Editorial / Hot Topics / News
Band-Aid Solution to Protect Prices in Online Retail
Overseas brand suppliers want to ‘stitch up’ Australian consumers by restricting international online retailers the ability to sell here, but this out-dated method of price protection simply won’t work.
In March I wrote my thoughts on the perception of online discounts, that, from an industry-wide point of view for online retail in Australia, it may be a bad perception that hurts future investment in the industry and some products.
It was with great interest that when I opened the paper this morning – yes I still have one delivered – I found an article on the front page of The Age entitled, ‘The beginning of the end of web bargains’ followed by, ‘Importers close door on overseas online stores’. Venturing online to view the interest in this article, I discovered that the piece had been given the prime real estate position for news articles, accompanied by a new heading ‘Web shoppers stitched up’ and that by 9AM over 190 comments were associated with it. Serious interest indeed.
Aside from some very emotive headings and subheadings, the article explains that importers of certain fashion brands are reaching agreements with international labels to charge a higher fee to Australian web shoppers – or to not supply them at all. The obvious winner is the traditional retailer, obvious loser the Australian consumer. But this style of prohibition and price raises a question regarding whether it is a sound business decision. Will it work? By work I mean will more jeans be sold by traditional retailers here in Australia? Because that can be the only intent behind this move by importers.
Importers argue that the government’s unwillingness to act on lowering the GST free threshold has forced them into this position. The reality will be that the price hikes a demanded by importers will be more than just the 10 percent GST. This certainly puts the tax-free threshold argument on thin ice. The other issue rearing its ugly head in this situation lies with the traditional retailer and those involved with bricks and mortar retailers. Their inability to embrace online, and their inability to use new tactics and ideas to try stay relevant in today’s modern online world makes this recent move appear more backwards than forward.
This position by retailers and importers to protect business isn’t a new one – tariffs by various governments have existed for years, cartels operate in several different economies and in numerous industries – but the difference in modern retail is that almost anything is possible with online. There are no borders. The move from these importers will actually open up new businesses and services to assist the savvy online shopper.
Currently, PayPal operates a business called HopShopGo to great success – a business that gives Australian consumers a US based address, and more importantly gives them the ability to have items delivered from places they would not usually be permitted to. This works by having items purchases to a permissible address, before having the item forwarded to the non-permissable address. The retailer, and subsequently the suppliers, never find out the final location that the item is delivered to.
This manoeuvre by PayPal to create HopShopGo is intelligent business, banking on the Australian consumer’s desire to purchase brand name items at better prices, as well as getting access to a better range of products that US sites offer. And HopShopGo are not alone. Currently I am aware of at least six others who operate similar services. They exist because retailers and importers locally are never going to be able to continue to operate as they do today.
In The Age article Mattias Friberg, Director of a business that imports brand name jeans, described the recent move as, “the best ‘Band-Aid’ approach to stop the flow of sales going offshore”.
I couldn’t agree more. It is a band-aid approach and shows a lack of foresight, a lack of awareness of the savvy online Australian consumer and it lacks new thinking.
Local retailers could sell more products online by allowing in-store pickups, by offering iPads in-store only connected to their site to order from an extended range of products, or even allowing consumers to purchase from US or UK sites – but making pick up from store locations. This way, local businesses can offer superior service and advice – and these local Australian angles should be pushed more by retailers.
By increasing price on some branded products and stopping the online consumer from buying their desired product at the first attempt will only further send business to services such as HopShopGo, and alienate Australian retailers.