Is internet shopping to blame for the current woes of retailers?
That’s certainly what the retailers would like you to believe. Indeed, the retailing industry – including heavyweights such as Myer, David Jones, Harvey Norman and Target – are about to launch an advertising campaign in major newspapers in a bid to pressure the Federal Government to impose GST on all goods bought over the internet.
The retailers claim that goods purchased from offshore via the internet are getting an unfair tax advantage because such purchases are currently exempt from GST and import duty if they’re worth less than $1,000.
And they warn that failing to act will reduce the demand for casual and part-time workers, and will ultimately cause the loss of thousands of jobs in retail, manufacturing and logistics.
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Canberra has already responded to the retailers’ gripes by announcing a Productivity Commission inquiry into the impact of internet sales on the retail sector. But the retailers aren’t happy. They’re trying to force the Gillard government either to tax purchases made over the internet, or to offer a GST-exemption for local purchases worth less than $1,000.
It’s not surprising that retailers are unhappy at the moment. They’ve had to contend with customers who have become increasingly thrifty and reluctant to open their wallets. As a result, retailers have had to offer widespread discounts in recent months in order to clear stock. Even worse, reports from retailers suggest that sales slumped further after the Reserve Bank raised interest rates in November.
But while the retailers may like to blame internet sales for their woes, it’s clear that they’re only a small part of the problem.
It’s estimated that Australians spend between $1 billion and $2 billion buying goods from offshore on the internet each year – or an average of around $200 a year for the country’s eight million households. This is a drop in the bucket compared to the country’s $250 billion a year in total retail sales.
It’s also small compared to the amount of money Australians spend buying goods and services when we’re travelling overseas. And the surge in the Australian dollar has led to a boom in how many of us are heading overseas.
According to official figures, there were 5.2 million short-term resident departures from Australia in the first nine months of 2010, up 15.4% from the same period in 2009.
Given that, on average we spend $4,000 to $6,000 when we go overseas, it’s clear that our physical spending overseas – on items such as hotels and restaurants, as well as the goods that we purchase – represents a much bigger threat to local retailers than what we buy over the internet.
But that’s not to say that the retailers should not be worrying about the threat they face from internet sales. At present, only a certain demographic are showing an enthusiasm for buying products online. The vast bulk of the Australian population simply isn’t participating in online shopping.
When more Australians migrate into online shopping, it will have huge ramifications, not only for retailers, but also for the owners of commercial shopping premises.
This article first appeared on Business Spectator.