Retailers demand more competitive laws to fight online challenge – the top five legal problems holding them back
Thursday, June 28, 2012/
The retailers are out in force. Months after the Federal Government said it wouldn’t do anything to impose a 10% GST on offshore sales, retail veterans are once again pushing for Canberra to make a stand.
Harvey Norman managing director Katie Page, along with executives from Big W, Bunnings, Coles and Super Retail Group, said yesterday at a conference the GST-free threshold, trading hours restrictions and labor laws are holding them back from competing with the online world.
“Regardless of how you service that customer, it’s got to be seven days a week, 24 hours a day,” Page said at the Australian National Retail Association’s forum yesterday.
“As much as commentary keeps saying there’s structural change in retail, the laws have not moved with that. When you talk about the GST and $1,000 – when that came in in 2000, we were in an analog world,” she said.
Pagewent further, saying businesses shipping to Australia should pay the corporate tax rate.
“I don’t care who buys what from whom in which country but I absolutely do believe that whoever ships in this country must pay the tariffs, must pay the GST, the GST collection, the compliance costs, the on-costs for wages, the carbon tax and the company tax.”
Coles managing director Ian McLeod also said trading hours laws are becoming “simply archaic”.
While the GST issue has been debated for some time, it’s true that traditional retailers are hurting in a number of different ways. Whether it’s zoning laws, or parallel imports, businesses are finding it tough to compete.
Now, we’re not saying retailers have a good case for some of the following potential reforms – but at the very least, here are five key points that are holding them back from competing with online stores:
This is the obvious one. Right now, bricks and mortar retailers are selling goods subject to GST. But for online retailers based overseas, shoppers can purchase a book, piece of clothing, or any other type of product, and then have it shipped to Australia and escape paying the 10% tax.
Now, of course there is plenty of debate about just how much the 10% tax will actually change things, considering the price difference between many local products and those overseas is greater than just 10%. But it’s a price difference that can be closed, and retailers continue to call for it.
The current problem is that it costs too much to recover the tax. But as the National Retailers Association keeps saying, there are some fixes that could be made to ensure charging GST on foreign imports becomes revenue-positive.
Of all the problems facing retailers right now, this is probably the most black and white. Everyone admits there are problems with the zoning laws – they restrict businesses from opening in areas where they can become most profitable, and are generally outdated.
Last year, the Productivity Commission even released a report saying business compliance costs could be reduced, and more land would become available for construction if zoning and town planning laws are fixed.
Current laws restrict businesses form opening in certain areas because they aren’t zoned properly. It’s a huge problem – but not for online businesses.
If you’re a large online store you will have to operate a warehouse, but there are more ways to get around zoning laws in the operation of the site.
Zoning laws are outdated, there’s no question about it. This is one area where online retailers are definitely playing on an uneven field.
3. Labor laws
Retailers have been arguing they should be allowed to cut penalty rates for staff on weekends, in order to stay open and keep providing services to stay competitive. After all, paying staff over $20 an hour on a Sunday doesn’t make sense if you’re not bringing in much profit.
On the other hand, online businesses don’t have to pay staff penalty rates at all. In fact, many of them are able to operate on a skeleton staff, shipping goods with no need for a retail storefront.
Not much can be done about this. Online businesses will continue to enjoy this special advantage, and the government isn’t about to cut penalty rates. Either way, it’s definitely a burden for traditional retail to bear.
4. Trading hours
The fact Western Australia just passed a law allowing businesses to trade on Sunday suggests there’s a problem with the way trading hours are handled.
Every time a national public holiday rolls around, businesses spend even more time figuring out just how each state’s opening hours are going to work. And it’s incredibly confusing, as SmartCompany has pointed out several times.
Online retailers obviously don’t have to abide by any of these rules. Traditional bricks and mortar retailers are subject to trading hours legislation that was written back when the internet wasn’t a competing force.
There’s a dire need for trading hours to be fixed, perhaps even made uniform across states. Otherwise, retailers simply can’t stay competitive.
5. Parallel imports
The issue of parallel imports affects both online and bricks and mortar retailers, so it doesn’t create quite the same online advantage as the other issues, but it is still important.
Parallel import laws affect every industry, but interesting changes are happening in the book industry.
The law says bookstores cannot import a book themselves if a local publisher brings it in within 30 days of publication, and then renews the supply within 90 days. It basically guarantees bookstores can’t get cheaper imports and compete.
The good news is that the government has announced it wants to change the rules to make sure publishers bring books in within 14 days, and then renew supplies within 14 days as well.
We covered the changes yesterday, and although it may be a while before the new laws come in, at least there is some movement.