I just changed my account settings from the US to Australia in preparation for the local store opening, ten minutes later I receive an email saying they believe my account was accessed by an unauthorised party…. they are reversing the change, locking the account for 5 hours and resetting the password.
I've seen Amazon's wrath
Predatory pricing?
A lot of the fine and mid-ranged boutiques I use to go to in London and Paris closed down because Amazon were offering similar quality clothes and brands for a ridiculously low price. I quite enjoyed spending my time browsing in those businesses with other locals. People lost their businesses and it was sad to hear their stories.
A lot of the fine and mid-ranged boutiques
This will be the end of ma and pa stores in Australia. Sad times indeed. :(
That's free market for you. It's friggin sad to hear…but barginsssss
Its actually a bad thing for the Australian Economy, we all need jobs and to keep money in Australia… why are we all so eager to get another American giant in here… why arent we doing this ourselves!!!???
Think of your local major regional shopping centre, millions of dollars invested in the building, people employed in the specialty shops, but many retailers struggle to survive already before they take a hit from Amazon.
Next will be Amazon fresh here to give Woolies a beating, its sad enough a German company (aldi) and American (costco) have their business models changing that market but big Aussie business community are too dumb to follow suit… Woolies are massive employers, tax payers, and have Australian shareholders including our super funds… i don't know why big Aussie business don't recognise its a global economy and respond to the market improvements instead of flogging a dead horse with their old business models.
we all need jobs and to keep money in Australia
Seems like it's unAustralian to do that. Look at how many people own Apple products and overseas cars.
why arent we doing this ourselves!!!???
Because no one has taken the initiative to do so.
Competition is good for the consumer, more variety, it forces locals to be better than they were before.
I for one welcome our new Overlords of retail (Bye Gerry!)
@cwongtech: sure competition is good, but my gripe is why are the aussie businesses with the means to compete, not competing. Mr Harvey would probably complain about it instead of raising capital on the asx and competing with Amazon or eBay. Even the likes of chemist warehouse are on ebay now, sending a cut of profits back to the good old U.S. of A… they've got us beat in the business world… at least Gerry hires Aussies who live and pay tax and buy things here, so around and around the money goes.
The problem is it doesn't force the locals to be better, they are too slow to respond then go insolvent first… then we are left with no oil refining industry, car industry, manufacturing industry and next no retail industry and soon… no economy and the end of the Australian renaissance / golden age. Future third world here we come!
The green movement will kill resources mining, replacing power production with imported solar panels, then all that will be left is banking but the govt is going to attack the big 4 next, the big 4 are holding up this economy! Its Aussie tall poppy syndrome killing our own big businesses! Why people think it's bad for our businesses to make money is beyond me.
It's called capitalism smuggler. If you don't like it don't use Amazon.
@MrFrugalSmith: >why arent we doing this ourselves!!!???
Because we don't want to lose money or start a cloud computing service to make up for losing money?
@Diji1: Bezos is worth like $100 billion…. he's arguably richer than Gates again… there's more than one way to make money than "declaring" profits/distributing dividends - he's growing market cap and asset-richer than most people could ever imagine.
@GetOffMyUnicorn: Obviously, but, Aussie players can compete on a capitalist market too, but they aren't responding to market changes effectively.
I will shop at Amazon, because its the best option and the only way I can play my inevitable part in sending a message to big Aussie business to lift their game. Hopefully before they fail in a heap will Aussie retail giants respond.
As diji1 says, Amazon rarely declare a profit. Its predatory market capitalisation expansion. If Aussies had setup their own alrernative to Amazon first, they probably wouldn't have bothered coming and market share would stay local.
@MrFrugalSmith: if you need jobs to keep in Australia then Australia needs to start manufaturing…At present we are relying completely on Chinese and Asian products…we do not manufacture anything in Australia…
All the Samsung and Apple products you buy money goes out of country!!
@MrFrugalSmith:"I will shop at Amazon, because its the best option and the only way I can play my inevitable part in sending a message to big Aussie business to lift their game."
I will shop at Amazon for the best prices. This is a bargain website.
@GetOffMyUnicorn: hence the "best option" and "inevitable" parts. We are just consumers in the system, we will always gravitate to the best value
@Kunalk222: Man if the only hope for Australia is manufacturing then we are frankly screwed. We have zero chance of competing, zero.
Even if I was to list one, you wouldn't know who they were.
No one designs but there are a few that have a brand.
