Would a 10% GST surcharge stop you from buying overseas?

[il padrone]

Why on earth would I choose to pay 50% - 80% more buying from a LBS? Because that is what it would still be, even after paying GST

[AUbicycles]

The 10% gst wouldn't make a difference. But the likely associated 2 week delay and $100 charge for customs to assess and bill it could make a big difference especially for small items.

That's a good point which I havn't considered.

Put simply if retailers/distributors do not have an online presence then they are unlikely to be competitive. If they are not aware of the market prices they are unlikely to be competitive. If they consider that customers are fools they will not survive

I agree on the smokescreen - the GST approach is just tackling on part of the issue.

Regarding the online presence however, I think online communication is essential however don't feel that online retailing suits all. Even with overseas retailers, I get the impression that the industry is still healthy - we are not seeing bike shops close down every week and with people I have spoke to, some recognise that it is affecting sales of accessories however on the whole, while they may not have kind words for the overseas retailers, it is not putting them out of business.

The logistics and costs of setting up an online shop and running it properly put true online competitive out of reach of a lot of local bike shops, a shopping cart system is just 10% of selling online - the local bike shop needs the expertise to sell successfully online (or may have success if they service a niche market).


Regarding servicing - there are a few mechanics popping up - some specifically promote their independence "It doesn't matter where you got it from, I can build it / repair it".

[sogood]

Regarding servicing - there are a few mechanics popping up - some specifically promote their independence "It doesn't matter where you got it from, I can build it / repair it".

These seemed to be thriving. They don't have to compete with mail order stores.

[jaseyjase]

i really want some input from a bike shop, how they feel about all this whole thing, their thoughts, how we can all win..etc

[sogood]

i really want some input from a bike shop, how they feel about all this whole thing, their thoughts, how we can all win..etc

At the end of the day, market forces will win.

[Aushiker]

Hi

Wouldn't change my buying patterns. My shopping overseas is both about price and service ... service is simply a concept not well understood by my LBS and well distributors; they don't know how to spell it. Four weeks to get a spoke in ... are they serious?

Andrew

[ghettro]

Agree with what pretty much everyone has said so far. If anything I've seen a growth in bike shops in the last few years. There are more and more popping up, and there are also more and more Australian based online only shops too. Adapt or die!

The "I don't care where you bought it from but I'll build/repair it" sounds like a good direction to go to. No matter how cheap or fast an online store is, it's near impossible to subsitute face to face service - LBS's should focus on this.

[mikesbytes]

Some interesting comments. I suspect that the administration costs is why there is not GST under $1K

Local pricing has more to do with the overheads of running a shop and the high prices they have to pay to the wholesalers, often the wholesale price is higher than the mail order price, but the shops can't bypass the distributor

[CommuRider]

Well if maybe Gerry Harvey and the other whingers pay for the extra customs admin, salary costs that will allow them to collect the 10% for under 1K then go ahead. Oops they call them "tax". Seeing the corporate tax rate has been gradually reduced for the lot anyway they can well afford it!

Petty whingeing Scrooges. Scared of a little competition.

[Kalgrm]

^^^^^^

What they said ...

Cheers,
Graeme

[dobby]

Honestly I think that the attitude of some posters on this thread is very caustic. It is not a matter that larger corporates can "afford" something or not - nor they can handle competiton, allowing some to not have to trade under the same laws is basic unfair competition. Allowing items of < $1000 in GST free hurts the smaller retailers more, because not only do they have to comply with the law and collect it, they have the costs of collection and administration as well. As an importer I used to have to pay a Customs processing fee, and Duty, and GST when I imported (large containers, about 20 per year). If people buy overseas the Govt should simply levy an administration fee, as well as the GST and Duty and send people the bill. If peoples preference is to shop overseas, that is fine, but the revenue must be collected on consumption, which is the basis of the GST.

