Amazon purchases and new GST Rules

[Lappa]

Infinity lock mitre setup gauges from Infinity in the US - $40AU each or $72 AU the pair (at 75c to the $)
In Australia $69 each or $129 the pair.
Is this a fair mark-up by the OZ retailer or is it gouging?
The retailer stocks a number of Infinity products so these would be included in a shipment.

[BobL]

Infinity lock mitre setup gauges from Infinity in the US - $40AU each or $72 AU the pair (at 75c to the $)
In Australia $69 each or $129 the pair.
Is this a fair mark-up by the OZ retailer or is it gouging?
The retailer stocks a number of Infinity products so these would be included in a shipment.

I don't doubt there's gouging but you can't compare this way as you're assume the Aus Retailer is buying them at the same price as the US retailer and that is rarely the case.
So you have to look at the Aus retailers buy price.
I can only comment on one case and that is for Stihl chainsaws where Aus retailers pay more for them from Stihl than the RRP in the US.
The US buys about 20x more chainsaws from Stihl than Aus does so the US retailers have a huge advantage.
The average US retailer also sells many more chainsaws per unit time than Aus retailers so they make up for lower RRP by having a a higher turnover.

[Beardy]

Infinity lock mitre setup gauges from Infinity in the US - $40AU each or $72 AU the pair (at 75c to the $)
In Australia $69 each or $129 the pair.
Is this a fair mark-up by the OZ retailer or is it gouging?
The retailer stocks a number of Infinity products so these would be included in a shipment.

a quick google

At the time of this writing (August 2014), one Australian Dollar buys .92981 US dollars; so a 100,000 AUD salary equates to 92,981 USD.
Having moved last year to Australia from Washington, DC, where I was earning a GS-14/1 salary, I can say from experience that similar income in Australia does not go as far as back home.
Australia is the most expensive country in the G20, and fourth most expensive in the world. Sydney and Melbourne are among the world's ten most expensive cities, on par with London and New York. This partially (although by no means entirely) explains why the average annual salary for Australians is considerably higher than for Americans - appx. $70,300 USD vs. $44,300 USD.
Comparing cost of living across two vast and diverse nations is difficult, but this site does a pretty good job of it. Key indicators:

• Consumer prices in the United States are 32.32% lower than in Australia
• Rent in the United States is 37.08% lower than in Australia
• Groceries in the United States are 24.91% cheaper than in Australia
• Gasoline in the United States is 32.49% cheaper than in Australia
• Basic utilities (such as electricity and water) in the United States are 20.47% cheaper than in Australia
• Internet subscription in the United States is 25.28% cheaper than in Australia (and download speeds are, on average, 75.78% faster in the United States than in Australia)

And my personal gripe...

• Domestic beer in the United States is 42.15% cheaper than in Australia

[Lappa]

.
I can only comment on one case and that is for Stihl chainsaws where Aus retailers pay more for them from Stihl than the RRP in the US.
.

So Stihl is gouging Aussies as well. Aren’t we the lucky ones

[aldav]

Bow Products Featherpro Featherboard single US$30 ea. on the manufacturers US website - @ 75c exchange rate (which you won't achieve at the moment) equates to A$40. Timbecon normal price $49. After taking account of freight, GST and (maybe?) duty Timbecon would seem to be charging a fair price. So are the Australian retailers of the Infinity Lock Mitre Set-up Gauges gouging? To me the most likely answer is either possibly or probably. The chances of the answer being no would seem to be highly unlikely and yet it's the same Australian retailer selling both products. So are some American manufacturers gouging Australian retailers or is it that there is no alternative to the Infinity product and the consumer is therefore fair game???

[FenceFurniture]

I don't doubt there's gouging but you can't compare this way as you're assume the Aus Retailer is buying them at the same price as the US retailer and that is rarely the case.
So you have to look at the Aus retailers buy price.
I can only comment on one case and that is for Stihl chainsaws where Aus retailers pay more for them from Stihl than the RRP in the US.
The US buys about 20x more chainsaws from Stihl than Aus does so the US retailers have a huge advantage.
The average US retailer also sells many more chainsaws per unit time than Aus retailers so they make up for lower RRP by having a a higher turnover.

Stihl have taken the "home turf" thing to a whole new level in the States (maybe here as well). Over there dealers are only allowed to sell to those in their local dealership area. As I understand it - not just state to state, but city/region restrictions as well.

Whilst I agree with the premise of your argument, Stihl isn't the best one to use as an example. There are plenty of European based companies that try to exercise this turf thing, and also at least attempt to fix retail pricing. Festool was fined €8,000,000 (around AUD12,000,000) about 5 years ago for price fixing in Germany.

I would think, and certainly hope that a small company like Infinity would just have a single wholesale pricelist.

