Online retail hits back in Productivity Inquiry, eBay argues import threshold not the issue

International online retail giant eBay has hit back at the domestic retail market, warning the low-value import threshold should remain at $1,000 or risk creating a “severe negative impact”.

eBay’s submission to the Productivity Commission Inquiry into the retail industry comes after several domestic retailers, including those represented by the Australian Retailers Association and the Australian National Retailers Association, argued the threshold should be completely done away with, and the goods and services tax placed on offshore online sales.

But eBay Australia spokesperson Jenny Thomas says the retail debate extends beyond whether imported goods valued at less than $1,000 purchased online should be subject to the GST.

“We don’t particularly see GST as the issue here; we see this as the reluctance of traditional retailers to embrace online. And increasingly people are doing that and we’ve seen people lift their game, so the GST isn’t as big an issue as some think it is,” she says.

Thomas points out the reason many people shop online is because of discounts that extend far beyond the 10% covered by a GST. This same reasoning was also found in a recent Australia Institute report, which discovered many retailers are marking up their goods by an unfair amount.

While retailers argue they are forced to do so to account for higher wages costs and shipping, Thomas says shoppers are still forced to look elsewhere.

“It’s easy to see where there is a disparity, because in many cases you’re seeing differences of $200 or $300, and it seems incredibly unfair.”

“This is the great thing about the internet – consumers have the option to compare prices a lot more easily than they have in the past, and the challenge is to really meet that.”

More Australian companies are going online. Department store giants David Jones and Myer have begun expanding their online stores, while furniture and white goods business Harvey Norman is experimenting with online. Yesterday, 50-year old chain Betta Electrical announced an online expansion “to stay in business for the next 50”.

AAMI Insurance also announced last week it will be closing its retail branches in favour of online and telephone-based shopping.

eBay Australia and New Zealand managing director Deborah Sharkey quotes research showing sellers on the site are experiencing growth 10 times higher than those businesses in traditional retail – and says its business will be impacted if the threshold is reduced.

“These contributions would be significantly eroded if the GST low-value import threshold is reduced, hurting numerous stakeholders from businesses to importers. We believe that any moves to slow down the uptake of online retail would punish consumers, who would subsequently pay higher prices.”

“We believe it is important to work with the Government to ensure further infrastructure investment is made, enabling eCommerce to continue its growth in Australia, benefiting small businesses, consumers and regional Australians.”

Several of the submissions to the Productivity Commission claim the Government is missing out on hundreds of millions of GST revenue. Some have even recommended dropping customs duty on textiles, national trading hours, and a hold-off on minimum wage growth.

But Thomas says the issue of lost revenue, and some other aspects of retailers’ arguments, ignore the growing disparity between prices.

“The companies we see on eBay are large businesses turning over millions of dollars a year, taking advantage of the strong Australian dollar to pass savings onto consumers. So we don’t see the GST as a big issue here.”

“The demand is there online to provide the product where the consumer is shopping. And we’re seeing the ability of international sellers, and domestic sellers as well, to pass on those savings.”

Sharkey adds in the submission that “online retail offers consumers low prices, wider selection and greater convenience”.

She also points out that many businesses in Australia are using online channels to improve productivity and cut costs, allowing them to “operate free from the constraints of shopping centre or store trading hours”.

The Productivity Commission is set to hand down its report on the retail industry later this year.