A few months ago there was a call from Harvey Norman, the CEO of the like named retailing chain for the introduction of GST on overseas purchases of under $1,000.Â Up until now these private purchases have been free of GST and import duty, the logic being that to collect the tax would cost more than the tax raised. There has recently been more pressure put on the government by other retailers to start collecting these taxes.
I can see their point however I think it is about more than just the tax and the competition placed on these traditional stores. Over the last ten years the online shopping community has been increasingly placing pressure on the traditional “bricks and mortar” stores and their inefficiencies. The traditional store has remained unchanged for many years and the new tech stores, both online and with physical outlets are seriously under cutting these traditional outlets.Â All one needs to do is to browse ebay, and the numerous online stores for retail goods such as electronics, books, DVDs, music etc. Many people are undercutting traditional outlets, even taking into account GST.
Placing GST on personally imported goods will do little if anything for government revenue, it is merely a form of protection for traditional retail businesses. Even purchasing from Australian businesses via ebay, who include GST can achieve substantial savings. If the likes of Meyer, David Jones, Harvey Norman and Target want to compete they have to embrace a whole new business model and come into the 21st centuries way of doing business.
As a good example look at the price of HDMI cables. I can buy a perfectly functional HDMI cable from an online store for $15, which when you add freight comes to $20 to $25. Now if one had to pay GST then you would be adding an extra $1.50 and then the government would need to collect this, which would cost far more than $1.50. Now this price is about the same whether it was from an Australian online or overseas supplier. The same HDMI cable from Harvey Norman typically costs $75.Â Take a high end gold plated, shielded heavy duty cable. Online it is about $50 and from Harvey Norman about $200. Both of these companies would be paying roughly the same wholesale price.Â Note that both of these cables give exactly the same image quality, it is only the build quality that varies.Â The difference in price between the two resellers is with the business model they both use. By blaming GST Mr Norman is putting up a smoke screen and trying to blame consumers for his short sightedness. Do not blame us, fix up your business.
There are certainly customers who will still want to buy in person but as more people are buying on line these traditional outlets need to change or die a natural death.