[LINK] Kogan on Online Retail....

Richard Chirgwin rchirgwin at ozemail.com.au
Mon Jan 10 17:32:26 AEDT 2011


Frank,

I'm still interested in why *all* the blame for price differential is 
laid at the feet of the retailers. Why do we let the vendors / 
manufacturers off the hook?

According to HN's annual report, the franchisee's margin is about 6%. If 
I add franchisee sales ($5.2 billion) to HN-owned stores' revenue ($1.3 
billion), I get sales revenue of $6.5 billion. HN's profit is $420 
million - a margin (not mark-up since this includes outgoings like rent 
and salaries, etc) of about 6.5%. This margin would, I would suppose, be 
much higher if all of the "padding" of product pricing were taking place 
in Harvey Norman rather than among the vendors.

None of this excuses our retailers from their part in being 
uncompetitive - I would particularly mention crappy customer service as 
a sore point (I find smaller retailers beat larger hands-down in terms 
of customer service) - but I don't think it hurts to try and understand 
the whole of a problem rather than one bit of it.

RC

On 10/01/11 12:16 PM, Frank O'Connor wrote:
> OK, Leaving aside the monkey brain issue, it comes down to three
> objections to taxing on low value/low volume imports:
>
> 1. It costs more than it raises in revenue. Doesn't make a lot of
> sense to do this ... as the ATO pointed out.
>
> 2. If one passes on the costs (as Customs and the ATO would probably
> be bound to do if the government caved to the retailers demands) the
> cost would be far more than its worth. Remember the retailer doesn't
> pay GST on their bulk imports. (They pay at the POS, and claim
> REFUNDS as credits for anything before same.) Customs would probably
> charge say $50 to $100 per article (presumably billed and collected
> at the Post Office ... taking up more of the Post Office's time and
> resources as well) in addition to the GST, and it would probably
> involve much to and fro'ing of paperwork and a tortuous long process
> to clear goods before you got your hands on them. For goods about
> $900 to $1000 (or if the inordinate markups in the cost of like
> product in Australia continued), it would probably still be
> economically worth while, but for goods of lesser value ... forget it.
>
> 3. The ONLY beneficiaries of these charges and process would be our
> uncompetitive retailers, who could continue to live in their
> uncompetitive Nirvana, raking in their huge margins and holding a
> geographically isolated population captive. In other words ... it
> would be an uncompetitive industry protection plan for the retailers
> out dated business high margin model. Blacksmith's never had this
> protection in the turn of the last century ... so why should another
> dying business model/service get it now.
>
> In other words ... the retailers would have put charges and process
> in the way of their competitors, and the situation would become so
> tortuous that buying from on-line retailers overseas would simply not
> be viable for people. This is what the current kerfuffle is about.
> Not the 10% GST ... which is an irrelevance. It's about putting in
> place processes and charges that make single e-commerce transactions
> non-viable and/or painful.
>
> For the government this situation would be revenue neutral ...
> although the bureaucracy would get an expansion happening in their
> empire ... they would simply recover the costs of the exercise. For
> the retailers, joy is their's .. competitors has been wiped out.
> (This form of capitalism isn't really about competition ... it's
> about wiping more efficient competition out, using means other than
> efficiency) And for the customers ... well, we'd be back
> geographically trapped in the hands of the retailers.
>
> That said, because of the Internet we'd know we were being ripped
> off, and would be getting progressively angrier and more resentful
> with those who did this to us ... government and the retailers.
>
> Everytime we bitch about cost/product/job loss/industry closure or
> whatever they invariably throw globalisation in our faces ... well
> now the shoe is on the other foot. The retailers must adapt or
> perish. They must add value, rather than subtract it ... or try get
> the government to subtract it from their competitors  on their behalf
> (which is what this whole exercise is about).
>
> Job losses? Hey, disbursed goods delivery for example is way more
> labour intensive than when you and I go to the centralised stores and
> do the work for them... and a heap of other services and industries
> will benefit from an e-commerce rather than supermarket/traditional
> retail model. And hey, if less land was taken up by unsightly
> shopping malls and retail outlets ... maybe land values would go down
> to reasonable levels.  :)
>
> At 11:19 AM +1100 on 10/1/11 you wrote:
>> There seems to me to be a general conflation of two issues in this
>> discussion (here and elsewhere) between the performance of local
>> retailers and the economic case for GST on international purchases.
>>
>> I don't have much to add to the discussion of the performance of local
>> retailers.
>>
>> As regards GST: it is a consumption tax applied to sales to the final
>> consumer.  I can't see a good reason for Australia to forgo tax revenues
>> on consumption that is purchased from overseas, particularly as this is
>> likely to increase over time.  I can't see any policy problem with this.
>> Can anyone?
>>
>> There is, however, a practical problem in getting a collection process
>> that functions smoothly and effectively.  I'd guess that can be sorted
>> if the financial transfer is used as a tax point but I wouldn't know.  I
>> don't think 10% GST will stop people from purchasing goods at 50% of the
>> local price overseas, although it will swing marginal cases a bit.  I
>> bet Harvey Norman wants in addition to GST on foreign purchases, the
>> most obtuse and difficult tax collection scheme that can possibly be
>> constructed :)
>>
>> (There is a good economic reason for slanting taxation towards
>> consumption rather than productive investment.  OTOH flat rate taxes are
>> regressive since they are impact the poor to a greater relative degree,
>> but I think this can and should be mitigated elsewhere.)
>>
>> Interwoven with the above there's also a third irrational "monkey brain"
>> issue of taxation in general: no one wants to pay tax.  However, we all
>> want to live in the amenity of high tax countries and no one wants to
>> move to places where tax rates are genuinely low, eg, Somalia. Enough
>> said on that one. :)
>>
>> - Jim
>>
>>
>> CONFIDENTIALITY NOTICE AND DISCLAIMER
>>
>> The information in this transmission may be confidential and/or
>> protected by legal professional privilege, and is intended only for
>> the person or persons to whom it is addressed. If you are not such a
>> person, you are warned that any disclosure, copying or dissemination
>> of the information is unauthorised. If you have received the
>> transmission in error, please immediately contact this office by
>> telephone, fax or email, to inform us of the error and to enable
>> arrangements to be made for the destruction of the transmission, or
>> its return at our cost. No liability is accepted for any
>> unauthorised use of the information contained in this transmission.
>> If the transmission contains advice, the advice is based on
>> instructions in relation to, and is provided to the addressee in
>> connection with, the matter mentioned above. Responsibility is not
>> accepted for reliance upon it by any other person or for any other
>> purpose.
>>
>> _______________________________________________
>> Link mailing list
>> Link at mailman.anu.edu.au
>> http://mailman.anu.edu.au/mailman/listinfo/link
> _______________________________________________
> Link mailing list
> Link at mailman.anu.edu.au
> http://mailman.anu.edu.au/mailman/listinfo/link
>





More information about the Link mailing list