Posted on Wednesday, January 11th, 2012
An increasing number of Aussie retailers are making preparations for their online offerings as the transition to e-commerce and the use of discount coupons gathers steam.
Aside from the fact that an ever larger number of Australians now prefer to do their shopping online, the transition to e-commerce is also being driver by the refusal of the Federal Government to reduce the GST threshold of $1,000 for Australians making online purchases.
The government’s refusal to reduce the threshold is driven by the fact that such a reduction would cost the Federal Government approximately $2 billion to implement, compared with the $550 million in expected revenue were the GST cut to purchases valued at $20 or over.
Instead of cutting the threshold, Brendon O’Connor, the Home Affairs Minister said the government intends to implement a compliance campaign, designed to ensure that there was no abuse of the existing regulations.
Growth in internet retailing continues unabated, with the most recent report from the Ministry of Boadband suggesting that in 2009 Australians spent somewhere between $19 billion to$24 billion online, or roughly 3 percent of total retail sales. According to the report, anywhere between 50 to 80 per cent of the amount spent online, was spent with Australian retailers.
PayPal the online payments platform is forecasting online retailing to grow by a whopping 40 per cent, with turnover expected to reach $33.8 billion in 2012, up from $24 billion last year. Whilst online retailing continues to expand in Australia, largely at the expense of traditional brick and mortar retailers, the industry still lags behind markets in the US and UK, according to PayPal Australia Managing Director Frerk-Malte Feller.
Mr. Feller said that there continues to be a large opportunity for retailers in Australia to take advantage of the growing preference for online shopping.
“As Australian retailers struggle to build effective online presence, overseas competitors are taking advantage of the gap in the Australian market and are currently taking around 40 per cent of Australia’s online retail spend,” The Australian quoted Mr. Feller.
Last week retail giant Harvey Norman announced that it would not open any new physical stores in 2012, and instead is focusing its attention on the retail market in Asia, with plans to launch a number of websites based offshore, according to Gerry Harvey, the company’s chief executive.
“It’s got to the stage where there’s no incentive to open a major new store in Australia. None. Our rate of expansion in Australia would be lower now than it’s even been in Harvey Norman’s history,” Mr. Harvey said in an interview with the Australian Financial Review.
Mr. Harvey predicts that this year will be a turning point in the Australian retail industry, which will experience a major shake-up, with some retailers managing to survive, whilst others fall by the way side.
Harvey Norman is not completely exiting the traditional retail space, and has plans to open as many as 10 new physical stores in Malaysia by the end of 2012
“We are not doing this with a great deal of joy. We have been able to do this for a long-time, we have held off. But you get to a point where you can’t hold off,” Mr Harvey added.
Although the company is joining the online retailing bandwagon, Mr. Harvey expressed concern at the consequences of Aussies not paying GST in return for lower prices.
“Either jobs will go or wages will be cut, or it could be both… If we want low global prices, then we will most likely have to accept low global wages and working conditions. That’s the rarely mentioned dark side of the GST-free bargains we are getting online,” he stressed.