Dear retailers, when prices are 60% cheaper offshore, GST won’t save you

Amazon packageTough talk from the retailers, who continue to demand GST be applied to all purchases.

It’s rubbish of course. 10% GST is not why people are shopping online.

Let’s take the example of my last Amazon UK order, which I placed when the AU dollar was at its height, about two weeks ago.

  • Book: Neil Gaiman’s “Neverwhere”. UKP 4.46 (AU $6.96). Cheapest AUD price (via Booko, looking only at Australian outlets) $15.95
  • Book: “Wiped! Doctor Who’s Missing Episodes”. UKP 12.69 (AU $19.81). Cheapest AUD price (via Booko, looking only at Australian outlets) $27.51
  • DVD: Red Dwarf series 1. UKP 4.58 (AU $7.15). Cheapest AUD price (via DVD Plaza, excluding postage) $35.55.
  • DVD: Red Dwarf series 2. UKP 4.58 (AU $7.15). Cheapest AUD price $35.55.
  • DVD: Red Dwarf series 5. UKP 4.17 (AU $6.51). Cheapest AUD price $35.55.

So, the total Amazon order cost was UKP 30.48 (AU $46.87 — may not match prices above because this is what I actually paid; above is the UK price I paid, converted using the exchange rate from a couple of days ago), and because it was more than UKP 25, I got free postage.

The total Australian retail price if I’d bought from the above, and assuming I’d been able to get the cheapest online DVD price at a retail outlet (and therefore avoided paying for postage) would be AU $150.11.

In other words, ordering online was less than a third of the cost of buying locally.

Now, of course this is influenced by many of the products originating with UK publishers. But even so, we’re talking about a factor of three.

Even if the AUD to UKP fell back to, say, 50 cents to the pound, and even if 10% GST was applied to everything, it’d still come out at AU $67.06; still less than half the Australian retail price.

So, sorry Australian retailers. GST is not the problem here. The whole pricing model (including the publishers and distributors) needs looking at if you want to get competitive.

Where bricks and mortar retailers should have an advantage

Bryant & May towerI would note that the Wiped! book has a printing error. Pages 33-48 inclusive are missing. I’m going to need to return it.

Obviously this’d be much easier if it had been bought retail, but I’ll be interested to see how Amazon UK handle it. I know that earlier in the year, SendIt.com sent my cousin in the UK an incorrect birthday gift (some book about WW2 instead of the Donkey Kong Country game we’d ordered for him), and there was some difficulty in getting it all resolved (in fact I’m not even sure if it was all resolved).

Retailers’ advantage is in customer service, particularly in cases like this where things go wrong. Face-to-face service can be worth a lot, and could help save market share. But only if they can figure out how to actually provide good face-to-face service.

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16 Replies to “Dear retailers, when prices are 60% cheaper offshore, GST won’t save you”

  1. Indeed. Got a knock on the door yesterday and took delivery of 8 signature edition Agatha Christie books from Amazon UK.

    Cost with free shipping = GBP38.66, or AU$86.40 @ current exchange rate.

    Retail in Aus = AU$16.99 each, or AU$136 or thereabouts for all.

    $50 cheaper. Clearly not GST only!

  2. Funny how EVERY SINGLE ARTICLE about “zOMG online shopping is So cheap!” never, ever, EVER mentions one little details: SHIPPING CHARGE.

    $40 for your books? Good for you. By the way: $39 shipping and handling fee (cheaper if you don’t mind waiting 4-6 weeks).

    OR, you can drop by your local retailer, pay more, and bring your books home TODAY.

  3. @Jagger

    Can you read? Daniel said shipping was FREE.

    Then of couse for books there’s placs like the Book Depository with storewide free shipping.

    As for 4-6 weeks, please. Even here in Taiwan I get stuff within a week.

  4. It took me a bit to get the relevance of Bryant and May chimney, but I did. No one who I know who buys online, myself included, does not take into account shipping charges when comparing.

  5. @Jagger, pay attention please. The shipping was free because it was over UKP 25. I wasn’t paying attention to precise dates, but it took about 10 days to reach me.

    @Andrew, well done :-)

  6. “Cost with FREE shipping = GBP38.66”

    Even adding your guestimated shipping, it’s still cheaper than retail. Sure, we had to wait, but in our case we were ordering a load of old classic books to complete a collection. Actually, most of that collection was bought in Aus at full retail price, but Christie was quite a prolific writer and it was getting too expensive.

  7. @Daniel, I agree. These days I buy most of my books and DVDs from Fishpond (free shipping over a certain amount) and from Book Depository (free shipping regardless of amount). Even if GST were applicable, it’d still be vastly cheaper than buying from a bookstore.

