to purchase overpriced perfumes at 3am will bring customers back into stores.
Ultimately, none will save old-style retailers who have failed to adjust to a brave new commercial world. Their existing business models built upon consumer ignorance and high margins are evaporating. Their argument to customers is basically “pay 200 per cent more or kiss local jobs good-bye”. But little of their argument holds true. It is not up to government to save traditional retail – they simply can’t – but a new generation of retailers will see that they are forever consigned to the bargain bin of history.
Disclosure: The author is a casual employee of a large retail company and has worked in the offices of others, but bears no love for any of them.