Closing shop - it's all the fault of GST

[il padrone]

The Retail Cycle Traders have decided to close their doors and blame it on the lack of GST on imports.


Hmm..... it seems that they really have a problem - with addition and multiplication. A 10% GST added onto imported goods will do 3/10 of stuff all to the price differential of a 100%+ price mark-up. Wake up RCTA, the market has changed

[bychosis]

Here we go again...

Was listening to the radio last night, apparently a lady had thanked Gerry Harvey for complaining that online shopping was so much cheaper, she is saving heaps now.

[AUbicycles]

It is interesting that the $1000 import threshold had become such a core issue for the RCTA - I understood that it was one of many issues though lets not rule out that the media is playing this angle in their reporting. The BNA forum surveys and other surveys show that the majority of shoppers will NOT adjust there spending habits if GST was levied on imports below $1000.

While the GST has some affect on pricing - it doesn't make up for the bulk of the price difference which is drawing shoppers to make online purchases (and not only overseas). Some may have seen this chart already from the BNA 2013 survey:



This is from the The Online Australian Cycling Marketplace Report 2013 which I published for Cycling Trade and provides many of the answers.

[jasonc]

yup. GST...

I just bought some ultegra chains. here: $85
c r c: $22.

GST will fix that.

[Mulger bill]

Some muppet in the comments pointed out that a $50 customs fee will be applied to all parcels regardless of value if implemented and that this will kill the online buyers.

Only if you buy multiple small shipments. People will either buy bulk or collaborate in group buys to spread the cost.

Face it Gerry, THIS particular Genii WILL never be forced back into its bottle.

[cyclotaur]

The RCTA (and Gerry Harvey, for that matter) sound more like Buggy Whip salesman than canny retailers.

I'd say the vast majority of casual and recreational cyclists buy complete bikes locally, but then rarely get them serviced. Keen sporting or recreational cyclists probably do the same wrt the initial purchase, but then mostly do their own servicing using parts and tools bought online.

That is the basic lie of the land, market-wise, and anyone who wants to operate in the bike business should know that and work accordingly. I also had some inkling the $1000 threshold was related to the cost of collecting lesser amounts from O/S purchases, but I may be wrong.

[sogood]

Clearly the retail industry has decided that GST is one thing they can attack and shift the blame on others and apply pressure through the government. If it modifies 5% of the shoppers, then they are not going to complain. Nothing to do with what's really at the core of the issue. It's all calculated. Altering their existing money making strategy and margins? Hell no!

[MickMelb]

Some muppet in the comments pointed out that a $50 customs fee will be applied to all parcels regardless of value if implemented and that this will kill the online buyers.

Only if you buy multiple small shipments. People will either buy bulk or collaborate in group buys to spread the cost.

Face it Gerry, THIS particular Genii WILL never be forced back into its bottle.

Actually there is a good chunk of truth in this if my recent UK experience is anything to go by. There the Freight Company (Fedex) charges GBP 30.00 flat fee for collecting any amount of VAT at 20%. If $50 was the flat fee for GST collection here and then you add 10% GST it would certainly greatly reduce sub $100 O/S purchases ...and many over that amount would be a lot less attractive.

Yes, the organised would still buy but it would certainly change purchasing behaviour which is exactly the desired effect.

Another consideration is that if/when GST is increased to 15% then it is much more likely it will be re-imposed on sub $1000 purchases as more revenue would be available.

It is a depressing thought.

Mod says: Political comments removed as per forum rules

[RonK]

"After 65 years of representing the interests of bike shop owners Retail Cycle Traders Australia has voted itself out of business, succumbing to dwindling membership and the power of online shopping..."

Declining membership? Perhaps the bike shop owners feel they're not getting value from the association.

Retailers might be disappointed if they're counting on getting protection from the newly-installed government. The PM has recently declared he will negotiate free trade agreements with a bunch of countries. At the same time the Minister for Industry say support for the car industry will come to end.

The previous government said the cost of inspecting the huge volume of goods arriving made reducing the threshold uneconomic. Clearly even at the current threshold parcel inspections are random, with some attracting import charges and some not.

Equally clearly, even if the GST could be collected it's not going to deter anybody from buying overseas when the savings way exceed the GST. And I wouldn't be surprised if some of the overseas retailers would be prepared absorb it anyway.

So that just leaves some kind of additional punitive duty or charge - would the "free trade" goverment dare to impose one since their policy platform has been to oppose and abolish any new taxes.

[Paul B]

Would not mind betting that if the government levied a GST payment on these sub $1,000 purchases than the vendors would offer a further 10% discount.