It might be an interesting example to try and pull apart. In AUD they are $40 in the USA, and $69 here. Assume 50% mark-up from wholesale to retail, which would give a w'sale price of $26.66.
Freight cost - not much, even by airfreight, in a decent sized box. Call it $2.
Import Duty, probably 5%, so $1.33
GST upon retailing at $69 would be $6.27
Cost of warehousing such a small item - nil
Total costs $36.26 unless I've missed something (maybe an allowance for Custom Clearance which would only apply to imports in bulk - otherwise airfreighting already looks after that)
Profit = $69.00 - 36.26 = $32.74.
That's ~90% profit where the US retailer gets 50% (by the earlier definition). I can't see that the Aussie retailer needs 40% more to cover the country differences. Perhaps 20%. A price of $59 to $63 would be fairer, and quite reasonable. A retail price here of about 150% of the overseas price (in AUD) is fine by me, depending on the freight costs etc.

It's certainly far from the worst example I've seen.

[BobL]

Stihl have taken the "home turf" thing to a whole new level in the States (maybe here as well). Over there dealers are only allowed to sell to those in their local dealership area. As I understand it - not just state to state, but city/region restrictions as well.

Whilst I agree with the premise of your argument, Stihl isn't the best one to use as an example. There are plenty of European based companies that try to exercise this turf thing, and also at least attempt to fix retail pricing. Festool was fined €8,000,000 (around AUD12,000,000) about 5 years ago for price fixing in Germany.

I would think, and certainly hope that a small company like Infinity would just have a single wholesale pricelist. .

There will be an official wholesale price but if you buy 10000 units you will obtain a much lower price than if you offer to buy 100. Even Aus retailers offer this, eg Element14, Altronics etc.

[FenceFurniture]

Yeah, but I don't think anyone in the world is ever going to buy 10,000 of the same router bit. I understand what you are saying though.

[ian]

And my personal gripe...

• Domestic beer in the United States is 42.15% cheaper than in Australia

sounds about right.
it's generally accepted that US domestic beer is mostly flavoured water.

[BobL]

sounds about right.
it's generally accepted that US domestic beer is mostly flavoured water.

I think you mean coloured?

Actually my experience is the US microbrewery scene makes our micro brewery scene pale into insignificance. If you know where to look there is all manner of delicious brews available in most US major cities and towns. Every city I have been to in the US has surprised me with the high quality and variety of microbrewery Beers. US microbreweries are much more willing to try unusual ingredients and have come up with some incredible brews. One of my favourites is Dog Fish Head, there's nothing like their 18% stout and their IPAs here in Aus. They also made a beer using sultanas and champagne yeast which was amazing. Stone brewing in CA are also one of my other faves. I could go on - well maybe a bit more. Seattle has a vibrant microbrewery scene - I did a brewery crawl over a couple of days there back in 2005 - it was hard work as there were so many. Even though its the home of StarSluts some of the Coffee was also outstanding.

[ian]

I think you mean coloured?

Actually my experience is the US microbrewery scene makes our micro brewery scene pale into insignificance. If you know where to look there is all manner of delicious brews available in most US major cities and towns. Every city I have been to in the US has surprised me with the high quality and variety of microbrewery Beers. US microbreweries are much more willing to try unusual ingredients and have come up with some incredible brews. One of my favourites is Dog Fish Head, there's nothing like their 18% stout and their IPAs here in Aus. They also made a beer using sultanas and champagne yeast which was amazing. Stone brewing in CA are also one of my other faves. I could go on - well maybe a bit more. Seattle has a vibrant microbrewery scene - I did a brewery crawl over a couple of days there back in 2005 - it was hard work as there were so many. Even though its the home of StarSluts some of the Coffee was also outstanding.

Micro brewers don't count as the beer they brew is tailored to a particular palate and alcohol content.

the coloured water comment applies to mass market brews -- especially those in tins.

[Bob38S]

Interesting thread, don’t know if this helps or hinders but some info,

As of 30 June 2015, Harvey Norman Holdings' overseas operations (all conducted under the Harvey Norman brand) are in:

• Croatia (2 stores)
• Ireland (12 stores)
• Malaysia (14 stores)
• New Zealand (36 stores)
• Northern Ireland (2 stores)
• Singapore (17 stores)
• Slovenia (5 stores)

[Cal]

I would like to add a little to this thread. I started in retail (photography gear) back in 1990 and ended in 2010, in the beginning retail margins for any camera were around the 30% mark and tax on the camera was 33% . I don’t know if anyone remembers the pre GST days that we all paid tax on many items? Anyway as time went on and with the implementation of GST product prices come down and so did margins, the Harvey franchise began as did the JB hifi stores which meant more competition in the photo world, it was no longer a camera stores domain to sell photo products it became a free for all and the wholesalers welcomed it with open arms. Back at the start the store I worked for was part of a buying group which meant that as part of that group we had better buying power than an independent store. We could either chose to discount certain items to encourage customers to buy from us or just pocket the profits which may have added 10-15% to the margin on a given product. Once the new players come to town the wholesalers had retailers that were way bigger than what they had ever had in the past and the small retailers (even the buying groups) were hung out to dry. The retail margins dropped very quickly to around the 10% mark just to compete with the large box movers, the boss even said to sell cameras at cost if we had to to get the sale. This left us with trying to make up the difference in overall margin out of accessories (no easy task). The wholesalers/importers within Australia do not buy anywhere near the quantities that the US, Asia or the EU do, another factor was that at the time there was no Nikon Australia etc. like there was in the US and Europe, all goods were imported by independent importers. A part of the importation agreements were that for 100 cameras come with enough spare parts to cover warranties say 30%, if more cameras than the 30% come back for repair the importers had to wear the cost of repairs not to mention the labour costs for those repairs.
No doubt the wholesalers/importers were making good margins out of the retailers back in the day. Things have changed though and there are less independent importers than what there were, Nikon, Olympus and Sony are now importing and distributing their own product which means profits go back to the parent company OS and margins are withheld within the company, the big chain stores like Harvey, JB, Big W, Myer etc. get the big discounts from the wholesalers and the independent stores get the dregs. I don’t know what happens within the woodwork world but I would hazard a guess that the retailers in Australia are not making a motza out of us as some would suspect. The wholesalers may be doing ok but as a country we just don’t have the population to allow us the buying power of the rest of the world. As a country we are a very small fish in a really big pond.