Exactly, why dont we? as a Flying Ace you'd of course know Australia even used to be capable of producing aircraft… there was a time we did whatever we needed to at the cutting edge of technology, and now we accept we are no good at most things… wtf
@Kunalk222: the way to do that is automation and robotics, and allowing continuation of (with clean improvements) fossil fueled power to restore electricity costs competitiveness on a global level. … advanced engineering doesn't employ as many here but caters to our ability to educate mechatronic engineers to oversee automated manufacturing… and prevents IP loss to a country that happily steals your product design because it doesnt share our copyright laws. So a few engineers, educated in local system, combined with local power production, local transport and logistics chain, materials supply chain etc retains profits here, is better than a labour intensive manufacturing force overseas. We have to admit labour intensive manufacturing here is dead.
@GetOffMyUnicorn: We are Australians. So sorry you don't feel part of the community. I am happy with Capitalism too - you are not actually understanding my posts.
My entire point is that Australian retail businesses should be deploying Amazon's business model here. It is sad we are all here going "oh yay, Amazon are FINALLY coming to Australia, at last!?" We shouldn't need to, if our businesses recognised market forces and innovate… its frustrating that an Australian (or group of) business CAPITALIST/S with the means haven't taken advantage of an Amazon style model and COMPETE in the MARKET at their game.
Dick Smith (no relation) was just on Sunrise (TV) this morning reiterating many of my sentiments, Bernard Salt has written about it.
Australia will take a hit as a result of this.
Amazon were offering similar quality clothes and brands for a ridiculously low price.
Win for consumers I'd think - loss for people with too much money.
Ah yes, you'd suggest that we should pay MORE money to big companies to show that we dislike them.
… wait what?
You say that like its an easy thing to do.
We are absolutely nothing compared to other countries who have the big names like japan, china, Europe, who are actually capable of doing what you're talking about, yet they still can't compete with Amazon, eBay, Google, Microsoft, apple etc.. and you want little old Australia to???
They have all allowed those big yanks to enter their markets and dominate, and you want Australia to somehow magically compete or setup something similar and not let those big names in, then fail, and be left behind the rest of the world while we pay through the nose for things other countries pay peanuts for….nah not good idea.
Don't get me wrong, I really really wish that it could be so, but alas, it's just not possible at the moment.
You don't get anywhere by taking the attitude to do what is easy, that perception is half the problem.
We aren't as small as people commonly think, of the 200ish countries, we're the 13/14th largest economy in the world, comparable in size to Russia.
China has JD.com, Alibaba, etc and Amazon had to buy a Chinese company to gain entry to China on their terms. It doesn't dominate. It also has vipshop, the fastest growing retailer in the world.
Europe has 19 of the top 50 eCommerce retailers in the world.
Japan's Rakuten beats Amazon on sales.
Sure it may not be easy, but others are doing it and we need and can do some more home grown ecommerce and distribution powerhouses.
@MrFrugalSmith: If the .gov is short-sighted enough to prop up the property market, not invest in innovation (shitty nbn) and not force foreign companies to pay taxes here, then we only have ourselves to blame. Why we include property prices in our GDP is beyond me. It's not like countries go around boasting about high prices for petrol and milk. If things keep going this way, we'll all just end up swapping houses with each other.
Edit: As Bill Gates said "We're more than happy to pay tax here, you just have to make us."
Sad truth is that ALL cars are overseas cars now (or rather… from here on out that will be the case).
@mbck: free market can have short falls. It doesn't stop dominant players to price the smaller players out in the short run only to put prices up when the competitions have been annihilated.
It is ACCC's job in Australia to stop things like that from happening.
Competition is good, transfer pricing and hence tax avoidance is bad. That’s my only gripe
Here is what happened to me when I started selling on Amaon (us and uk) and how it benefitted the Australian economy.
I had to buy a car, so I bought one from a car dealer and gave him a sale and probably got him a commission from it.
I also bought insurance for that car so that sale which probably help that person/company .
I needed a warehouse to stock and make my products so I leased one from Ray white which probably gave them a commission of some sort as well as the owner of it.
I bought all my tools, furniture, Internet for work, electricity etc… Which all in turn contributed to keeping their jobs for little bit longer.
I think by selling on Amazon helped me grow my business which in turn helps Aussies and the economy anyways. If I wanted to rent a retail shop for Tatts or something and make like 9% per ticket sale or 5 cents for every newspaper sold then I think I could not survive that long.
Retailers alredy sell on eBay so why can't they just sell on Amazon . It would be a win/win situation anyways for them.
@idonotknowwhy: this is why it doesn’t happen in this country. Most Australians, just like idontknowwhy, expect the government to do it for them.
The reason we don’t do things is the government already does too much. Our wages are high, and we want them to stay that way; Therefore we have to make the best of our other advantages.