[jasonc]

Would not mind betting that if the government levied a GST payment on these sub $1,000 purchases than the vendors would offer a further 10% discount.

I think we'll find the big ones - wiggle, c r c and pbk - will work it out to make it nice and easy for us poor aussies.

[AUbicycles]

There is a tendency for bricks and mortar retailers to feel that it is all about competition from overseas online retailers - but they should take time to check out local online retailers. The local online retailers are competitive and perhaps a few members have even purchased online from an Australian retailer before.

[sogood]

There is a tendency for bricks and mortar retailers to feel that it is all about competition from overseas online retailers - but they should take time to check out local online retailers. The local online retailers are competitive and perhaps a few members have even purchased online from an Australian retailer before.

Would you classify New Zealand local?

[AUbicycles]

Excluding New Zealand as well!

[open roader]

Around 2.5 years ago, my friend closed his bike shop (country Victorian town of pop. 12,000 with one other bike shop in town) I was a regular customer (purchased 3 bikes in 5 years plus other bits and pieces) - he actually encouraged me to purchase upgrades / shoes / clothing and other higher cost items from online sources. He is very open and honest about how he could not get his hands on the same products from local distributors for anywhere near a competitive price with distributors often asking him to buy at prices higher than the big Brit stores were offering to the average punter. He also says the costs of doing business from shop rental to wages to bike companies insisting upon ridiculous sales targets and displaying so many models on the floor was a major driver of him closing his shop.

He is an excellent bike mechanic and would have been able to make a decent profit via bike repairs as a solo proprietor (ie no other employees) selling tyres, pads, spokes and other consumable parts on top of perhaps 3 -4 dozen new bike sales per year but escalating rents, insurance, business software systems costs and being forced to buy in 3 times as much stock and assemble them all and display the lot in a small-ish shop was simply too expensive to sustain. The GST on private imported goods had precious little to do with his decision to close the shop....

[Ross]

The previous government said the cost of inspecting the huge volume of goods arriving made reducing the threshold uneconomic.

I believe UK charges duty and/or VAT on EVERY import, so what makes it so unviable for Australia to do the same? Not that I want this to happen, just askin'...

There is a tendency for bricks and mortar retailers to feel that it is all about competition from overseas online retailers - but they should take time to check out local online retailers. The local online retailers are competitive and perhaps a few members have even purchased online from an Australian retailer before.

Bike Bug sell GP4000S tyres for $39.95, have done for ages .Cell Bikes often have them for around the same price. PBK are dearer, they are currently selling a twin pack for $83.35, Wiggle just over $40ea. c r c are actually the cheapest at $32.95ea. the other week I went to a LBS and these tyres were "on special", reduced to $80 from $100. Now if BB and Cell can do these prices then why not LBS?

[Dimis]

You can spin the "arguments", "facts" and "statistics" however you like, but the reality is the internet has reduced the need for "middle-men" who have been hiking up prices, for simply passing items on, and make a living from it.

Most people are happy to pay for a "middle-man" service when it comes with an added value, either the ability to "try on", "see, touch and feel" or maybe added insurance of warranty, service, etc... but people are loathed to be ripped off by "middle-men" who offer NO value add.

Harvey Norman is one of these... The only value add they can offer is X-days interest free. But you pay top dollar for it.

And there are plenty of other retail stores (cycling included) who I'd put in the same boat.

The rest of this as I see it is smoke screens and mirrors to place blame on something other than the obvious... They offer nothing, and have been making a small fortune from it holding buyers to ransom, and they are losing this golden goose, and fearing actually having to "work" and produce something or add value to something.

Enjoy

[sogood]

Bike Bug sell GP4000S tyres for $39.95, have done for ages .Cell Bikes often have them for around the same price. PBK are dearer, they are currently selling a twin pack for $83.35, Wiggle just over $40ea. c r c are actually the cheapest at $32.95ea. the other week I went to a LBS and these tyres were "on special", reduced to $80 from $100. Now if BB and Cell can do these prices then why not LBS?

Likely selling GP4000S as a loss leader, to attract other sales. I doubt Bike Bug and Cell can reduce the margin to the same level for their whole line of products. Further, much of retail pricing depends on what the distributors price their items. Without them lowering, it's commercial suicide either way for the retailers.

[Comedian]

The other thing affecting LBS in Brisbane (not sure about elsewhere) has been the rise of the bicycle chain store.

Up here we've got 99 bikes and we had gold cross. Plus we've got others like anaconda as well. I'm told that some of these chains not only have great buying power but are aggressive in trying to buy market share with low prices.

