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.

Online vs local

I find it a little difficult to accept the big retailers’ claims that ensuring GST is applied to mail order goods ordered online from overseas will make a big difference. GST is only 10%.

Take for example the DVD of Edge of Darkness, which I mentioned the other day.

Amazon UK price: 3.97 + 3.68 postage = 7.65, or A$12.18 (and note that more than half the postage cost is a “per delivery” charge, so it’s cheaper to order more items at once).

Cheapest price shown on DVD Plaza’s Pricecrawler: A$24.45

(It’s also notable that the version most local etailers are selling appears to be the no-extras version; Amazon has the 2003 edition with a number of special features. And yes, it matters, at least to me. I’m a sucker for that stuff.)

An Age article the other day noted that most Australian bestselling books are in fact cheaper if bought locally. That may be significant if a lot of the books you buy are Australian bestsellers, which I expect includes a number of locally published books.

But that’s not usually the type of stuff I buy.

Ultimately shopping around is the way to go. For the stuff I buy, often it’s cheaper if bought off-shore. And it’s not a 10% GST difference, either… If that’s the only difference, I’m likely to buy it locally so I can have it immediately.

But if it’s a big difference as in the above example, and I don’t need it straight away, then sorry, my wallet tells me I should buy off-shore.

Adults-only Lego

I found this Lego set on Amazon UK. It’s actually way more elaborate (and expensive) than any I remember seeing in the Australian catalogues, but what I thought was really funny was that Amazon has attached a legal-sounding age restriction to it, as if it was an adult video game or DVD, or alcohol.

Lego age restriction

“Not for sale to persons under the age of 16. By placing an order for this product, you declare that you are 16 years of age or over. This item must be used responsibly and appropriately.”

That’s right folks — responsibly and appropriately — which means no giving it to your 7 year-old and letting him pull all the pieces apart to make robots.