Now I am not an accountant or economist, however we are being sold the idea that imported goods that do not have GST added, is disadvantaging Australian retailers.

The example I will use, is that I was in the market for a new fishing reel. The Cheapest Australian price was $180, with most retailers at about $240.

Including postage, I bought 2 fishing reels for $180. Even adding the 10% GST of $18, still means I bought 2 fishing reels for the cost of buying a single one in Australia.

We are often sold the idea that increased competition, means lower prices. Yet barriers are introduced to protect the Australian premium on goods.

Why does the Australian premium exist?
Who benefits from the Australian premium?

Who benefits from the Australian premium?
Wolly B,
Probably people who are only Australian on paper.

Wally, its all about out of control costs.

Back in the early 90's, retail space where I had my business was charged at around $150 per M2. Today, that same space is charged at upwards of $1500 per M2. A ten fold increase.

Combine to that the cost of compliance, increased employment costs, increased everything, and there is your answer.

I said back when online shopping was gaining momentum, some 8 years ago, that it would be the demise of retail, and it will be simply because they don't have the costs associated with retail businesses.

While many argue that staff are still required to assemble and despatch orders, these warehouse style operation know in advance what they have sold and what needs to be despatched, which means they can set their staff levels accordingly. Retailers on the other hand require staff on hand, just in case they are needed as sales can fluctuate up to 40% on a daily basis in my experience.

Retailers also have the problem of window shoppers who are simply wasting retailers time to do their research, then buying online anyway.

So whats going to happen, as I see it is the larger retailers will survive as they also sell online and, as smaller retailers drop of the perch, these larger ones will have more bargaining power to negotiate better deals with land lords.

As for your fishing reel, I hope you are comparing the exact same product for starters. So if the cost price of the reel was say $120, then how can anyone with a retail shop and staff compete.

Finally, many online businesses today don't even employ many staff as they are simply the middle man as the order is dispatched directly from the manufacturer in the likes of China where wages are $2 per hour, not $25.

So while the GST is insignificant, its still just another nail in the retailers coffin.

This push for GST on internet purchases is not about tax fairness, rather about protectionism.

The cost to customs of processing a parcel for GST is at least $50, so anything below $500 costs more to process than revenue is collected. The proposal to pass this onto the customer means that for someone buying something for $100 will pay $60 in tax and processing.

Shadow Minister, "This push for GST on internet purchases is not about tax fairness, rather about protectionism"

I'd generally agree with that.

I would also say that there are businesses who have adopted unfair trade practices and are getting away with it. An example could be the refusal of manufacturers' distributors in Australia to provide the warranty of that original manufacturer where the product was not sold by them. Local distributors look up their list of the serial numbers of the products imported by them and refuse to handle any with numbers outside of those, despite the willingness of the original manufacturer to live up to its warranty.

<As for your fishing reel, I hope you are comparing the exact same product for starters. So if
<the cost price of the reel was say $120, then how can anyone with a retail shop and staff
<compete.

Posted by rehctub, Sunday, 21 September 2014 8:37:06 AM

The fishing reel was the same brand Diawa, except the size I bought was larger than the one available in Australia.

I estimate the actual manufacturing cost of this reel to be about $25, made in Asia.

Another issue is sinker moulds. In Australia they retailed for around $100 to $120 per mould. I got 5 from America for the same amount that one would have cost me in Australia. We forget that the retailer would have bought these at wholesale prices.

I do understand that for example the number Nikon cameras being sold Australia wide, will be the amount one store in America will sell in a year.

I have walked out of retail stores because I am sick of waiting for service. Especially when I want to buy an item, and there is no service.

Harvey Norman, I asked for a deal, cash, take away now, only to walk out and go to Retra Vision to find the exact same item for the price I offered Harvey

ps I was in a really bad mood that day.;)

Wally, in my first butcher shop, 89, I ran on a gross margin of 28%. my turnover was $430,000, my GP was $120,000 and my net after all expenses, including a wage fir myself $25K was $66,000. About half my GP or 15% of gross.

So I bought something for $10, sold it for $14 and made $2 (approx including my wage)

Today, a typical butcher shop in a Cantrell has a turnover of $900,000, with a gross margin of 50%, or $450,000.

Typically, rent and consumables accounts for 15%, total employment costs, 25% and profit about 10%. So that's a total of $360,000 in costs and just $90,000.

So, we now buy something for $10, sell it for $20 and still only make about $2 profit, with the rest being swallowed up in costs.

The sad part about all that is that it's the consumer that is paying much more for their goods, while retailers have gone backwards in real terms. The end will not be pretty.

As for your reel, my figure was only for the purpose of an exercise as I am fully aware of the cost of products compared to their retail price.

As for the service issue, again this is a result of online shopping, because so many consumers have simply used the retailers as test pilots, yet it's so common now for consumers to shift the blame on to poor service.

The ironic thing about service is that while people are very impatient with retailers, they accept having to wait to see their doctor and have done for decades.

It's not only in retail, it's anywhere an employer has to engage anyone. We are now competing with countries that do not have all the entitlements expected by workers. Long service leave, holidays, sick days, overtime, meal allowances, weekend penalty rates, superannuation, workers comp, uniforms, GST, maternity leave, and sometimes cars and travel allowances etc. It just gets so expensive to employ anyone here, why is it surprising that it's difficult to compete ? (have I left anything out?)