    @Jagger, 4-6 weeks for shipping? Wherever did you get that figure from? If the book is in stock, it frequently ships within 2-3 days, and sometimes within 24 hours. My experience is that most books arrive within 4-10 days of ordering. The longest I’ve ever waited for a book in stock was about 3 weeks, if I remember correctly, and that was unusually long. Both Fishpond and Book Depository provide estimated despatch times before you order, Fishpond provides estimated arrival times after you order, with emailed updates as each item is sent, and both provide a means of tracking your order online.

    There have been only two or three occasions when I’ve been disappointed with the order when it arrived. Not because of any defect, such as the missing pages in Daniel’s Wiped! book, but because it turned out to be a book that I wouldn’t have purchased if I’d had a chance to flick through it in the store before buying. For example, I ordered a book on German genealogy that turned out to be pretty basic and didn’t tell me anything I didn’t already know. But really, two or three disappointing purchases out of literally dozens and dozens of perfectly satisfactory ones is still a very good success rate.

    @Daniel, I note with some amusement that your book with the printing error is subtitled “Dr Who’s Missing Episodes.” So that makes them the missing missing episodes. :-)

  8. I think the key to Daniel’s whole post is the last sentence. This really is the best way to make that gap worth-while. Unfortunately, my experience these days is that encountering good service seems to make me pleasantly surprised, when it really should be the foundations of good service. There predominantly seems to be little thought for a little extra effort put in at the current transaction which could well bring about future transactions.

  9. I recently purchased running shoes online. I knew the style and size I wanted and I purchased online both to save money and to get a colour not available in Australia. Australian retail was $220 and I bought on eBay for 75GBP + free shipping, which worked out at just over $120AUD – a $100 saving. It did take 10 working days, but that was OK.

    The reason that I went down this path is that I am heading to the US in a few weeks, where these shoes retail for $100USD, so I was going to buy them there but decided I didn’t want to lug them around on my travels. Regardless, the RRP is basically $100 less and I am sick of being ripped off in Australia.

    Also loving Book Depository…

  10. Recently bought the Alien Anthology Blu-Ray set on ebay for $39.75 (including free postage from UK), the same boxset retails at JBHIFI for $125.xx(it is on special at the moment, still dearer though at $75.xx). Plus the UK release of this boxset has better packaging.
    Still, people are not mugs, they know how to find things cheaper and will save money by shopping on line.

  11. @Daniel – Amazon UK are very good with replacing damaged/defective items, generally they’ll just send you a replacement and let you keep the dodgy one.

    I now purchase all my books/games/blu-rays from the UK, my money goes much further than buying locally and in most cases delivery takes two weeks at most. Aussie retailers reckon you don’t get the same ‘service’ online as in-store, but last time I looked JB Hi-Fi’s service wasn’t their main selling proposition.

    And that’s ignoring the plethora of titles Aussie distributors decide not to bother releasing locally…

  12. It’s not just about increasing the cost by 10%.

    Retailers are probably more interested in increasing the hassle of buying overseas than increasing the cost.

    Imagine if, to collect the GST on goods purchased overseas, you had to go down to your local post office, fill in a form, line up and wait (and wait), and then pay your 10% on the declared value before collecting your parcel. Not a deal breaker, but an added hassle that might start to tip the scales back to local purchase.

    The other cunning plan underneath this would be to charge everyone for the cost of administering the collection of the 10%. So everyone might suddenly find themselves paying 20% to 30% more.

    Retailers would argue that both of these things is exactly what they have to do for their imports (or pay the distributors to do for them).

    The savings on buying overseas are still so substantial that I don’t believe this will save them, but…

  13. I haven’t bought anything online yet except new maps for my Tom Tom, but it sounds like the way to go.

    I recently went to JB HiFi fully intending to make a large purchase, but there was hardly any stock on display to view and the sales staff were nowhere to be found. I’m unimpressed by 90% of customer service in oz and I don’t ask for much, so I’ll definitely be looking to buy online where possible in future.

    I guess we’ve all heard about the huge mark-ups Australian retailers charge? Well and above what’s considered reasonable overseas, I guess Gerry needs a new Rolls Royce?

  14. Baby Jogger Pram in Australian store = AUD $930
    Baby Jogger Pram on USA Amazon = USD $499 + $30 shipping for delivery in 5 days.
    Ummm what the???!!

  15. In all of this discussion about prices, I think we’ve overlooked something important here, people, and that’s the delicious irony that Daniel’s book โ€œWiped! Doctor Whoโ€™s Missing Episodesโ€ was actually missing pages 33-48.

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