www.abc.net.au/news/2012-09-21/janda-democratising-tax-evasion/4272502

Take the time to read the above article on the gst by Peter Janda, it is in relation to why the Government is forcing you to buy your gear offshore.

Now my response is that maybe as avid windsurfers we would rather be Peter Pan than Pirate Mitt Romney Hook. Remember GST revenue goes to the states to fund Childrens Hospitals, just like the royalites from Peter Pan funds the Great Ormond St Hospital, as seen in the Olympics opening ceremony.

The consumer is not to blame for this, the retailer is not to blame, but 'the system' blows.

Anybody who does any shopping on the internet knows that the GST argument is rubbish.

Internet prices are often 40-60% lower than shop prices. Add in the GST and internet prices would only be 4-6% higher and they would still be better than 30% cheaper.

My reasons for buying from the internet:
- cheaper prices
- better range of products
- better service
- safety (no questions refunds, PayPal buyer protection)
- ease

Reasons for supporting some local shops:
- Excellent service (just pop in and check stuff out)
- Loyalty (goes both ways)
- Small discount (as a reward for being a good customer and to be competitive)

Reasons for not supporting some shops:
- Stupid and arrogant staff
- Poor range
- Poor service
- High prices

Its bad enough that we cant make anything in Australia anymore now we want to buy almost everything offshore to, something has to give and it will be jobs.

I will probably close down as I can't compete with the Government subsidising the opposition to the tune of 21%. It's impossible to give good service when people think you are ripping them off, sets a bad vibe.

My business could not be any further from the Harvey Norman set up, so I can't comment on his business, but here are my figures;

1. Consumer costs when buying locally, if the retailer does it for free.
Wholesale $100
Add Duty 5% $105
Add Imp Proc Chg say $5 $110
Add GST $121

That's 21% on cost that the consumer has paid to the Government.

2. Consumers cost when buying locally on a moderate mark up
Retailers cost inc charges $110
Add $20 retailers mark up $130
Add GST $143

3. Consumers cost when buying from overseas retailer
Wholesale $100
Add $20 retailers mark up $120

What has happened in the last few years are a two major factors.

Firstly the widescale use of the www

Secondly the parity of the Australian dollar and the US dollar.

The www makes market information very easily available. I remember as a kid back in the 80s looking for stuff I was interested in buying. My options were classifies in papers, usually the local or state papers. Later on the Trading Post came along. Today anyone with a web enabled device which one can basically pick up for next to nothing can view markets right across the world.

The parity of the Aussie dolalr to the US dollar makes it fairly easy for even the most financially illiterate viewer of markets to work out how much something costs in Australian dollars. As most markets are priced in US dollars it makes it quite easy for Australians to work out how much stuff costs around the world.

There isn't much we can do about these factors. Basically any business that relies on their customers being ignorant of how much stuff can be bought overseas is basically dead. Go into any shopping centre and you can see shops that are dead. Their business model belongs to the last century. Its sad. People lose money or jobs. However nothing can be done about it. The GST doesn't make much difference one way or another.

Plenty of big multinational companies will suffer the same way. Why for example do Japanese companies charge more for their product sold in Australia than America. Usually the excuse is America has a bigger market. However the fact is they charge what they can get away with. Australians though things should cost so much. Americans think things should cost less. Unfortunately for these overseas companies less Australians think things should cost more here than they do in America.

For example I recently bought a camera. I priced the camera I was interested in online and it worked out to be around $400. Down at the local shopping centre I went round to a few shops and most were selling the camera for $500 to $600. I wasn't prepared to buy it at that price. However one shop was selling it for $400. So I bought it from them. When it came to memory cards I bought a 32GB class 10 card for $20 online. For the same price I could only get a 4GB card at the local shops.



What do you suggest Phil? Should we stop people having the Internet or somehow find some other way to limit people getting information?

the following is a general retailer qustion and not necessarily windsurfing - but - what ever happened to 30%-ish markup on a store's buy price (ala cost price or wholesale price) being the socially accepted markup? (i was involved in sales from 1990-2000 and 30% markup was typical)

it seemed to go from 30% to 100% or more in such a very short time did retailers like hardly normals bring their demise upon themselves?

i'm glad we have a sensible local windsurfing store with sensible pricing on the GC

Haircut said...

the following is a general retailer qustion and not necessarily windsurfing - but - what ever happened to 30%-ish markup on a store's buy price (ala cost price or wholesale price) being the socially accepted markup? (i was involved in sales from 1990-2000 and 30% markup was typical)

it seemed to go from 30% to 100% or more in such a very short time did retailers like hardly normals bring their demise upon themselves?

i'm glad we have a sensible local windsurfing store with sensible pricing on the GC

As a rough approximation retail mark-up is around 100%. That doesn't mean the retailer is making 50% profit on a sales item.

As an equally rough approximation overheads costs are 35% (increase that many times for small retailers with labour, rent, advertising etc, and reduce it many times for internet based on-sellers with no stock, no stores, no inventory, no scruples) and taxes are 5%.

So - retailer pays wholesaler $100. Sells for $200. Overheads costs are $200 x 35% = $70. Taxes at 30% of profits = $10. Gross profit, after tax = $200 - $100-$70-$10 = $ 20, or 10% of revenue

As another equally rough approximation a business that makes 5 to 10% profit on revenue is fairly average.