It's how inflation occurs as everyone down the chain from councils who demand payments from shops in rates to the plumber who comes to fix your tap; their overheads are killing them. Yet everyone is demanding more and more from employers and governments in social services. With the demography changing rapidly as we age, it is all becoming unsustainable.

Yes snake, you left out distribution costs.

A case study.

I had an article made to my specification by a firm in Taiwan. It was probably made in China. I landed it into my store for $2.00 against the $8.60 it had cost to make it here. Incidentally just the brass to make the product here in Oz cost $3.50. This is quite ridiculous when you consider the Asian brass was probably made from Oz, copper & zinc.

My costs when delivered to a retailer were,

Landed cost ...$2.00
Packaging......$3.00
Freight local..$8.00
Freight Perth.$14.00
Total say.....$16.00 average
My markup 20%..$3.20
Total invoice.$19.20
Retail markup..$8.60

Retail price $27.80 + GST

I had to mark up on my invoice values, as that was the actual cost of selling the product.

This is a realistic indication of the cost of marketing in Oz. At this many suppliers & retailers can not make a go of business.

I ultimately gave up selling in Perth & Adelaide as the freight costs were ridiculous.

That's very interesting Hasbeen. Many people do not stop and think about costs of running even a small business and small businesses are the backbone of this country. Most just complain about the tax advantages of those so-called wealthy individuals who they think are ripping them off.

We do start from a disadvantage in that we are a large country geographically with a small population and we don't have the advantage of economy in large scale production for a domestic market as China and Europe and the USA have, although that's not necessarily the case with agriculture, but the farmers do have the climate to contend with. Added value on minerals might help but there are still all the problems that you and I have already mentioned.

Judging by some of the 'Usual Suspects' on OLO you would thing Australia was one of the poorest countries in the world, not one of the richest (10th highest GDP per capita just behind Canada, that's not the Congo). They go on about how hard done by their little businesses are, but I bet they all have flash cars, and big houses and go on holidays every years. No need to whinge and whine fellas when your doing so well.

What a miserable bludger you are Paul. Your whining would drown out any intelligence you ever heard.

Most small businesses go broke with in 5 years of starting.

Not only don't they drive flash cars, after going broke most have lost their home, that they used to finance the business in the first place.

I can only assume you are a public servant, or work for a large company. No one that had even half a clue could talk the kind of crap you go on with. Certainly no one who had ever had to earn their keep could be so stupid, or so misinformed.

Hasbeen sound like you ran a small business that went broke. You got to expect that. The majority will go broke, considering their only qualification is their own incompetence. These same dreamers blame everyone for their failings except themselves. They blame their employees, their customers, the government, public servants, any one but themselves for their own stupidity. These are the same people given half a chance will rip-off their fellow Australians, be it a tax rip-off, or ripping off their poor employees and customers, if they can get away with it, they will!
If you can't make it in a small business in Australia where everything is in you favor to succeed, then you deserve to go broke, and the quicker the better!

You sound more like the one who wants to rip off people Paul. I have found that those who go crook about others ripping people off are just the ones who would do it given the chance. Why else would they believe it of others, if it was not their own nature.

Sorry I haven't managed to go broke. I found it was remarkably easy to run a moderately successful business, if you know what you were doing, charged moderately, & treat customers as you would want to be treated. It is no recipe for getting rich, but it works.

I have salvaged a couple of bankrupt business which is much harder, as you have to live down a bad reputation previously generated with suppliers & customers.

The reason so many fail is that like you they have no idea of the costs involved, or the problems with cash flow. So many employees see all that money, but don't understand the costs.

One company I ran in the mid 80s, had a half a million insurance bill every April, at the end of the worst revenue period, & just after spending another half a million on maintenance. Someone saw all the cash on short term deposit in late January, & reckoned we were coining it, because they had no idea of the logistics.

I have had friends go broke because they thought more of the money in their business account was theirs, where it was all about to have to pay suppliers, insurance companies & governments. Too few smaller businesses do their budgeting well enough to realise the big costs about to descend on them, especially tradesmen starting out on their own.

I would be interested to know how you earn a living Paul 1405 or perhaps you are retired like me ? Opinions are quite varied on this forum and replies often create a picture in our imagination that could be quite false. I suppose that's why ones occupation is a start in understanding the background and thus the opinions expressed.

See Hasbeen, you proved my point << Sorry I haven't managed to go broke. I found it was remarkably easy to run a moderately successful business, if you know what you were doing, charged moderately, & treat customers as you would want to be treated. It is no recipe for getting rich, but it works. Agree 100%.

I have salvaged a couple of bankrupt business which is much harder, as you have to live down a bad reputation previously generated with suppliers & customers.>>

By the way for a number of years I ran my own small business. A service business to do with engineering. Employed people etc, and it was successful, kept us going for a good few years. I knew what your history was I've read it before on the forum.
I done a small business course at night, my wife done the books and I used an accountant. Before that I had done 8 years studying engineering. I prefer running a service business, rather than selling product. I made a few mistakes, like trusting people, then have problems with bad debts, live and learn. I was lucky in that the people I employed were good people I knew and had worked with before, so they were reliable at getting things done on time. My function ended up more estimating and customer liaison, which took up most of my time. In a service business the key word is service. keep your customers happy and they will will keep you happy.