Australian retailers hurting as shoppers head online

The pressure is growing on retailers, with the Australian Retailers Association claiming that too many customers shopping online is hurting the industry. The Association also says the move online is depriving the Government of over $600 million in GST revenue.

The comments come as retail giant Gerry Harvey says deflation in the electronics sector is putting more pressure on his business. 

Australian Retailers’ Association executive director Russell Zimmerman says retailers are becoming more and more concerned about the number of Australians spending money online at stores based overseas. 

“I think it’s probably fair to say our retailers are quite upset about it. With the dollar pushing parity, a lot of retailers are suffering and more people are just spending money overseas, where things are often cheaper.” 

“The areas we’re seeing this are in the electronics sector, so people buying cameras and so forth. But we’re also seeing people buying fashion overseas where things are much cheaper.” 

Zimmerman says Australians are set to buy $12 billion worth of products online this year, and he claims about 45% of that will be spent offshore. Recent figures from PayPal indicate about 40% of online expenditure is going overseas. 

He also points out that no GST or import taxes are charged on overseas purchases of less than $1000, and that the Association is talking to the Government about these issues.

“They are missing out on these charges, so we think they either need to start charging more GST on online sales, or lowering the threshold, or a combination of these things. New Zealand has a $400 threshold; perhaps we should lower ours.”

“The flip side of this is that businesses also need to make sure they are competitive. That’s the important issue here.”

Zimmerman says the issue of online retail is now becoming crucial for the Government, and something must be done quickly. “The Government is losing hundreds of millions in taxes, and it may well be more than that.”

Meanwhile, retail giant Gerry Harvey has said his margins are getting “squeezed to buggery” by the high Australian dollar.

Harvey Norman recorded a 30.8% reduction in profit before tax, due partly to start-up losses from the introduction of Clive Peeters stores and deflation in the audiovisual and computing category – a problem Harvey says is particularly troubling.

“Our hope is that we get some good technology coming out so we can make some margins and get some dollars,” he told The Australian Financial Review. “That’s the biggest problem at the moment, the audiovisual area.”

“Business is not bad… but margins are being squeezed to buggery in this category, and it’s not possible to sell twice as much to make up for it.”

The problem of deflation in the consumer electronics category has been raised before by Harvey and other industry representatives, including JB Hi-Fi chief executive Terry Smart.

Harvey Norman recorded first quarter sales were up by 3.6% in Australia, but compared with the previous corresponding quarter, sales were flat.