But no. We elect empire building politicians that create an ever expanding list of government agencies and QANGOs for their highly paid mates and hangers on that impose three levels of red and green tape with multiple differences in compliance; we legislate our energy prices from one of the cheapest to the highest in the world; we make start ups jump through multiple compliance requirements; and then the courageous few that finally struggle though the approval maze are aggressively told they don’t have a #sociallicence.
It’s just so much vastly easier to set up overseas, and therefore that’s what happens.
PS: The problem with GDP isn’t that property is included, as is all other expenditure. It’s that a dollar of government expenditure is treated as just as wisely spent as a dollar of business investment, or personal consumption of one’s own money.
Most Australians, just like idontknowwhy, expect the government to do it for them.
Not entirely. In most cases, I really wish they'd back-off and do LESS.
EG. If house prices are falling (which is supposed to be okay, because that's what markets do), they shouldn't have intervened with FHOG's, stamp-duty concessions, etc.
Anacdotally, my share portfolio is constrained by what I can afford to invest. A decent amount of my money goes towards my dwelling. This money could be working for the country in better ways.
we make start ups jump through multiple compliance requirements
I'm 100% with you on this one. This is another thing I meant by "not invest in innovation" and "shortsighted". They could also just reduce the red-tape. Startups with limited funding can't pay early employees with equity, because they're forced to pay tax on AUD early on.
The few which make it through (Atlassian) end up leaving.
But one thing which I believe that only the government can do, is force the large US companies to pay taxes here. I don't blame the US corporations for doing this. They almost have no choice, because if for example. Microsoft pays taxes here and Apple doesn't, then Microsoft is at a competitive disadvantage. If they are all forced to pay tax here; then they will, and they won't be at a competitive disadvantage.
Correct me if I'm wrong about this, I don't have a particularly well-informed view here, and haven't spent too much time researching these topics (because there's nothing I can do about it).
we legislate our energy prices from one of the cheapest to the highest in the world
Could you explain that?
@idonotknowwhy: 15 years ago we we very cheap for power, together with most of the worlds bauxite, it’s why we had a lot of aluminium refineries here. Since then we have introduced policies to shift power generation from coal to renewables, starting when JWH introduced the RET. This costs more. The goal might be worthy but consider the cost. Manufacturing are moving offshore where power prices are less. Power costs, including price stability and reliability aren’t the only reason, but it is one of the reasons. I use aluminium as an example as it is basically solid electricity.
On the tax issue, a company like Apple sells its hardware to the local entity at wholesale prices. The local entity pays its tax obligation on its taxable income, basically the profit of retail minus operating minus wholesale. Google sells from Singapore , there just isn’t much tax locally. I laugh at this government ads about this. They claim they are getting more out of corporates, then say they are getting $1.5b in tax from them. They don’t say $1.5b extra! And even then that is just a week or so interest on all that government debt created in the last decade.
It is astonishing that people don’t trust politicians, yet always vote for the dude promising to help them solve their problems for them. Like battered wife syndrome.
im all about supporting local economy, but in all honesty, the experience and especially the customer "service" given at some local shops, is almost non existent. if local business wants my money, they have to try much harder than they are right now.
dont treat your customers like crap, like they dont exist, and then whinge when you get online\overseas competition.
ultimately, people want to support local business, as no one wants to see anyone unemployed doing it tough, but at the same time, especially as this is ozBARGAIN, if i can purchase something significantly cheaper online, i will.
its also amusing seeing the likes of harvey norman and dicksmith "warning" us of buying from these competitors. youve had an unchallenged monopoly for years mate, get over it!
why are we all so eager to get another American giant in here… why arent we doing this ourselves!!!???
If we were so conscious, why did we allow other American businesses and brands to enter at the first place? Half of our grocery, confectionery, clothes/shoes, cosmetics, pharma and automobile brands are America or Europe based. Why did we allow Costco, Aldi and many other smaller store chains? Our brands just don't exist or are not competitive in pricing. Time to invent our own Amazon and Facebook?
PS: Funnily enough, I used to believe proudly that 'Smith's' chips is our own brand and we didn't let 'Lay's' in. I was so ignorant.. Just recently I read somewhere that Smith's used to be our (and British) brand and it is owned by good old Pepsico (Lay's) for several years now. One of my favourite ice creams 'Magnum' is owned by Unilever. What are we talking about?
@Kunalk222: for them to even consider that, you are going to somehow beat the slave labour conditions in terms of wages, or watch the prices of iphones etc rise by a few hundred dollars and watching the customers complain
Competition is good for the consumer
Of course competition is good for the consumer. But these giant retailers only bring in temporary competition.
