Questions about purchasing bicycles and parts
I am curious as to the duty applied to bikes and components. And other goods too.
The only reason I say that is because Gerry Harvey et al only harp on about GST. You'd think if there were further cost pressures from taxation they'd cry murder about them too.
It's probably 5% quite a lot of things are, just look it up on the Customs website (working tarrif 2012), takes about half an hour to figure out each item, there's 97 chapters and 8 Schedules. The Harvey's of the world do actually say it's the GST and the other Government charges, I think they know that if they started getting into the other stuff then they would sound like even bigger whingers.
I've tried to setup an import company, distributing products for one of my other hobbies.
It's amazing the number of hidden costs that aren't apparent to the consumer.
As a distributor, you need to cover costs for:
Rent for storage space
Cost of inventory (interest on loan if required, otherwise ROI if you invest cash)
Wages for all staff including yourself.
Promotion/advertising across multiple states.
Warranty (not all situations covered by manufacturer, and most will require you to ship goods back to them at your own expense)
Shipping goods to resellers across all states.
When importing, shipping a pallet of goods isn't much cheaper per item than by air.
You need a couple of pallets at least, but the big savings come if you fill a container, which is a significant investment.
You need to have some buffer for currency fluctuations, or risk having a warehouse full of stock which cost you more than you can sell it for.
The local distributor is also an additional layer of profit, as in large overseas markets, the manufacturer is local, and resellers can buy direct.
The government do make it worse, but honestly, that component is small relative to the costs that relate to the size and location of our country.
That's not to say i don't buy things overseas,
I make that decision based on risk, price gap, warranty needs etc.
I do feel sorry for the majority of local bike shops, although a minority do make it worse for themselves too.
5% on bicycles, bicycle frames and forks. Otherwise, all other bicycle parts (except alloy and titanium frame components) are tariff free.
See Section 17 - Chapter 87 - Reference No 8712 and 8714 of the Working Tariff 2012 http://www.customs.gov.au/webdata/resou ... CW2012.pdf see page 5
Ours is not to reason why...merely to point and giggle
This discussion comes up all too often. It always goes nowhere. The last one ended up with insults flying left and right.
Some business people seem to think everyone else is stupid because they don't understand the costs of doing business. My argument is that if your costs of doing business are so high that you can't find a way to compete, then you probably shouldn't be in business. There are some clever local operators who know this, and they've already found novel and sustainable ways of differentiating their businesses from the rest of the market.
I guess we've found this generation's Luddites.
But lobbying the Government for a level playing field regarding just taxes and charges can only be a good thing, most people don't know the hidden charges, how could they?
Overseas guys Wholesale $100 then say 33% mark up, $133.
Aussie guy $100 then 5% Duty, $105, then IPDC $49, $154, 33% mark up, $205, then gst, $225.
Do you know what it costs to do business in Britain? The way you guys carry on, it must be free. Apparently they don't have staff, rent, taxes, rates, utilities, advertising, internet or fuel costs.
You aren't asking for a level playing field. You're asking for a return to the protectionist policies of the 1950s.
Yeah. We're dumb.
Has anyone else in Adelaide noticed JT cycles downgrading stores and Megabike expanding?
There's no mention of any of the normal costs of doing business like rent etc, none whatsoever, I'm only talking about the Government charges and taxes.
Nobody is asking for protectionism like the car industry. It's just a simple example with the same mark up for the retailer, it assumes everything else is equal.
As a bike parts consumer, why can't the Government provide a system where stuff in our shops is as cheap as it is in overseas shops.
Don't turn it into a slagging match, of course I don't know what it costs to run any type of business in Britain.
The bit about being dumb is your assumption I'm just trying to help.
I knew there was something fishy about that video. A taxes equating to 54% + GST just didn't gel with what I've experienced myself commercially importing goods.
IPDC. Import Processing Declaration Charge.
Cost - between $9 and $70. Per shipment imported. Not per item.
The Aussie Guy that you refer to surely would not be importing his stock one piece at a time. Surely.
Therefore, you are not talking a whopping 49% tax (using the $49 called out in previous calcs) on a $100 item. If the importer is importing 100 items, it costs them... what... 49 cents to process that item. 1000 items - and now we are talking commercial quantities - 4.9 cents.
So the real figures are something more like $100 + $5 duty = $105, $105 + IPDC $0.49 = 105.49, 105.49 + 33% mark-up = $140, $140 + 10% GST = $154. Far cry from $225, and not that far off $133... and not that bad when you include the fact you're going to get local warrantee, etc.
So, just to re-iterate. We are talking $133 for an overseas supplier, $154 for an Australian supplier. $21. Taaahhhhh-wenty-one dollars.
Phil - you should amend your video. But I figure that would kinda ruin the whole alarmist "GOVERNMENT FIX THE PROBLEM" vibe you've got going there.
