I wish this would be the last piece I ever write on the GST and Low value import Threshold; however I am not confident of that at all. Today the Government announced that they are not going to change the law and regulations relating to the $1000 threshold that is currently applied for overseas goods; but they will begin to prepare a business case and plans for the development of improving parcel processing in the country. The Retail Associations sees this as a ‘hollow victory’, consumers and other voters may see it as more time wasting and procrastination.
The GST debate as an issue in Australian retail, Australian Politics and online retail is about to chalk up its third birthday – in its short existence one can only imagine how many hours of writing (this piece included) have been spent covering it, how many trees were involved in printing related articles (please don’t print this), and the human time in creating three reports looking into the matter. And despite all of these resources – there is still no clear definitive statement or course of action to actually solve the issue or put it to bed once and for all.
The facts as I understand them from the numerous articles, reports and interviews’ I have read or watched is that currently over 58 million parcels pass through Australia every year and lowering the threshold from $1000 to $500 would place too much pressure on an under resourced system – hence it would cost more than it would recover – essentially what the first report on the matter stated nearly a year ago. Subsequent reports have also confirmed this.
The other fact that no one really mentions is that overseas purchases have really only enjoyed this popularity because our Australian Dollar is so strong and has been trading above parity for some time. So what then happens to this GST issue when the Australia Dollar isn’t as high? Other issues such as even if the 10% GST is enforced on overseas items; they are still cheaper and how come Australia is so bloody expensive are never given much print time.
There is no doubt that the retail playing field is not level; overseas competitors are currently exploiting their range, prices and service standards to Australian consumers; but local retailers must accept their share of responsibility for the lop-sided playing field – after all it is not like the internet popped up over night. For too long local retailers took advantage of the isolated location of Australia enjoying protectionism that only comes from geography and our relative market size. And with this protection came complacency – retailers had no reason to innovate, change, excite or stimulate; look at David Jones – their POS system was out of date when I left school over 10 years ago; yet they still use it. Nordstrom by comparison are soon to remove all fixed cash registers and move to a more mobile, responsive and engaging checkout.
Let us then pretend that the GST was enforced on all items above $500AUD – does this instantly solve Australian Retail woes? Not likely. Will items still be cheaper overseas – on most items yes. Will consumers simply spend to a threshold, and then start a new transaction to avoid the GST threshold – yes. So really not much changes then.
What if retailers presented a retail offering that plays to their strengths – that being their physical presence and a meaningful online offering to complement their in store experience and service. Some will argue that these bricks and mortar stores already have an online presence – I said above it has to be a meaningful one; online is a different beast to bricks and mortar, simply having an online store is nothing like having a Bourke St Mall presence. In fact sometimes the closest thing to having an open online store that isn’t done properly is closely related to having a bricks and mortar store at Uluru.
Consumers are now using mobile devices, tablets to complement their online shopping – which in turn complements their in store shopping – combined we call this retail. Local sellers have he edge with using data, creating offers, enticing both in and online store promotions, serving needs and by doing this will be able to future proof their business.
Regardless of what happens with the GST – and personally I cant see it changing for sometime – by which point the AUD may not be as high – and overseas sellers may have collected enough meaningful data to successfully target to; it may be too late anyway. As consumers change, retail needs to change with them – just because you had a successful bricks and mortar presence last decade doesn’t mean you will see out this one. I would be encouraging retailers to focus more on what they can change and influence rather than wasting time on what they rely on others to do for them.