My degree is in Financial Economics, and the GST is a consumption based tax that flows to the states (Not the Commonwealth) to pay for things like hospitals and education. The person responsible for the tax, was the consumer (not the business). Therefore the consumer, who is the end user of things like hospitals and education, MUST pay the tax. On the issue of fairness, why should any business have to strictly comply with the tax laws of the country, at the risk of heavy fines or penalty interest from the ATO, and the Govt say well these laws don't apply to us, nor the consumer because they are too hard to enforce so we will let items in without GST. This is a total breakdown of the "rule of law" (meaning the law applies to everyone equally) which is the very basic premise of our society. When people can't use essential services because there isnt enough GST revenue to pay for them, people will realise that levying the GST is fair, equitable and necessary. Please remember there is a large growth in online commerce over the next decade, which translates to businesses not being able to compete, and a large loss of GST revenue.

[AUbicycles]

Thanks for your views Dobby.

Looking at the voting results - participants will likely continue to purchase overseas even with GST levied - in principle it is good when GST is collected however as Oxford suggested, the administrative cost of levying customs / GST would be prohibitive. Regarding your comment on the "rule of law" lets not forget that a commercial enterprise is a different entity to an individual and don't think a comparison works.

The Government has to set the rules for trade and I feel it is unrealistic to expect consumers to take initiative and adapt spending pattens for indirect rewards. Industry needs to lobby the government (with a bit more thought than is currently the case) plus industry needs to also look at themselves and work out how they can make local purchases more competitive and attractive - play on their strengths and adapt. Lets not forget that if a business can find a exemption on imports, they will not waiver it for the benefit of society.

If you take a look at the survey in "The Ultimate Guide" I published last year - there was a question on the motivations for buying locally which will be of interest (Question 6.3 on page 74).

[gururug]

india built their economy via two main principles;

a) Service ( and goods export only ) orientated business

b) Locally manufacturing as much as it could and minimising the amount of dollars leaving the country

While it is not feasible for Australia to manufacture most bike parts. We need to ensure;

a) We are manufacturing / farming goods / services and exporting them to an equal value.

b) Globally, we are not creating excessive transport needs / waste.

Be fantastic to own a transport company

Don't forget, some dollars from your overseas purchases go to local couriers / Aust post.

15%-20% extra would be my threshold for buying locally. Unfortunately, there aren't many items that are available with such discounts.

[DavidS]

I can't see why a local business purchasing and importing goods in bulk can't compete with a single consumer who is buying a couple of items. There is something seriously wrong with their business model. If they don't fix it they will go out of business. I don't think I have bought anything bike related off the 'net and I prefer to support local shops, but if the price premium is too much I don't see why I should support a local shop which is charging too high a price.

DS

[CommuRider]

It's not just the price premium - it's the variety.

When I was shopping around for a folding bike, I rang several LBS who are suppliers of Dahon and none of them had the Dahons that I had my eye on but they appear on the Dahon website. It's the limited choices here (given the small market) that make me turn overseas. Why do we consumers have to put up with the limited variety when the manufacturers' own websites show what we are missing out on?

[dobby]

DavidS

The reason Australian importers cannot compete is Australia is a low population, very small, geographically diverse country. If someone were to come up with an idea to inhabit an uninhabitable country today, we would laugh. This country is called Australia, and its people are allover the place - would be a much better efficient country if we all lived in Queensland. The population is maybe 20 million, and maybe 1 million ride a bike. Maybe 1/3 of that 1 million might like to buy high end gear, and there are several brands in most categories. Most of the importers would be tiny scale importers for products like Shimano, Campagnolo groupsets, things like Reynolds or Mavic wheelsets etc - the market here is tiny by comparison, and that market is spread out allover the country.

Contrast it with the UK, a country with a population of 62 million fit into an area smaller than Victoria. Maybe 3 million ride bikes and the country is geographically closer to companies like Campagnolo etc. So there is a larger market, with a better logistics platform. Real estate is probably much cheaper, wages are less, and the costs liek Superannuation etc are less than our system, as are holidays, sick leave etc.

What we are seeing is Australians not wanting to pay Australian prices - but take the other benefits of living here such as superannuation, holiday pay systems, free healthcare etc etc etc. When we want to take advantage of those countries with lesser systems, our standard of living and wages, must be lowered to compete - and I can't see to many on this forum taking a cut in pay readily, so their country can compete with others.