The real issue in Australia is supply chain costs and bargaining power of businesses service a small, remote population.
So what you really should be doing is campaigning for the government to move closer to the rest of the world, and get more people over here while we are at it. I'm sure they will be keen to help us push Australia closer to Europe so we can all enjoy cheaper bike parts.
With your figures still 16% down compared to the opposition, that's a fair bit.
But 100 items, those sort of figures are only for quite large shops, what if I go into a shop and want something quite specific, size, colour, brand, maybe outdated, maybe brand new, the guys not going to order 100 otherwise he would have stocked it long ago. Then he says, 'can't do it', or 'it will cost you this much'. I end up thinking 'what a lazy clown, I'll shop overseas because the range is better and cheaper', so the guy loses a customer through no fault of his own.
Supply chain, bargaining power is a totally separate issue.
I'm not a big fan of increasing the population, but again that's a separate argument, ask Dick Smith.
16% is nothing compared to the 69% markup you quoted in your post. It is the difference between being in the ballpark, and being completely out of the game.
I regularly purchase items locally when they are 10-20% more expensive, and I suspect many around here do too. Why? Convenience, ease of warrantee issues, and the simple fact that you can have it right... now.
Now. Separate matter.
You say, shops aren't ordering 100 items.
For starters, it's unlikely that local shops are dealing with overseas suppliers, more likely they are dealing with local distributors. Local distributors would definitely be ordering the quantities to avoid the IPDC skewing prices.
But let's ignore that piece of trivia and assume we are talking a small shop that, for whatever reason, imports directly from overseas and does not use a local distributor to source their product.
If their order is under $1000, they don't pay IPDC.
If their order is over $1000, they pay IPDC on the entire shipment. For an order of value $1000, it is effectively a 4.9% tax. As the order value increases, the effective tax rate decreases.
Therefore, and I'm sorry to say this because you obviously took some time to produce that video, but your argument is not valid.
You mention that supply chain and bargaining power are a separate issue. They are **the issue** with Australian prices being higher than rest of world.
I slashed one of my wrists before I got to the end of the video so I can't comment on most of its content...
Unless you've done some importing you wouldn't understand all of the fees, when the overseas guys ship into Australia they've got one postage fee - thats it!
Here is a list of the entries from my last shipping invoice, I've been importing for several years and even I don't understand what some of these charges are - I know they are unavoidable though so not much point complaining.
Customs GST Paid
Customs Declaration Fee
Destination Port Charges
Quarantine Permit Fee
Delivery Order Fee
Additional AQUIS Fees due to containers final destination being a "rural" area
Aquis Lodgement fee
When an Aussie company matches and overseas price, they do it at the expense of their profit margin.
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Are most of those fees due to your use of a container? And port to port shipping obviously.
When I've imported stuff (albeit in smaller quantities than you would) I've pretty much run into duties, GST, brokerage fees and that's about it.
I expect those costs would be quite considerable in absolute terms, but do they work out to be a fairly small cost (10-20%) when costed against an entire shipment's wholesale/retail worth?
16% compared to zero is a fair bit, but I thought about that when making the video, maybe something like 25% would be better (like buy 10 items at once) but then I would have had to explain that as well and it's a hard one to get across. Also I could have made the product more expensive like $1,000 which makes the $49 proportionately less, but you know, have to start somewhere, the reality is the same, why lump it on one bunch of retailers and not another. Even 1% is a lot in some markets.
The ease of warranty is or soon will be the same, a big company like Chain Reaction could/will just employ a local 'warranty agent' and pay them a wage or do a deal with a local shop. If I was say China car co. I'd just do a deal with Auto Masters and NRMA, hey presto, national service network, 24 hour assistance.
On stuff that is to small to bother comparing you may well be paying a lot more than 10-20% whenever I have been on an overseas holiday it feels like about 100%.
Local distributors/importers are a whole level of extra cost that is getting wiped out as all industries become more efficient, it's more common nowdays to just have an 'agent' who helps the shops with consolidating orders direct to the factory.
Yes they do, that's the point of the video, if you check out the legislation, it says OK as a one off i.e. as an individual, but if you do it all the time, you will not get the $1,000 threshold, here it is straight from the Customs website:-
And that's what a shop does, gets packages in all the time for customers.
As a thought I'd like to be wrong about this, if there is another bit of legislation that trumps this one let me know.
At this point the duty, IPDC, and gst kick in for the o/s guy, so at this stage it is all equal, but still a bit of a rip for the consumer and I pity the poor customs agents trying to figure if something is genuinely under $1,000, what does he do? open the packet, then try and work out what it is?
Supply chain etc it is separate to a discussion on govt taxes and charges, may as well talk about sexism.
