All taxed up

The Australian Bureau of Statistics reported that April 2011 saw a 1.1 per cent increase in retail spending – higher than the consensus market forecast of a 0.4 per cent rise in the month. The significant recovery in retail trade – which fell 0.3 per cent in March – is led by an increase in department store sales, up 3.6 per cent.

This may spell good news for retailers in a crucial time where Australians are tightening their purse strings and saving their money for a rainy day. The latest global online consumer survey by Nielsen has recorded a decline of 2 points in Australian consumer confidence in the first quarter of 2011. With rising utility, fuel and food prices topping the list of concerns, it’s no surprise that consumers are cutting back on non-essential expenditure.

While the Aussie retail industry has taken a nosedive, it’s important to note that there is an increasing trend to buy online, often from overseas. It’s an activity that everyone with Internet access can do – it’s convenient, safe, simple and provides a wide range of choices that often works out to be cheaper than what our local department stores offer for the same product. Spurred by the strong Australian dollar, it’s no surprise that many of us are not only scouring the web for clothes or shoes (holla fellow Asos lovers!) but also everything else – household accessories, books, electronic gadgets, car parts, mobile phones… the list of what you can purchase online is endless. And it all makes sense: if you can find something online that is lower priced than what the local distributors are offering, it’s only logical that you would choose the option that has the least cost.

Currently, Aussies are exempted from duty for online transactions under $1000. In 2008, Gerry Harvey of Harvey Norman claimed that local retailers were at an “unfair disadvantage” and called for a GST to be imposed on products bought online that cost under $1000. His sentiment is shared by major retailers who reported that their businesses had fallen victims to online stores, which could lead to Australian job losses. To counteract the online shopping trend, the Australian National Retail Association – which represents leading retailers including Coles, Myer, David Jones, Woolworths and Bunnings – is campaigning for the Government to reduce the $1000 tax-free threshold to $100 for online goods.

Pretty ridiculous, in my opinion. If the giants are crying about losing out to online stores, why aren’t they providing a more competitive environment for shoppers? We turn to online shopping for cheaper deals and bargains due to the excessive price markups by local traders. All we want are reasonable prices, excellent service and a wide range of choice – yet most leading Australian retailers fail to deliver these. You can’t call for an even playing field when the market is monopolised to begin with. Consumers are being ripped off right under their own noses and they know it… so they look elsewhere.

It will be interesting to see how the opening of Zara Melbourne on Wednesday (deep breaths – less than 48 hours away!) will have an impact on retail spending, particularly in Victoria which remains one of the worst hit in the current trading environment.