First small family businesses will be the first to get pushed out. You've lost some variety and competition there. But what happens when Woolies can no longer compete, with the larger overseas retailers? Not only does the consumer suffer from a MASSIVE slice of competition lost, but the economy takes a hit. Thousands upon thousands of local jobs gone. Including supermarket workers, farmers, logistics, manufacturers etc.
It's a lot easier for overseas companies to compete with us, because we have a minuscule population of 24 million - on an isolated island. The US has 300 million, the EU has 508 million, china has 1400 million. We aren't even 10% of the US. Which means international companies can easily subsidise their losses with their profits from overseas. Then once local competition has been eliminated, they control the market and can raise prices.
@ladis: China isn’t winning solely on low cost. They’re genius at reverse engineering, they’ve massive population and they can execute repetitive processes in a way Australia would never be able to achieve.
Australia cannot ever compete. It’s done.
The ma and pa stores would survive (as in other countries where Amazon is present) if (a) great customer service was there, and (b) the margins come down to a more reasonable levels (in my professional experience the lowest margins I have seen was in food retail which was 60% up to 600% in clothing etc. and specialty foods and I suspect that this is not even the end of the line.
Even the big supermarkets have really high margins compared to the equivalent companies overseas.
Example: Aldi in Germany has a profit margin between 1%-2%, whereas Woolworths in Australia has 10 times that.
Amazon pursues a low pricing, low margin but high volume strategy.
I would be happy to buy from small local stores if the price difference was say 5% but not if it was 50%.
"Modesty and restraint" in terms of profit margins is the key to success in a society where price is really the main and sometimes only factor to purchase with identical products and comparison is made easy.
On Ozbargain, surely price is THE determining factor and I would surmise that this is the case for more and more people the tougher times get.
@MrFrugalSmith: not wrong.
it would be nice if someone with significant dosh picked a niche and made warehouses to deliver as well as bricks and mortar outlets.
Australians have only themselves to blame for this. Corruption throughout politics, business and media. Apathetic population with tall poppy syndrome. Our disastrous NBN and Electricity problems are evidence that the country is slipping out of the first world. China and USA own Australia.
Well we had milk powder being well sought out.. Our solution ? "Herp a derp derp lets limit it to 2 cans per customer so we don't need to increase capacity and create more jobs and then blame it on the Chinese"
Quite a few.
Plenty of Optus and Telstra branded phones mostly Android based.
For example the Telstra tempo.
No way there will ever be a phone that can run iOS from an Australian company.
Aussie made cars have been of questionable quality for some time. I would never buy one. Give me a Jap made model any day.
Why are we making excuses?
Australian retail stores have been ripping off consumers for far too long. It's about time they learned a lesson.
It's pretty ironic and hypocritical for ANYONE on Ozbargain to be arguing against Amazon.
You can always buy amazon shares and benefit from it as well.
Amazon is still going to hire Aussies and boost the economy with employment in logistics, warehousing, paying taxes etc.
I don’t like to get ripped off.
The rise of online shopping has nothing to do with destroying local business. It’s evolution.
@smuggler: Admittedly though, there aren't any competitors to either of those products that are made in Australia.
@MrFrugalSmith: Because none of that looks good on a quarterly, and investors are dumb as all (profanity). Amazon is able to do the things Amazon does because Bezos just says stfu to any investor that questions bad earnings in any specific point in time. If Colesworth tried to do that their board would be fired in minutes.
I don't find Amazon's stuff that great, lot of stuff on the US site I recognise from Aliexpress!
@MrFrugalSmith: We don't have the same buying power here. That's why we are getting ripped off in the first place by wholesalers and distributors (who actually ARE the evil ones in the supply chain). Amazon cuts this by actually being the wholesaler/distributor in the supply chain, so that's why they can cut the costs significantly.
I've kind of been a bit outspoken about it before - people do bag retailers in Australia, but they are held ransom by ridiculous rent prices (cough Westfields / Lend Lease) and at the mercy of Distributors who take a good 20-30% cut at times. That is why I can buy stuff from my retailing ex-employer at "cost" but still can be found cheaper at Amazon and other rock bottom companies.
@Lysander: Sounds like you've never really run a business operation yourself. But here's Business 101 for you:
Australian Retail rent is ridiculous and keeps inflating even when the economy doesn't. Australian labour is not cheap, nor are sales taxes or utilities to keep the store running. Neither are the distribution logistics to get it into the store for you to sell. Throw in insurance for public liability, government licensing (of the business) and the costs of account / management as well as other fees here and there.
