Rampant Growth of e-Buying plus Undue Taxes Damaging Retailers

The rapid change in the dynamics of consumer buying coupled with unfair taxation laws are undermining the traditional brick and mortar retailers across New Zealand and Australia. The Australian Retailers Association (ARA) executive director Russell Zimmerman admitted that in last 3 decades he had never seen such a decline in retail sales during Christmas season.

The convenience of online shopping and discounts larger than the retailers offers, are attracting a chunk of consumers to e-commerce international websites. Besides, the taxes for goods bought online from overseas for under AUD 1,000 are exempt from tax in Australia, whereas in New Zealand, the 15 percent GST kicks in much sooner on any imported goods.

According to a survey by the ARA, which has more than 5000 members, 43 percent experienced a drop in sales as compared to last year, and 21 percent had no change - effectively a drop because of rising costs. The chief executive of Myers, Australias largest department store chain, Bernie Brookes, said the government was losing AUD 2bn a year in sales taxes as goods bought online from overseas for under AUD 1,000 were tax free.

Days ago, the Australian government ordered the Productivity Commission to examine the online tax-free arrangement as well as the economic impact of online shopping, following pressure from big retailers. Retailers claim they are suffering as shoppers spend their Christmas dollars online ordering cheaper goods directly from overseas which avoid sales tax and customs duty.

However, to counter the fallout of consumers high e-tailing spent, Myer and Harvey Norman, another retail chain biggie, have declared they would take whatever steps necessary to combat shoppers buying goods abroad online. Myer is now planning to sell GST-free goods from China over the internet while Harvey Norman indicated it was considering doing the same.

Although New Zealand online buying trend has not caught up like that of the US or UK, Research firm Nielsens online retail report for April shows 1.4mn New Zealanders bought online in the year to April 2010 - up 2.4 percent from the previous year. The growth of Trademe, the leading local online auction site itself is a proof to the change in consumer habits in New Zealand the e-commerce site made $88mn this fiscal, and is forecasted to grow $102mn for the 2011 financial year.

By Jose Roy