Merry Christmas…
Today is my last Money Weekend for the next few months. So I thought we’d take another look at the idea that online shopping is hurting our retail industry.
And with Boxing Day – which is more commonly known as ‘Shopping Day’ in the Smith household – here tomorrow, it’s fitting that we revisit this topic.
A couple of months ago, I mentioned the retailers were lobbying the government to apply the Goods and Services Tax (GST) to goods bought online from overseas retailers.
The Age helped the Gerry Harvey and mates with this article, revealing ‘…that they are speaking with sector colleagues about mounting a campaign against the government over what they claim is an uneven playing field.‘
And then, on Monday, Kris briefly tackled this again. Pointing out that it’s not the GST that’s hurting the retail industry.
‘…It’s not all the fault of the lazy and arrogant retailers. The government has a lot to answer for too – red tape, minimum wages, and import duties‘, he said.
To be honest, there’s nothing quite so satisfying to see lazy corporations losing money because they didn’t listen to the consumers that keep them in business.
It’s frustrating the big retailers are using the government as their excuse for any loss of revenue.
Just a quick scan of the comments left by The Age readers shows a different picture. Clearly a picture that Gerry Harvey and Solomon Lew can’t see.
Quite simply, people are shopping online and overseas out of choice. There’s so much more available than in Australia. But most importantly, it’s about half the price to shop overseas as it is here.
Not only that, there’s no car parking issues or sour and slightly hung over unhelpful Gen Y staff to deal with.
And look, a nice strong Aussie Dollar certainly does help.
Kris hit the nail on the head.
Lobbying the government to apply a GST isn’t going to increase foot traffic through retailers’ doors.
It’s all the taxes that have already been applied to the products available in Australia that are crippling the retail industry.
Let’s take a quick look at the apparel and footwear imports available in Australia.
Clothing alone in the past has attracted a 17.5% duty before it’s even found its way to the shops. Yeah sure, that’s been lowered to a 10% duty from 2010, but by the time you add GST you already paying 20% in taxes. That you know about.
Then you’ve got the hidden taxes.
And those reader, come from the big shopping centre giants themselves.
Think about it. If you’re a home owner, you’ve got your annual rates to pay. As directed by the local council.
Those big shiny shopping centres that most Australians love so much have their own rates to pay.
And local councils will ensure that each year, the rates for the shopping centre increase as well.
But not only are the shopping centre giants paying a land tax, they’re also copping a lovely ‘car park levy’. Which a council may or may not charge.
Now, do you think that the Chadstone or the Chatswood shopping places of Australia would wear this cost? Of course not! In fact the costs are passed on to each retailer based on the size of the retail space.
You’re aware that you’re forking out 20% to the federal government, but you’ve got no idea how much actually goes to the local government?
Next time you park in the ‘free’ car park, think about what’s it’s actually costing you.
And finally, then you have the minimum wage argument.
Let’s be honest. Whenever minimum wage is tackled here at Money Morning, the inbox becomes so full, it can take days to clear.
However, the government insists upon a certain wage, and a business must cover this cost somehow. So, that cost get’s passed onto you. You’re the one paying the minimum wage. Unless you decide to shop online of course, then the shop still has to cover the minimum wage, but he’s got no customers to pay for it.
The average full time retail worker in Australia earns a base wage of $15.30, compared to USD$7 an hour in America. And that’s before you add the 10% for Saturday penalty rates, Sunday’s time and half and a public holiday’s ‘double time’.
Now a casual employee’s base hourly wage is about 25% more than that. And this year, the labour costs to business increased 11.5% thanks to the demand from unions and governments insisting on a raised minimum wage.
Based on two full time and two casual employees, the average retail business can expect to cough up $140,000 on average in labour costs alone.
Just looking at those numbers can you see how the USD$20 T-shirt in America quickly becomes a $60 T-Shirt here?
These factors combined are what’s driving people to shop overseas online.
It’s wrong to say that it’s just the GST. And applying pressure on the government for a tax grab will not stop people spending their money in the U.K. or the U.S.
Between the upfront taxes and duties, the hidden local council costs and the minimum wage, shopping in Australia are no longer affordable.
Many years ago the government introduced ‘duties’ on imported goods to be sold in Australia. It was all in the name of ‘protecting’ our textile industry.
With our textile industry pretty much buried, these duties are slowly killing retail as we know it.
Yet again, you have an example of the government insisting it can ‘protect the people’ by applying unnecessary taxes that you end up paying.
If retailers want to stay in business, it needs to tackle the taxes the government force upon consumers.
It’s the amount of tax that retailers are paying that should be abolished.
The government has made sure it’s too expensive to shop in Australia, forcing consumers to spend money overseas, and crippling the very industry it thought it was protecting.
Merry Christmas.
Shae Smith
Assistant Editor
Money Morning
Most important story of the week…
Dr Alex Cowie, editor of Diggers & Drillers joined us this week for a look at what silver has been doing. The metal is up nearly 70% for the year, leaving every other commodity in its dust. ‘This is not normal,’ said Alex, ‘What is going on?’…Click here for more…
Monday: We’re sceptical about this sudden supposed thriftiness. If it’s true then it’s great news, but something doesn’t quite seem right… although to be fair we can’t quite put our finger on what it is… Click here for more…
Tuesday: So the relationship between the gold and silver price changed completely. So much so, that silver has been around seventy times less valuable than gold for the last few decades. But all this is changing. Click here for more…
Wednesday: “Ken Henry, who is stepping down, was said to be frustrated his resources tax was so little understood.” Ah diddums… vay didunt wike your resources tax, poor thing… Click here for more…
Thursday: The point is you can’t say someone is rich just by looking at their assets and consumption levels. Any fourth-grader would know that. You need to see the other side. You need to see the debt levels. As we’ve written before, the wealth created during the last thirty years isn’t real, it’s fake. It’s wealth created at the expense of others. Click here for more…
Friday: This ‘George Soros tipoff’ could make you 226% to 389% in 24 months. (Just don’t share it with anyone else). Click here for the most intriguing stock story of 2011. Click here for more
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