It all adds up to a massive increase in local competition.

[RonK]

The previous government said the cost of inspecting the huge volume of goods arriving made reducing the threshold uneconomic.

I believe UK charges duty and/or VAT on EVERY import, so what makes it so unviable for Australia to do the same? Not that I want this to happen, just askin'...

I don't know Ross, but possibly it's financially viable because at 20% the UK VAT rate is double the Australian GST at 10%.

But the purpose of the GST is to generate tax receipts for the government, not to act as a de facto import duty. If collection was only cost neutral, then it's really just a trade barrier. So the collection of GST would actually have to add to the Treasury coffers to be justifiable in my view.

[RonK]

the other week I went to a LBS and these tyres were "on special", reduced to $80 from $100. Now if BB and Cell can do these prices then why not LBS?

Why can't bike shops see that these prices are ridiculous? I can buy quality car tyres for this kind of money.

[bychosis]

The other thing affecting LBS in Brisbane (not sure about elsewhere) has been the rise of the bicycle chain store.

Up here we've got 99 bikes and we had gold cross. Plus we've got others like anaconda as well. I'm told that some of these chains not only have great buying power but are aggressive in trying to buy market share with low prices.

It all adds up to a massive increase in local competition.

I think where these chain stores will/can fall down is low paid staff and poor mechanics. Rebel sport tried it years ago. LBS needs to be all about service, not best price parts. Having said that getting people in the door with competitively priced parts is a big factor. The LBS needs to be able to buy stock cheaper than the bigger online shops sell for as a starting point so they can at least attempt to make a profit with a competitive price.

[RonK]

The other thing affecting LBS in Brisbane (not sure about elsewhere) has been the rise of the bicycle chain store.

Up here we've got 99 bikes and we had gold cross. Plus we've got others like anaconda as well. I'm told that some of these chains not only have great buying power but are aggressive in trying to buy market share with low prices.

It all adds up to a massive increase in local competition.

I think where these chain stores will/can fall down is low paid staff and poor mechanics. Rebel sport tried it years ago. LBS needs to be all about service, not best price parts. Having said that getting people in the door with competitively priced parts is a big factor. The LBS needs to be able to buy stock cheaper than the bigger online shops sell for as a starting point so they can at least attempt to make a profit with a competitive price.

You might be wrong there:

1. Rebel Sport, Amart All Sports and Gold Cross are all owned by Supercheap Autos, which also owns BCF, Ray's Outdoors and FCO
2. 99 Bikes is owned by Flight Centre. A friend worked as a mechanic for them and told me he earned as much as in his previous job as a Telstra telecommunications technician. And got two trips to the TdF while he was there. He's now semi-retired but still works as an independent mechanic.

[Xplora]

My most recent experiences in LBSs show an "ideal" situation for them. Smashed my front wheel into the kerb, had to be trued and tyre replaced on the spot. The tyre was 50 bucks for Bontrager AW3 23mm, that's not bad. Not as cheap as the 37 dollar Conti, but I can deal with it. Also got 15 minutes of labour truing the wheel and retorquing the headset for 25 bucks. Safe, rideable bike for 75 bucks. Win.
Waiting for the final parts for my Quarq to get installed has taken a while; waiting for people to come back from holidays and resolution for parts has taken a while, but despite the delays I've had the bike running so it hasn't been a serious issue. They are absorbing some costs for me, and despite the fact that I'm spending a lot of money for some Quarq putty and it might have been resolved quicker, I am confident that I'm saving a LOT of cash being patient. They make easy money, I save easy money, problem solved.

There are some battles they can't win. They need to focus on the battles they CAN win. Worth noting that I've spent around 7500 bucks with the second LBS over the last 18 months. Much more than I've spent on cassettes and tyres.

[casual_cyclist]

Harvey Norman is one of these... The only value add they can offer is X-days interest free. But you pay top dollar for it.

Harvey Norman...
I was holding a product box in my hand and asked the sales guy a question about said product because I missed the print on the box with the answer. Just as he was answering the question incorrectly, I noticed the print on the box with the correct answer, pointed to the relevant info, placed the item back on the shelf and walked out. I subsequently became good friends with my local retravision sales guys. They told me to get the best price I could and they would either match or better the price. I buy all my gear there now, which is convenient because they are my closest electronics shop and any returns will be easy to deal with. That said, I have not had to return a single item. I am prepared to pay a small price premium to deal with a local and get a local warranty but that premium does have it's limits. My next garmin will be from HTA (http://www.highlytunedathletes.com.au/) based on price, service, reputation and local warranty.