This is the same from big companies to the family businesses in retail. Hence why you never really see any family retail business get "rich" - they make a living on basic wages that is left from all those costs.
For this to happen there needs to be a desire to drive quality.
Australian made products are going to be much more expensive. They have to be much better/have better warranty.
Australian manufacturers are not interested, they want to import parts from China, assemble locally, over charge and dodge warranty claims.
You are funny. I only obtain my livelihood from advising people and business in business and legal matters, including a lot of pro bono/free work - my contribution to the local community. But that is a different matter.
Retail rent is high which is another example of the "get rich quick" and greedy attitude, not considering medium or long term.
Labour costs - you only have yourself to blame, especially considering the productivity and efficiency of the labour force which is the most significant problem I encounter in the businesses I advise.
And let's not forget customer service and attitude. Most business I frequent as a private person I am made feel as if I am a nuisance and interrupt their day of leisure and chatting at work. Naturally, I will never go back to those business but rather buy online.
The businesses that have friendly and helpful staff I stay loyal too and am happy to pay a bit extra.
There are small businesses that grow and can succeed here but it requires friendliness, customer service, and competence - most businesses lack one or more of those and that is why they get difficulties when more efficient, effective, customer-service oriented and hence cheaper competition comes in. Plus a lot of small business owners have no clue about running a business (especially accounts, marketing, stock selection, and inventory management) but ask on forums (hint, hint: https://www.ozbargain.com.au/node/268870; https://www.ozbargain.com.au/node/330114; https://www.ozbargain.com.au/node/333149; and of course the guy who thought opening a coffee shop in a government building would guarantee him the custom of the workers there - that was the business model).
My question to you bchliu is then: why do people still think Australia is the lucky country given all of the above?
It is clear to me that it is not at all but merely the most capitalistic place on Earth (and yes, I have lived and worked in the US, including NYC but compared to Australia in general that is "tame").
My question to you bchliu is then: why do people still think Australia is the lucky country given all of the above?
It is clear to me that it is not at all but merely the most capitalistic place on Earth (and yes, I have lived and worked in the US, including NYC but compared to Australia in general that is "tame").
That is not a hard question to answer. You say you've been around the place but have you really seen how "lucky" this place is compared to a lot of other less developed countries in the world? Just look at the lifestyle standards here and compare it to the less fortunate neighbours in the region like most of the SE Asian countries? Even in comparison to Japan (arguably one of the top Asian countries), Australia has a lot of things going for it that they do not have such as healthcare systems and other qualities of life.
As for evils of capitalism - not sure if that is something to be discussed here. But it is what runs the modern world from Murica to Australia to China (I laugh each time someone calls them Commies). I would argue against notions about Australia being the most capitalistic country - America and China are much worse.
See, that is why Australia falls down. Do not compare the country to African and poor Asian countries but the ones that are better, more well-off. That is something to aspire to rather than being content about how other countries have it worse. If you aspire to be like countries that are better Australian standards will improve. Otherwise, the country is at a standstill and old systems get entrenched. There is a reason China has progressed so much in the last two decades - they aspire to be like the US and Western Europe rather than saying we are lucky because Myanmar, the Maldives, Africa as a continent etc. have it so much worse so we do not have to do anything to improve.
The healthcare system here is not great at all. Even the NHS in England is way better.
I still go to Europe for anything complicated, unless I can find a Western Europe continental or US American trained professional in the vicinity.
Not sure about China but that has its own other, more fundamental problems such as dictatorship and human rights abuses but the US is definitely less greedy and capitalistic then here.
From professional experience I can tell you that small business there do not operate on a minimum 60%-500% profit margin as I come across here regularly. Of course, with competition and Amazon such a margin is not realisable any longer and that is why many of the businesses complain.
They can still make a good living with a 20% profit margin but of course then the new phone every six months, the new car every year or other year, 4-6 holidays every year, buying houses to let etc. must be a thing of the past.
@centrelink: i think someone is about to build a new factory near Wellcamp Airport, Toowoomba. Thank goodness regional Australian businesses can still do some repsonding to market forces instead of just getting caught up in red tape and drinking lattes in the CBD board meetings.
@entropysbane: well said. It amazes me that people like the Greens leader were on TV today talking about voters being sick of big business doing "deals" with government. Wow, how short sighted. He thinks its better they are adversarial rather than work together to achieve suitable outcomes. I am a lowly employee but I work for big Aussie business, they have capability to get things done, pay hundreds of fellow employees reasonably well (by world standards)so they can live good middle class lifestyles, inject money into the local economy and all pay taxes.