But if the overseas guys know that the Aussie guys have all these extra charges, then like Adobe he sells just under the Aussie shops price and pockets the difference, ends up looking like the Aussie guy cannot negotiate a good price, but really the overseas manufacturer/retailer has a vested interest in competing with a hobbled competitor, and 16-69% is really a lot. So you are paying more, just Australia does not get the revenue.
Looks like local e-tailers are starting to get the picture; if you can't compete on price then compete on service
http://www.smh.com.au/lifestyle/shoppin ... 286mt.html
There is absolutely no point to this argument... No one on this site will ever see this issue as anything than the Australian retail outlets are "RIPPING US OFF".
I'm going to relate this to the cycling industry but I'm sure that it would apply to most industries on the market appart from some.
Firstly we are dealing with only a small ammount of overseas stores which do not allow you to se the bigger picture.
The online stores have structured their business around being able to undercut any other store out there through various methods... No point going into it it's irelevant.
As someone who has spent time in Europe and had to deal with everyday life there I quickly discovered that when you start to look around the stores there it is apparent that yes on some things they are cheaper then we are here but for the large part they are more expensive. Not to mention if you are acctually earning a living over there. In that scenario a lot of the things you can afford yourself here would be out of your reach.
The one point that people also don't seem to care about is that every dollar you spend with Wiggle, Chain reaction, PBK or whoever is being sent overseas.You weaken the economy and over time that will start affecting everything... To the point where there will be no cycling industry in Australia as every company and store involved in it now will abandon it in droves.
Don't take this as "This guy's just saying all this because he earns a living from the bike industry." take it as someone who is more astounded by the fact that we allow companies like Coles and Wollies to create a monopoly on things we can't do without and chose to bitch, moan and complain about prices of things you choose to buy when you should be out just riding your bike and enjoying yourself.
so why can my LBS, who I have been shopping at for 2 years, is always within 10% to overseas prices? When they are over a 10%, its generally because the product is CHEAPER than what it is online (Shimano equipment excepted), still be running?
So. Wait. You've accepted the figures (69% markup, if I remember correct) in your video are wrong, and have back pedalled to say that 16% is way too much and it should be zero.
Just getting this straight.
I have no idea what holidays have to do with any of this.
Sorry what planet do you live on again? Distributors are the crux of the Australian cycling industry. Shops that import direct from O/S are a minority.
In most other industries, brand names tend to either own the supply chain or have exclusive distribution arrangements in place.
I am telling you that none of that multiple package stuff ever happens. Customs are not resourced for it. If you order 3-4 parcels from one place over the course of the month, they will not pull you up.
And a savvy importer can have goods under-priced on customs documents, marked as samples if its a small quantity, or marked as warantee replacements. To the letter of the law but not in the spirit of it.
Customs agents don't have to figure anything out. There is a declaration that states value, and 99.9999% of the time they take that declaration at face value.
But as I said above. Orders over $1000, the effect of a $49 surcharge/tax is really quite minimal and invalidates any argument you have.
I know that it is separate - but my point is that the government taxes and charges are minimal, and the real 'fat' in our prices is typically the supply chain.
Both examples are right, mine at importing 1 (which is what you are doing when you buy 1 thing overseas) and yours if somebody gets 100 at a time, both correct just different assumptions. And yes if it's 0% for the o/s guy, why not make it equal it's only fair.
Think about it, why is everything cheaper in overseas Bricks and Mortar stores? even ones in expensive places like Hong Kong and London? We end up getting the feeling that it is Internet vs bricks and mortar whereas its actually Australian retail versus Overseas retail.
Planet Oz, Distributors have traditionally been the crux, guys like wiggle don't have distributors. Its those exclusive arrangement or ownership of the whole supply chain that makes it so easy for Brands to price discriminate into Australia. i.e. this is the price we will try and stop you buying it anywhere else, of course the internet is making that all the harder.
Shops are ordering far more than 3-4 parcels from one place per month, that's what an individual would do.
If I worked for somebody as a buyer and they asked me to bend the rules I wouldn't do it, nobody would, so what are you left with; small shops run by owners who are comfortable cheating, where is their right to grow their business?
If you buy something and it comes in the post (less than $1,000) does it have a declaration stuck to the outside of it? Honest question I don't really know, I thought they just posted it to you and the whole idea was to not have to worry about any of the customs crap.
Yes, I have no argument for anything over $1,000 the Government has provided a level playing field there.
Like I said, the overseas brands have motivation to keep the supply chain prices high for Australian Importers/Distributors/Shops, it would be like running a business if you knew your competitor had 25% higher costs, you would always want them to be uncompetitive and you will always price just under your competition. This is a hard thing to see as of course the o/s shops are also competing amoungst themselves.
Because they are legends and really, really, good at what they do. There's also freight advantage in getting things in bulk, if they were given the same chance as the overseas shops, they would be able to grow their business and have them for breakfast.
Simple, your LBS is working on a SMALLER margin than the overseas company. Why are they still running? You'd have to ask them that question.
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