Anyone makes less they go broke, any one makes more then other people enter the market, create competition and the capitalist system balances out

(unless the Government enters the market and introduces false markets like massive and unsustainable rebates in one tiny segment, additional taxes on only select entities, grants to individuals on an unequal basis, guarantee to support one company if its loans go bad, but not another etc. etc, but they then usually get voted out and the capitalist system balances out.)

The place is going down the gurglar with people using price as the only thing that matters. Everyone is going for the cheapest goods and we are in race down to the lowest common denominator.Consumers aren't educated in the difference between quality goods and crap.
When they wake up there won't be any quality goods left as they will have closed shop due to lack of support.

The GST doesn't make much difference one way or another.

All things being equal it's 10%, but add in also the duty and the Import Declaration Processing Charge, (which are both applied before you put the GST) and like I showed in this instance 21%.

For example I recently bought a camera. I priced the camera I was interested in online and it worked out to be around $400. Down at the local shopping centre I went round to a few shops and most were selling the camera for $500 to $600. I wasn't prepared to buy it at that price. However one shop was selling it for $400. So I bought it from them. When it came to memory cards I bought a 32GB class 10 card for $20 online. For the same price I could only get a 4GB card at the local shops.

So Camera overseas wholesale cost for both an Australian or Hong Kong retailer, with delivery included to the shop in either country, $300 Australian.
Overseas shop adds 33% mark up to get to $400 for you.

Australian shop, $300,
add duty 5%, $315
add Import Declaration Processing Charge $48.85, now at $363.85, This is your local shops cost.
He adds 33% mark up, $483.
Then you have to pay GST which the shop collects off you to give (again) to the Government, final price, $532.
Both retailers have made 33%, just the Aussie consumer has been nailed in hidden charges and taxes.
Your man just did you a favour at $400 due to other reasons, like he really needed $400 fast, but it's not sustainable.

What do you suggest Phil? Should we stop people having the Internet or somehow find some other way to limit people getting information?

Couple of suggestions (and the irony of a 2-bit windsurfing instructor advising the nation on tax reform is not lost on me, thought that's what I elected Pollies for)
1. Just copy whatever the other countries are doing.
2. Go online to have discussions like this, to show some people that it is not the retailers it is the system.
3. Economics 101, there are no long term costs, everything can be changed.
4. Get rid of GST and go back to income tax only, it's only been around since 2000.

Yes its the system. Wholesalers and importers charging more for their stuff because they can get away with it. Rents so high. Labour costs high too. Whats the answer?

Scrapping the GST would be great but it ain't going to happen. If anything the rate of GST will go up over time as government taxation from other sources dries up.

If you are a retailer and your wholesaler sells you widgets at a higher price than what you can buy it online, perhaps its time to look online for alternate sources of supply. Cut out the middle men. Its what the consumer is doing and there is no way they are going to stop doing it.

Mobydisc said...

Yes its the system. Wholesalers and importers charging more for their stuff because they can get away with it. Rents so high. Labour costs high too. Whats the answer?

Scrapping the GST would be great but it ain't going to happen. If anything the rate of GST will go up over time as government taxation from other sources dries up.

If you are a retailer and your wholesaler sells you widgets at a higher price than what you can buy it online, perhaps its time to look online for alternate sources of supply. Cut out the middle men. Its what the consumer is doing and there is no way they are going to stop doing it.

Hang on I forgot, the system is already level for items over $1,000.

ThePhil said...
3. Economics 101, there are no long term costs, everything can be changed.

That correct, and everything is changing. Consumers have realised that some products can be bought overseas for less. Knowing the wholesale price of most electronics (your $300 wholesale price is completely off the mark, $120 more likely) I can tell you it's the retailer not the Government that's the problem.

Times are changing. Some retailers adapt some won't. Those that don't won't be around. You don't see too many horse drawn carts these days. I bet those guys lobbied against motorised carts just as much as Gerry Hardly Normal is currently lobbying to have his greed driven outdated business model protected by government intervention.

What is happening is no Politician has the balls to explain this to the public and nobody wants to listen to anything so boring, so they are leaving it to retailers to do their job for them (or getting big backhanders from Amazon etc) then once the argument is done one of them will say hey we have a solution to this problem.

If it is over $1,000 then everything is equal, no problems, but then everybody just marks down the invoice values, or breaks things like kites (bar and lines) into 2 items.

If you get something in the post and it is clearly undervalued and the customs guys that work at the Post Office find it. Then they send you a 'First Notice', if you do nothing, then 28 days later they post it back to where it came from. There is no penalty and you can check this on the Customs website. If a shop/importer did the same thing he would be charged with fraud.

Works well for kites and sails as they are quite expensive items relative to the freight costs, it's a lot cheaper to send things into Australia than out as there is a lot more stuff coming in.

I know a lot of guys that just fly from Perth to Hong Kong, even works out cheaper with the flights. (They are obviously going to a Bricks and Mortar store, not an online one).

My first ever YouTube video, pity it's about tax, but believe me it's worth a look.

With all due respect are you really that naive to believe overseas retailers don't pay any taxes, duties or local sales taxes?

plus your markup calculations are wrong. I assume you are talking about fashion? Most Australian retailers slap a markup of between 100 and 600% on clothing.

eg. Diesel Jeans generally sell for a about 80 - 90 Euro in Germany. this is from a brick and mortar store. Their GST is 26% btw. The same pair of jeans generally retails here in Sydney for around $520. But then during sales I have odd sizes left over from the previous season selling for as little $90. Just a wild guess, the retailer would make a cool $300 on a pair of jeans after expenses. If that's not greed I don't know what is.