[CommuRider]

How about billionaires like Gerry Harvey? Are they willing to take a pay cut too? When you have Alan Joyce being paid millions while he wants to keep cutting staff and maintenance crew, it reminds me of that American pilot who landed on the Hudson river who lost his pension because his company said they needed labour costs cut. The result? A year later he retired, his CEO still gets paid millions.

Very disingenous argument there.

Alright to have a few rich people profiting from low paid workers and ripping off customers and still lobbying against tax increases - reduce the corporate tax rate and introduce the GST.

Funnily enough we have a high income per capita...consumers vote with their wallet. Other countries live in oligarchies and the few groups that control the economy lobby to keep their market share and build up protectionist walls. Just look at crony capitalist countries like Indonesia.

@dobby you are not the only one with a grasp of financial economics in this forum. When you have econometrics under your belt try modelling what you propose to the Treasury. The people here are just using the positive promise of the internet.

[CommuRider]

And btw, Australia has one of the most business friendly environments in the world. It takes 2 days to open a business here compared to 13 days in Britain so all this hot air from some businesses complaining about government red tape...I can show other countries that have it worse.

And where are the people from Deals Direct and Grays Online? They are not complaining because they have changed their businesses to suit the internet savvy populace we have here, and all those other ebay merchants.

[toofat]

another reason the LBS is out of favor is currency fluctuations
as the dollars gets stronger the dollar price on wiggle Ribble etc reduces
the already expensive price in the LBS only appear to go up
Somebody in the supply chain is pocketing this, it cant all be last years stock

[dobby]

Commu

For a person with Econometrics "under his belt" you have quoted 2 people - you would know the statistic of 2 is not "statistically valid".

We are not talking about billionaires like Gerry Harvey, I am talking about a cross sectional argument about a whole economy, not just how it affects one man. To the very best of my knowledge many of Harvey Normans stores are independent franchised stores - and Gerry made his money developing the premises (which he sells to the franchises, or leases to them) and by way of licence fees/franchise fees - as well as owning come centres. Gerry probably didn't make his "real" money by actually selling furniture and electrical good - he made his money by floating a very large section of his company on the stockmarket - and a group of people paid a far too high price for many of those stocks.

The nuts and bolts of the argument is simple, if we are going to exempt the collection of GST on items under $1000 - should the GST be exempted on all purchases under $1000 in mainland Australia - and increase the rate of GST on purchases > $1000 (so you end up with GST of 20% on things like cars, new bikes, audio visual, new houses, jewellery etc etc etc).

The GST was implemented to level the playing field - as the Trasurer Costello and Prime Minister Howard sold it to the country. What we have seen is a system now in place which is not levelling the playing field, but creating an unlevel playing field where the advantage lies with businesses not in the GST system. SUre the GSt may not stop people buying, but if the GSt isnt going to be collected by the people (govt) who brought it to the country - why have a GST system at all? That is very very poor policy, very poor analysis and a very very weak Government argument. The Federal govt wont collect GST because this flows to the states, and why should they expend money in collecting when the Federal Govt doesn't see that flow - but they do - in the Income Tax system (really really poor productivity commission analysis and very poor Treasury analysis by a group of public servants more focussed on their own pay packets and benefits than on the very system they implement). The Govt argument that the items cannot see GSt collected on values less than $1000 is very weak - the VAT exempt threshold into the UK is a measly 38GBP, and to Canada, New Zealand and many others can do it - why can't we?.

[dobby]

toofat

As someone who has imported many millions of dollars worth of furniture over 2 decades, while the dollar strengthens you do make savings in the cost base of the goods, but you also see rises in shippings charges due to increased import activities and freight surcharges. While the strong dollar does help, it doesn't even out completely - because most bike importers will be bringing containers of products - not single items.

A 40% reduction in the cost base of furniture due to currency only translated to a 20% reduction in landed costs here (because of increased freight charges and shipping costs continually increasing) - I imported over 120 containers over 10 years.

