Australian online retailers move product offshore to use cheaper shipping rates

Australian online retailers are moving towards a shipping system where they keep stock offshore and ship on demand rather than mail products through the more expensive domestic channels like Australia Post, one industry veteran has warned.

The move comes as more offshore retailers are beginning to attract Australian dollars by reducing shipping costs to virtually nothing and even mailing products for free – opponents say this trend is stifling competition in the local retail sector.

Jason Picknell, chief executive of freight forwarding company Parcel Express, says he is noticing more companies now opting to keep stock offshore and then ship it on demand rather than pay excessive domestic fees.

“It’s escalating. You have the big boys ramping up free shipping into Australia, and obviously as more companies start coming on board from America they’re looking at the cost effectiveness of the postal system.”

“Certainly Amazon have been doing this for quite a long time, and it’s been in place for many years. But we’re seeing some Australians starting to do that now.”

Picknell identifies online bookstore Fishpond as one user of this shipping scheme, and he says there are others which do not wish to be named.

A spokesperson for Fishpond said this morning that while it keeps popular stock on-hand, many books are kept offshore and imported for much cheaper rates.

The trend also comes as retail giants Harvey Norman and Myer have both said they will open Chinese-based websites to save on shipping and GST.

“Previously these companies were bringing products in under a freight forwarding strength, but they are now getting rid of that process. They would warehouse it and push it out, but now they’ll just ship each product through normal postage services.”

“There are significant savings here, perhaps $1-2 each book for a book company. The savings can be significantly high.”

Australian online retailers are being pressured into providing free shipping as offshore-based retailers such as the Book Depository continue to make a killing by eliminating postage costs. Some Australian companies, such as online shoe retailer StyleTread, are already getting rid of shipping but for many it would reduce their margins too much.

“When you start advertising free shipping you’ve got to make up the costs somewhere.”

But although this seems like the perfect arrangement for local retailers, there is a problem – Picknell says it will drive up the cost for domestic shipping and hurt retailers which choose to import goods by bulk.

This is because Australia Post uses different shipping qualifications depending on where an object comes from.

For example, a normal book weighing over 500 grams will be classed by Australia Post as a parcel for domestic sipping. But if a business sends that same book via America through Royal Mail, or through New Zealand Post, then Australia Post classifies this via Universal Postal Union conventions – and there is a 30% difference in price.

“There is going to be a very fine line between jeopardising the domestic market and promoting the international market for parcels,” Picknell says.

While he warns this won’t happen overnight, Picknell says domestic shipping prices could rise to accommodate for the flood to overseas-based shipping routes.

“If you’re sending something domestically, the market rate for delivery to consumer is more expensive than if you’re sending that product from offshore, and that’s the bottom line.”