Yet again though I've just witnessed 800 more jobs disappear from a similar business who would have been flourishing had these idiots not blocked several big projects with red tape / green tape despite these companies, full of genuine Aussies, trying to comply with the miriad of compliance rules which would have seen suitable environmental standards upheld.
Yet these Greens type of people, who don't understand how the world functions, would have you think they were just big greedy foreign investors impacted by their cuts/blocks… couldnt be further from the truth.
Had it been approved, they would have been crying out about supposed corrupt "deals", but the reality is the companies were probably crippled by red/green tape and just pleading with government to allow logic to prevail before they went broke and people lost jobs.
simply not true.
There are plenty of domestic focused websites/companies who have managed to compete if not completely dominate the market even with the "big names". Example: Trademe completely dominates ebay over in NZ purely because they offer more, dont take fees from the seller for every little thing and is completely focused on domestic sales.
We had Gumtree which which was extremely popular couple of years back, ate into ebay's sales and was on it's way to become it's own thing unfortunately it got sold off.
@GetOffMyUnicorn: agree, i went to jbhif to buy LG Q6, asked the guy there if have one ? He said we don't have in stock, went to other sales person, got same response, i requested him to atleast check your stock …and guess what !? They had 'em…no apologies no regrets .all they had was "Cant be bothered approach".bought it becase they had cheapest price at that point in time…but will be avoiding store if i am getting better price elsewhere
I think you're also missing one of the major aspects of "why we had a lot of aluminium refineries" is that we have/had large reserves of Bauxite.
I always find it interested when people want to talk about mining and natural resources but fail to be honest about that simple truth "It doesn't matter if a gold rush is on, you can't mine for gold where there is none".
As getoffmyunicorn mentioned in the below comment - capitalism. The US is a capitalist blackhole. Why do you think all major brands strive in the US? At some point time we will be sucked into it. The only way to protect ourselves from it is be like China, mass produce at most competitive rates which I highly doubt is possible with our awesome work life balance work ethics.
@radicalhaqer: "An economic and political system in which a country's trade and industry are controlled by private owners for profit, rather than by the state."
@mbck: Do I shop at Harvey Norman, in Gordon ? Yes ! Do I pay more than in other on-line store ? Yes, about 10%. Why do i do it ? Because I like the fact, that when my hard drive is about to go down on Sunday, I can pop in, buy a backup hard=drive and salvage my files on the day. Because I like to have a look at the laptop before i buy it.
For the same reason I sometimes have a coffee from the coffee van during my son's soccer game.
@Lysander: I think you summed it up much better than any other reply, although didn't go near far enough on the union problem. I've heard that alt unions are gaining popularity though - cheaper because no kickbacks going to the ALP/destructive leftwing activist campaigns like 'Getup' and able to negotiate better with management whilst being less disruptive/heavy handed/thuggish to productivity.
ERM good for you? Not sure why I need your daily schedule and your likes. But here's a thumbs up.
Not trying to nit pick here mate, but considering you mentioned below that you are employed in the Business world as a consultant, you have confused margin with mark up in your above example.
There is a big difference, and confusing the two often can make the lay person feel that a Mum and Dad small business is making more net profit than they actually are.
I see what you're saying, but I remember when the US dollar was worth twice what the AUD was. Back then, Harvey Norman wanted $100 AUD for what was worth $50 USD. Fine, that was fair enough— it was on par what it would cost if I bought it overseas, give or take. Then the AUD boomed like 10 years ago. We were actually at 1:1 for a bit. Do you think places like HN lowered their prices to reflect the stronger Aussie dollar? Nope. Not even a little. They charged 2x as much still, and things that cost $50 AUD in the US were being marketed here at $100 OR even $150 AUD by places like HN. They raked in profits, in this time, banked their sales on ignorance, that people didn't shop around, and the fact that online shopping was a relatively new and distrusted thing back then— that we had no choice but to buy from them. They never passed on any savings onto the consumers, even though the AUD was strong as heck back then. I remember that it was cheaper for me to buy a HDD overseas, and pay $30 to ship it express, than to buy the same thing from HN, since HN wanted about 100 dollars over the RRP.
Of course, overseas businesses also did this, but places like HN were the worst. Then the internet opened up, and they couldn't fleece the Australian consumer any more. When this happened, they cried over it forever, trying to enact laws to protect them, instead of changing their business model or lowering their prices, or offering better service.
HN is as greedy as everyone else, and they absolutely need a kick in the pants. They are one of the worst retailers I've ever had the displeasure of buying from. I seriously have not a whit of sympathy for them. Some other places, I do, like DJs and Myer, but again, they really need to get with the program. The market is changing, and there is nothing they can do to stop it but adapt.
