Booming cross-border online sales are stirring up more trouble down under. Perhaps not surprisingly, the retail powers that be in Australia are rattling their sabers and threatening protectionist measures.
The tipping point
Just after Christmas '10, Harvey Norman founder and chairman Gerry Harvey, retail mogul Solly Lew, and fellow retailers launched a campaign against the leakage of sales, especially GST-free purchases, to the web.
Chief among their complaints, according to the Sydney Morning Herald, was that the GST-free threshold of $1000 for internet retail sites put Australian retail operations at a significant price disadvantage.
Australian online shoppers say "Not so fast, mates ..."
When the campaign, also supported by Myer and David Jones, backfired, the coalition of retailers quickly retreated from their advertising. But they did win a commitment for a Productivity Commission inquiry and since then the perceived threat of online sales from e-commerce brands based outside of Australia has exploded on the national retail agenda.
The Australian National Retailers Association welcomed the inquiry's start as it said recovery of the sector looked like a distant hope. ''Australian shoppers remain cautious post-GFC (aka the Global Financial Crisis) and with such a challenging retail environment, a wide-ranging review of opportunities for growth and the barriers to prosperity is overdue,'' the association said.
Perhaps the inquisition will help the retail industry realize that they are falling behind because they are holding onto the past and ignoring what their customers are telling them they want — and not due to the rise in value-priced imports from e-commerce businesses based outside Australia.
But local Aussie retail consultants believe that in many cases brick and mortar retailers will continue to struggle to keep up with rapidly evolving consumers. Many remain wedded to old school tactics that are not overly customer-centric. More on that here.
So instead of moving quickly to get with the times (and their customers), now there will be time-consuming reports and studies and contradictions and all the stuff that one hears when old school industry types start whining and moaning.
Of course that also means more time for U.S. e-commerce brands to get in down under and give the Australian customers the products, selection and price points that they are looking for.
Don't Build that Wall
Will we see countries move to erect barriers (e.g. special taxes on imports from cross-border e-commerce companies) designed to protect their domestic retailers? Or will consumers revolt?
The Fair Imports Alliance — a coalition of Australian retailer and wholesaler groups "providing a united voice on issues around the low value GST threshold of imported goods into Australia" — said the retail and manufacturing sectors had become increasingly concerned about the lack of consultation from the Customs and Border Protection Service since the announcement of a crackdown on the misuse of importation regulations.
The body has been calling for a full Government review of the current regulatory environment around low value imported goods. The Fair Imports Alliance claims that they are completely committed to "evidence-driven policy" which should examine a whole range of issues including (but not limited to):
- The GST threshold’s set amount and the reason behind that policy;
- The regulation and enforcement of the current and any altered threshold;
- The changing retail trend and growth of online sales;
- The effect of offshore purchasing on the Australian retail market place;
- The shrinking ‘bricks and mortar’ retail market and the corresponding effects on employment, regional communities and the investment retailers put back into the community;
- The use of the threshold as a mechanism for illegitimate business to operate and avoid taxation and regulation;
- Consumer protection; and
- Illicit trade, counterfeit and brand protection.
In case "they" haven't been paying attention, there is plenty of evidence that e-commerce and multichannel (aka "omnichannel") is the way to go these days. That is especially true now that the GFC is shaking up retail and separating the men from the boys.
And have they somehow missed the fact that international shoppers around the world are voting hands down for cross-border e-commerce with their wallets?
Protecting the consumer ... From what? The Evolution of Retail?
Australian shoppers want to support their local retailers and consumer brands.
In fact, Australians are the most brand loyal consumers in the entire world according to Forrester's Technographics survey which covers Asia-Pacific, Europe and North America. Sixty-seven per cent of Australians Agreed or Strongly Agreed to the statement "when I find a brand I like, I stick to it."
Australians are also known for their inclination to support local businesses. But given the dire financial times, one should expect Australian consumers to continue to question whether their domestic retail industry wants to support them.
Unfortunately it appears to many that the move to erect barriers is a move to protect the interests of old-school retailers, not the interests of the Australian consumer.
They do not appear to be listening to the Australian shopper.
Until they start listening and re-acting they will not evolve. Domestic Australian retail will continue to lose share to brands that are evolving alongside today's global consumer.
And as that happens, the Forrester data suggests that Australians will stick with a new generation of brands that understand today's digital consumer. Old-line Australian retail may well lose a whole generation of shoppers.
Until then,
Cheers
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