- Posted by Simon Byrne
- On July 5, 2017
By Simon Byrne
There is no doubt that we live in a unified world nowadays. The internet has broken down the geographical barriers which means overseas online sellers can easily sell into Australia.
It’s great for the overseas seller too. Easy and simple incremental sales that require zero effort and minimal labour. That is, the cost for an overseas seller to service an Australian customer is negligible. Put it in a box, bang a shipping label on it and bank the money. Actually, the money is already in the bank!
Whilst the buyer may save a few bucks, it is very damaging to our supply chain in Australia.
Consider this example. A band member goes into the local pro audio shop and spends more than an hour in that shop trying out various microphone options. The retailer has let’s say $25,000 tied up in microphone stock, he is paying for experienced knowledgeable staff and high street rent. His staff is tied up for an hour with assisting the customer to find the best solution that works for them.
By this time the seller could reasonably expect to make a sale however that is often not what happens. Instead, the customer makes a mental note of his preferred choices, goes home and logs onto cheaponlineaudio.com and finds he can get it for $150 cheaper from overseas and places an order there.
Let’s look at what happened here. The Australian seller and importer have incurred the costs of selling that gear, yet all the benefits of that sale have flowed directly overseas. That has a flow on effect, the Australian seller now has proportionally higher costs as a result of servicing these “non sales” which means he has to charge more for the sales he does make. See what is happening here? In part, buying behaviour is destroying the local market by driving up costs and reducing sales. Conversely, the overseas online seller’s costs are reduced because they don’t have to assist the customer. A perfect storm.
This in turn means the local distributor and support network is being destroyed. The international manufacturers notice that sales are going down in Australia and are inclined to put less resources into supporting the unprofitable market. In some cases, they just stop which means local support and expertise is gone completely.
Depending on the product, Australia represents about 1- 3% of the professional audio worldwide market. In some sectors, a single outlet in Los Angeles or New York produce more sales than our entire country so you can see why Australia has to fight to be heard.
By buying directly overseas, we are supporting overseas employment and the taxes that we pay overseas don’t contribute towards our economy.
Now we hear the “Australian reseller is a ripoff” argument. Really? Their costs are higher by the fact that their staff are paid properly, they hold stock, they pay GST, they support the Australian economy, they meet the Australian Consumer law obligations, and they pay taxes in Australia.
GST on direct overseas imports under $1,000 was supposed to come in July. In practice that did not happen because it seems that the mechanisms to do that are a long way from being sorted. Despite this, I say bring it on. It is incredibly unfair that Australian’s in the business of importing and supporting products are penalised by 10% when compared to their overseas counterparts.
I quite like Australia. I like the fact that by world standards we have a social security net, minimum pay rates, healthcare for all, decent roads and infrastructure etc. I also think it is entirely reasonable that those in the Australian supply chain benefit from what our country is about.
In that context, not supporting our local economy seems selfish and shortsighted.