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Australia's battle with discounters

Nigel Morris-Co...

Australia has long been in conflict with foreign discounters marketing, amongst other things, by internet. It all started with a fight over the price of books.

In Australia, like most countries, it is prohibited to put in place a system of "resale price maintenance" which means, in essence, that manufacturers set a fixed price for their products no matter where they are sold. However, unlike almost the whole of the rest of the world, book publishers were given an exemption under which they were allowed to set the price of their books and discounting was prohibited. Most people, except consumers, took this as an industry protection measure and there is genuine merit in that.

Australia has some excellent writers and has had since at least the 19th Century. But, as we see with Australian music, films and TV, no matter how good it is, it has great trouble breaking out while mediocre material from, in particular, the USA gains often unmerited international status and, with it, sales. The process is accelerated by the global dominance of two major media empires which promote their own interests via advertising presented as entertainment, parading their stars across a range of carefully targeted chat shows, features and even news broadcasting which, then, generates its own second wave of interest across social media, with which increasingly the borders are blurred.

The sale of the books that are promoted like that keeps the less well-selling, but often of far more merit and importance, on the shelves by the simple expedient of cross-subsidisation. And Australia has, unlike so many other English-ish speaking countries (including the USA: witness the collapse of Borders) been able to keep large bookshops like Dymocks and small bookshops like Mary Martin with a wide variety of product. The refusal to allow the discounting of books therefore provided a vital cultural element where small countries, of which Australia is doubtless one, are swamped by heavily marketed material.

But then came Amazon.com. Amazon wanted to gain a toe-hold in Australia and it decided that its strategy must be the same as in the USA: after all, books are easy to post to customers, unlikely to be damaged in transit and, especially in a country with (notionally) large rural population with one pub towns, there would be a hungry population anxious to get books almost at any price but especially at a discount. But it found it difficult and so Amazon started from the sidelines: it set up a representative office but not a business and it registered an Australian domain name and through that it began to market almost exclusively e-books, for which delivery was even simpler - and required literally no infrastructure in Australia.

Other companies, some of them Australian, began to set up websites which marketed, for example, white goods at prices that undercut the established bricks and mortar retailers. Often, they were not true discounts: they were simply GST evasion because imported goods were, generally, not taxed in the same way as goods sold in the high street. To compete, some retailers moved into large warehouses in the inner suburbs, aided by roads networks that kept traffic away from their high street shops. Retailer Harvey Norman's chairman, Gerry Norman, began a long tirade against how his company's profits were being wiped out by being Australia's homewares showroom while shoppers then went home and bought the same goods cheaper on-line. The situation reached farce when offshore retailers started buying goods offshore for delivery in Australia and stored them in warehouses there, somehow still able to charge less tax than a traditional retailer who might be keeping goods in the same distribution centre.

Some went online and closed shops. Also, resale price maintenance in books was abandoned and home-grown companies like Readings.com.au , still a multi-branch bookshop in Melbourne, developed its own online discount retailer. Readings has taken the fight to Amazon in a surprising way: it lists books that are published by Amazon's CreateSpace subsidiary and markets the print-to-order paperbacks alongside the offerings from major publishers. I know: my own books are listed there, as are those of my pal Jefferson Galt and neither of us could claim to be literary giants. Our Aussie mate, Adam Courtenay is also featured with his excellent non-fiction works.

Harvey Norman started its own on-line retailer. It does not publicise discounts - even its "hot deals" section doesn't mark a "before" and "now" price. Its prices are, compared to some other retailers, sometimes outrageously high. For example a Cuisinart ice cream maker is today listed at AUD649 ( https://www.harveynorman.com.a...) while Kitchen Warehouse (https://www.kitchenwarehouse.c...) says that the list price is AUD659 but their "everyday price" is AUD456.90. But Harvey Norman has stuck with a national chain of sizeable shops in central (ish) locations and that's an expensive way to do business.

One of the reasons that imported goods are cheaper is the non-evasion, non-payment of tax and duties. Almost all countries operate a de minimis regime for small imports, whether they be something you bring back from an overseas trip or something you import by post or courier. Retailers, however, are required to charge and account for tax on sales, no matter how small. Books, CDs, many items of clothing etc. all fall within the scope of that exemption.

Australia set up a tax system to deal with this - and it set a surprisingly generous limit: AUD1,000. But the Australian Border Force, of which Customs is part, makes it clear that even then some purchases may not be tax and duty free. For example, if an Australian company sells goods that are delivered from overseas, there "may" still be tax and duty to pay. Also, the ABF makes it clear, here, https://www.abf.gov.au/buying-..., that some goods are liable to seizure at the border and some may be subject to GST charged by the vendor.

With a mix of consumer protection plus economic considerations, Australia's battle is not yet over and its lessons and valuable to other small nations.

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