Amazon will still be forced to pay tax here, and hire Australians, etc. It's not like 100% of the profits would go back to the US, and it's not like HN pours 100% of its profits back into Australia either, I'm sure.
There are still Australian manufacturers. I don't think cars is a good example, because they are expensive to make, and developing countries have the most growth in the car industry because things are cheaper there. Same with electronics etc. Once upon a time, Japan was the technological powerhouse, then it became too expensive and Made in Japan dropped off. China is heading the same way. Soon it will be Bangladesh and India. It is a pattern, and economies cycle and adapt, and this will happen here too. The industrial revolution changed the world, some for the better, some for the worse, and the internet revolution will too. There is no getting around it. It's a bit sad, I suppose, but it is the way of the world.
Honestly, I would pay more for Aus made stuff of good quality, and there are brands that still do this, and I'm not alone in this. It's like vinyl records. People still buy these, even if it is a niche market. It's not the end of everything, it's not the absolute end of boutique stores either. Things will change, but then, the world always does.
This is without doubt the longest thread I have seen in reply to a single comment.
@Lysander: I can back you up to the point of ridiculous margin. As a small business owner of discounted variety shop, I have shopped around the likes Officeworks, BigW or Target to update new trend and ideas for my store. I am shocked by the margin of these stores, would say about 1000% margin to compare with our identical item, not to mention their power of purchase as a national chain. That is why BigW is so in deep sh*t but Officeworks is another story as they have no competitor in its market.
I do mean profit margin (looked at per item and as a whole), not mark up.
However, the point is, both are ridiculous in Australia.
Cool, but profit margin rate can not exceed 100% as it is a function of how much profit is made as a percentage from the final sale price. This is a basic truth of Business.
I have no vested interest either way in Amazon, but to me it has always seemed that from a true comparison rate that if we accept that Australia has a unique cost of doing business the only way to truly determine if retail is gouging here is to compare EBITDA margin rate of Aus retail with comparable overseas retailers. I think the results may shock people. Best Buy vs JB Hi-Fi is one I would like to see.
I have seen in a really good news article earlier this year that grocery final margin in Aus (Woolworths and Coles) is higher than the global average,but never on other categories. I suspect though that clothing may be high also but I don’t believe that every category is has high as people here in Australia believe.
I think that we are caught up in this age of easily compared prices with simple comparisons, but having said that I am on this site and usually go for the best price I can find.
I did some digging on the last half financial results from the public statements of JB Hifi and Best Buy released at the end of the last half for both companies.
JB/The Good Guys posted a net margin after costs of approx 6.91% and Best Buy posted 6.12%, pretty close considering that most people believe that electronics in Aus are far more expensive proportionately than the USA.
This is very different to the position you are posting on retail in Australia. Of course some places will be taking advantage of things, but it is a very general statement to think that all are not competitive.
Yes, Australian companies have a lot of work to do on service and modern Omni Channel business changes, but if you want to compare margin rates against other countries you need to compare it accurately and not in a manner that suits what you want to believe.
But that is where the fallacy is: why should we accept that premise?
Australia does NOT have a unique cost of doing business. Why does it? Because it is remote?
So are Alaska and Hawaii and many other island states and yet the prices are not this high.
And when we start talking about digital goods, there is not transport costs.
Why is a song bought on iTunes in Australia or a game bought here so much more than buying it in the US or elsewhere when it is delivered digitally?
Also, retailers love to cite exchange rate to hike up prices but very few, if any, actually lowered their prices when the Aussie dollar was so strong - instead they happily took the large extra profit.
The only reason why there is a unique cost of business in Australia is because many retailers and shop owners are greedy and want to get rich quick instead of realising it takes sustained hard work and does not happen overnight or in a couple of years typically. Building a strong business and fortune takes time.
In relation to your other post:
And if people worked more effectively and efficient, those numbers would look differently. If there was customer service, they would look differently.
You have to look at it this way. Best Buy achieves those numbers despite having to operate on low margins, while JB Hifi achieves these despite having no customer service, being inefficient etc. merely because prices are so high.
From my personal experience (dealing with former financial controllers of JB Hifi who now work elsewhere) it is definitely an "in spite of situation" - it is a miracle that people like that have not driven the business into bankruptcy but a large factor is the fact that their margin is so big they can afford those shenanigans while BB would go bankrupt.
Australia’s costs of doing business are well known and are driven by labour costs, regulation, rents and scale. These are all things that are not always able to be influenced by a business be it retail or manufacturing.
I am not arguing Mate that we as a population need to accept these factors what I am saying is that for you or I to open a business here we would have to account for these costs in any pricing model. This is something that in the short term is escapable.