On the Harvey thing, part of the reason for his wealth is that he provides his franchises with a loan to buy into the business, they then have to pay back the loan and franchise fee and pay rent for the floor space and advertising fees, warehousing etc. all of which goes back to the man at the top, they then have to pay wages and running costs and all the usual things that go along with owning a business, not an easy task with the low margins that they now have in consumer electronics.

[Beardy]

I would like to add a little to this thread. I started in retail (photography gear) back in 1990 and ended in 2010, in the beginning retail margins for any camera were around the 30% mark and tax on the camera was 33% . I don’t know if anyone remembers the pre GST days that we all paid tax on many items? Anyway as time went on and with the implementation of GST product prices come down and so did margins, the Harvey franchise began as did the JB hifi stores which meant more competition in the photo world, it was no longer a camera stores domain to sell photo products it became a free for all and the wholesalers welcomed it with open arms. Back at the start the store I worked for was part of a buying group which meant that as part of that group we had better buying power than an independent store. We could either chose to discount certain items to encourage customers to buy from us or just pocket the profits which may have added 10-15% to the margin on a given product. Once the new players come to town the wholesalers had retailers that were way bigger than what they had ever had in the past and the small retailers (even the buying groups) were hung out to dry. The retail margins dropped very quickly to around the 10% mark just to compete with the large box movers, the boss even said to sell cameras at cost if we had to to get the sale. This left us with trying to make up the difference in overall margin out of accessories (no easy task). The wholesalers/importers within Australia do not buy anywhere near the quantities that the US, Asia or the EU do, another factor was that at the time there was no Nikon Australia etc. like there was in the US and Europe, all goods were imported by independent importers. A part of the importation agreements were that for 100 cameras come with enough spare parts to cover warranties say 30%, if more cameras than the 30% come back for repair the importers had to wear the cost of repairs not to mention the labour costs for those repairs.
No doubt the wholesalers/importers were making good margins out of the retailers back in the day. Things have changed though and there are less independent importers than what there were, Nikon, Olympus and Sony are now importing and distributing their own product which means profits go back to the parent company OS and margins are withheld within the company, the big chain stores like Harvey, JB, Big W, Myer etc. get the big discounts from the wholesalers and the independent stores get the dregs. I don’t know what happens within the woodwork world but I would hazard a guess that the retailers in Australia are not making a motza out of us as some would suspect. The wholesalers may be doing ok but as a country we just don’t have the population to allow us the buying power of the rest of the world. As a country we are a very small fish in a really big pond.

On the Harvey thing, part of the reason for his wealth is that he provides his franchises with a loan to buy into the business, they then have to pay back the loan and franchise fee and pay rent for the floor space and advertising fees, warehousing etc. all of which goes back to the man at the top, they then have to pay wages and running costs and all the usual things that go along with owning a business, not an easy task with the low margins that they now have in consumer electronics.

Cal I would say that your experience in retail would be indicative of most sectors of the retail trade today. As you have said Australia is insignificant on the world trade scene.
I went to the world trade fair in China a couple of years ago and the minimum quantity of widgets that they propose you buy is very high.....I doubt there would be that many interested purchasers in Australia for some if the items but they obviously have no problem selling in those volumes to other parts of the world.

[Cal]

I don’t really understand where the government is going with the GST thing either, if we sell an item from Australia to somewhere overseas we and the buyer are quite with our rights to not apply GST on the item no matter what the price is. The government misses out on its piece of the pie because we can then claim back a tax credit for that item we have paid GST on. If an individual purchases an item here and travel out of the country they can also claim back the GST. No different to what the old duty free days (but less tax involved) I get that GST is an income for the country and having it forms part of our revenue and quite rightly so. The government has forgotten about a small detail in all of this revenue, selling public assets to the private sector that can and in some cases have become part of the “globalisation” which includes foreign ownership of Australian assets. The horse has bolted and the government fail to admit that they have stuffed up and are trying to claw back the revenue anyway they can. The government and big business wanted and I guess needed to be part of the global economy but they don’t want the people to be a part of it. Tax havens for the rich are common place and part of an accept business practice for those at the top of town. I think the government needs to come down hard on the legal tax fraud that is taking place and not screw the end users, but that won’t happen because you have to look after your mates right?