Retail

Retail roundtable: Is Amazon’s Australian ban a game-changer?

Eloise Keating /

GST

Source: AAP/Joe Castro

Retail giant Amazon caused a stir on Thursday when it announced that come July 1, Australian shoppers will no longer be able to buy physical goods from its international websites.

Instead, from the start of next month, Australian-based shoppers will be directed to the recently launched Amazon Australia site.

Amazon said on Thursday the decision to stop shoppers from importing goods via its sites is a direct result of the upcoming change to the goods and services tax, which will see GST applied to all online purchases from overseas sellers under $1000 for the first time.

Local retailers have long argued for GST to be collected on these so-called low value items, but global shopping platforms like Amazon have fought the government on exactly how the tax should be collected.

Australians can currently access some 480 million products via amazon.com, but in a matter of weeks, the selection on offer will drop to the 60 million products available through the Amazon Australia site, plus another 4 million products that will be added to a ‘global site’ within the Australian platform.

“While we regret any inconvenience this may cause customers, we have to assess the workability of the legislation as a global business with multiple international sites,” Amazon said in a statement.

“Based on our assessment, we will redirect Australian customers from our international sites to amazon.com.au where they can shop for products sold by Amazon US on the new global store, available today.

“This will allow us to provide our customers with continued access to international selection and remain compliant with the law, which requires us to collect and remit GST on products sold on Amazon sites that are shipped from overseas.”

The consumer reaction to the news has been one of outrage, but what does the decision mean for local retail sector? Amazon competitor eBay has confirmed it won’t be making a similar move, and the verdict from small businesses on the Amazon Australia site so far has been less than glowing.

We’ve gathered together a retail roundtable to unpick the decision — and its ramifications for Australian retail.

The independent retailer: Jon Page, Pages & Pages Booksellers, Mosman

“I must admit to being surprised by Amazon’s announcement yesterday. Having the Amazon US or UK website charge and collect GST is something that Amazon could easily do and is something they actually do in other countries and other tax jurisdictions around the world. In fact, by blocking Australians’ access to Amazon’s overseas sites it shows they can easily identify Australian consumers and charge them GST.

“I think this announcement yesterday was nothing more than a publicity stunt which has obviously worked. I will be interested to see if Amazon’s subsidiary business, The Book Depository, follows suit.

“I am excited that on July 1 the 10% tax loophole and headstart overseas retailers have been enjoying is finally being closed. However, this has taken over 10 years of lobbying governments on both sides of the political spectrum to fix what was an obvious problem both for Australian businesses and government’s tax revenue.

“As a local, independent bookshop we have never been afraid of competing with Amazon. Being able to do so now on a more level playing field is something I am really looking forward to. I hope those consumers who are upset about being blocked from Amazon’s overseas sites decided to give local retailers ago rather than switching to Amazon.com.au which in fact is a very poor offering at the moment.”

The online retailer: Naomi Simson, RedBalloon

“Amazon have cited ‘cost of compliance’ as the reason for blocking Australian customers. This is not only ironic (given they are the largest retailer on the planet), it speaks of an arrogance that says ‘we don’t care enough about Australian customers’ to make this investment.

“I suspect there is far more to it than that. Namely, they are trying to get their Australian business to work and if they stop the ‘grey’ marketing from abroad, then they will force Australians to purchase locally. However, simply put, the range, reach and customer experience are so vastly different I suspect customers may vote with their feet – or more precisely, their fingertips.

“Customers will work out a way to be served what they want, when and where they want to have it. I think this move sends a very bad consumer message to all Australians… it also says ‘we don’t respect your tax laws’. I was surprised to see them take this stance and I am curious to see what happens next.”

The makers: Dannielle Michaels and Monique Filer, b.box for kids

“We believe it presents an opportunity for Amazon to direct Australian consumers to Amazon.com.au, which has not as yet lived up to the hype.

We don’t believe this will level the playing field, as depending on the product, the consumer could potentially still get the products they want, at a much lower price from the US, even when GST is added.”

The industry analyst: Louise Grimmer, Tasmanian School of Business and Economics, University of Tasmania

“In my opinion, Amazon’s Australian entry has been somewhat lacklustre since their launch in December, and therefore I think Amazon’s new policy will not have a significant impact on huge numbers of Amazon’s Australian customers.

“While some customers have vented their frustration about the changes in Amazon’s policy, others are instead angry with the Australian government’s GST collection policies, and in some ways this move can be seen as a protest vote by Amazon against the federal government’s GST implementation that comes into effect on July 1. The winners out of this move will likely be other major e-commerce platforms such as eBay and AliExpress as Amazon’s customer base abandon the platform and seek out other online retailers.

Despite the initial hype about Amazon entering the Australian retail landscape, the Australian ‘experiment’ does not appear to be delivering for Australian customers in any meaningful way. Nor does it appear to be providing tangible benefits for those SME firms which have signed up to sell through the Marketplace platform.

“Many customers and retailers remain unconvinced, and this new move by the e-commerce behemoth adds to the frustration that many consumers are experiencing when shopping with Amazon.”

The futurist: Steve Sammartino

“I can’t help but think the ban on Australians using US/UK sites is a Trojan horse to get people buying from their local arm.

“The Australian launch of Amazon has been pretty underwhelming. The lack of a Prime service, which is their killer app, and the thin range hasn’t given many customers a reason to gravitate to Amazon.com.au. It feels like this move is a preamble to the launch of Prime – which will shift how commerce works in this country. In real terms, we’ve only got the information internet here – we’ve never felt the benefits of a truly consumer centric e-commerce environment and the impact will be seismic.

“If anything it’s a classic move from multinational conglomerates where they like to ensure their revenue from a particular market matches their cost infrastructure in that market. The GST ruling is convenient for Amazon to localise their strategy, as it certainly isn’t a cost or administrative constraint on the financial behemoth.

“For now, most consumers won’t have a choice, but savvy consumers won’t find it difficult to reroute their purchases by using a VPN and consumer freight forwarders. But it does add cost and complexity at the consumer end.

“Ironically, the extra 10% GST added to the purchase price would still render the large majority of goods via the US cheaper than they can be purchased in the local arm. My latest book (converted to AUD in both markets) sells for $13.97 in the US and $21.99 here in Australia. The 10% has little impact on the final cost of goods sold via Amazon and other online retailers as Gerry Harvey would have us believe.

“In terms of the government’s decision to enforce GST on overseas purchases, it is simply protectionism. In the long run it will do our retailers a disservice, as they will have to learn to compete on a global scale, in open markets. Creating a false barrier will simply reduce their export potential, with little consumer benefit.”

NOW READ: Why this small business owner is considering leaving Amazon Australia: “It’s just all fizz and no substance”

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Eloise Keating

Eloise Keating is the editor of SmartCompany. Previously, Eloise was news editor at Books+Publishing, the trade press for the Australian book industry.

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