At the moment with the strong dollar, many of these problems are magnified and I doubt we will see people boasting about online savings should our dollar hit the lows of 1AUD/0.55 USD that we saw in 2001/2.

[CommuRider]

*sigh*

If we are going to be pedantic, someone posted a link of online bike retailers including Aussie based ones. That should provide you a bigger sample greater than 2.

Some like Cell have managed to keep their storefront and online presence, the other NZ based Torpedo 7 to cite the more popular ones people use here - they are responding to the new online reality. Some have started to fill in new market niches for new breed cyclists. Are they complaining? Cell would still be just another LBS had it not been for the internet but now they are known Australia wide and regional users are aware of the cost differences due to online bike stores. The bike industry is facing the same pressures like other sectors - globalisation, trade liberalisation and competition. The bike retailers are facing the same pressures and you will see the demise of some, the growth of others and some who would shun online and provide services (we are a heavily service oriented country after all) in bike oriented communities.

The merely brick and mortar retailers are the biggest complainants and they are lost because the business strategy they have had for the last 30, 50 years doesn't work anymore in this WTO era. Asking government to give them an extra layer of protectionism will not help them in the long run. And I don't think government esp the Treasury wonks are going to listen

[apsilon]

To add some more fuel for thought:

1. Should GST be added to items that aren't sold/available here at all? On several occasions I've tried to buy (usually an up spec model) locally only to find it's not available and when I've contacted the official distributor they've told me they don't import that model as there's no market. Well if there's no market why am I trying to buy it? I've also been told on one occasion "You'll have to wait until next season, I don't want to import that now". Well I want to buy it now (which I did, for less than half the price from the US), not 6 months from now.

2. Should GST be charged on goods and services that I buy when I'm physically OS? If I buy a couple of pair of Levi jeans while I''m in the US for $30 a pop instead of $130 that's charged back home how are they even going to know that I bought them over there?

3. Should GST be changed on used items? Aside from actual used items, it's pretty easy to send items to a friend and have them forward them on (I do this to get around those few companies where the local distributor has whinged and cried until the manufacturer agrees to force retailers not to ship outside their domestic market). These could easily be classed as used as they're coming from a private individual rather than a business. Who can prove otherwise?

There's lots of holes and what ifs. The system isn't perfect (what government system is) so we just have to deal for. At the end of the day GST isn't going to make any difference to the results. Retailers simply must compete on a global market. They either need to force the local distributor to allow them to compete or perhaps look at bypassing them and importing themselves directly because otherwise, things are just going to continue to get worse for them.

[Gabon]

Good on Dobby for putting the opposite point forward. But alas I fundamentally disagree.

While I have some sympathy for some of the GST 'fairness' arguments (the Democrat amendments effectively spoilt the GST) - i do not recoil at all from strident criticism of the antiquated retail practices that still proliferate in Australia. It is clear that for certain goods (including many bikes, parts, clothes etc) a global market exists. If you cant establish a point of difference or add value to a product you must compete with that global market to survive. Australian retailers have been very slow to respond.

Globalisation has exposed a range of poor business practices in Australia, inability of many retailers/distributors to adapt to change and various methods whereby distributors seek to force retailers to sell products at high prices or with exclusivity in a form of brand snobbery/protectionism. How firms like Apple and DVD/Bluray distributors are allowed to have differential web pricing by internet and/or through region coding still defies me but that battle is for another day.

As has been mentioned earlier, Cell, Bikes.com.au, Cycling deal all provide a web presence, increasing ranges of products, competitive prices with those from O/S and have retained a physical property presence. They also do this with GST included on sales. So is GST really the issue - very loud and clear this forum has indicated that it isnt.

The assumption that retailers that people wont be boasting about online savings if the AUD falls is a classic example of the complacency and denial that goes with a retail/distribution sector that doesnt adapt to change. One of the fundamental reasons retailers in Oz have been slow to react to a global market is that the AUD has been at a low rate for a while. But the rise in recent years was telegraphed way in advance by the 'very poor Treasury analysis', the reserve bank etc.

[gururug]

A 90% increase in available products and a 30% drop in prices would stop me from buying overseas.