This is why if we want to compare margin your notion of margin at item transaction level is inherently flawed. The only comparison that can be accurately made is net margin after costs to see if a business is being greedy. And at this level some Aus business are comparable with overseas similar businesses.
I don’t disagree though that many business succeed despite having poor staff at management level and a flawed business strategy.
With your comment on Best Buy’s low margin at the taransactional level, you are either making an assumption or allowing for scale due to population, something that you have dismissed for Australia.
No, from my professional experience here is how it works on the example of supermarkets:
In Germany the average margin for supermarkets is between 1%-2% at most. This goes even for discounters such as Aldi. They make their money by simply selling more and by being content (due to market forces) with this margin. In fact, the margin is so cut-throat that Wal-Mart could not cut it in Germany and left altogether. And yet Aldi makes lots of money year after year and expands worldwide which shows that it is possible to make lots of money with a small margin while at the same time not ripping off your customers.
In Australia, before the expansion of Aldi, Woolworths and Coles set an arbitrarily high double digit margin they pursued. They could have been more modest but chose not to be, and that is due to mentality and market forces of course.
With Aldi's expansion (and more so if Lidl in fact does come to Australia) Woolworths and Coles were forced to lower their prices on basics, become more competitive by lowering costs and reducing margins.
They are still doing fine. What I am saying is that Woolworths and Coles do not need to make 10 billion profit a year, 5 billion is also fine as medium to long term that is better as it builds loyalty and does not make the customers feel exploited and squeezed.
Or in other words the mentality is very well demonstrated by this: I have met many people here whose dream it is to buy a house or several of them, basically paint them, and then sell them on for $50,000 more in 6 months time. I am sorry but in my book that is greedy. Sure, you could say, if someone pays, why not. But the problem is that the buyer wants to do the same thing etc. and in 5 years time the price went up by half a million.
What people expect in return for their efforts and labour bears no relation to the value they provide in many cases. And that is where the mentality problem lies (entitlement, overexpectation, overestimating of one's ability etc.).
Once the mining boom is well and truly over, Australia will have to make very significant cut-backs. And if foreign (read: Chinese) investment in the housing and agriculture market (as they bought up most by then) also slows and stops, then things will really get "fun". A lot of people will have to face hard cold reality and many will lose their houses (as has happened in other markets before - one would think people learn but obviously not).
Finally, Amazon will hopefully force businesses here to become more competitive. I am looking forward to all the "discounters" being in Australia (such as Lidl, H&M, Primark, Zaras, C&A etc.) as that will benefit the people rather than the businesses.
Agree on Supermarkets. sub 2% is the norm, but not in Australia. Woolworths and Coles have been making well in excess of this. Aldi and it's ilk have been positive in reigning this in. Amazon wont hurt either.
I also 100% agree on the notion of people chasing a quick buck in the housing market, it is not sustainable and is an exercise in greed. There are many people that feel entitled to quick easy wealth and get upset when they feel that others are gaining at their expense.
My point is that we tend to lump all Retail into one bucket as greedy when there are multiple examples of businesses that are pricing based on market demand and a fair net margin after costs in this country. Having said that guys like Gerry Harvey do themselves no favours by chasing publicity and being seen to flaunt their wealth. The Muir family are the opposite of this and their former business probably benefited from their approach.
Overall, I think that we will see some rationalization in our retail industry that will allow for more outlets to lower prices and chase the low margin high volume market. As it is in some categories that are two many retailers and not enough people in order to support the margins that the market and this website are after.
The Good Guys are as bad as any other business of the sort in Australia. Privately, the Muir family might be different but TGG are inefficient, ineffective, resisting positive systemic change etc.
Sure, there are always some decent businesses. But I can tell you in Hobart where I currently am, I could not name a single business in retail that does not have an excessive margin or mark-up. 100% seems to be the absolute minimum.
I could tell you many examples of how the government also bears a great amount of responsibility for the non-competitiveness of Australian business but that would take a long time. But as businesses and government both profit from the current situation and people are too complacent to change anything change will only come when the situation worsens and the cushy do nothing approach does not work anymore.
Amazon is hopefully the catalyst for this here.
Amazons wrath? Last time I checked most people go for the best value on this website. You clearly don't understand how economics work.
You clearly don't understand how economics work.
Of course not, I'm an engineer. You clearly don't understand what sending your money overseas does to the economy.
Back to the studies, young liberal.
I'm neither young or a liberal. I welcome Amazon just as I welcomed Ebay. Human beings have been trading for thousands of years, the way we trade has changed, that's all. If you don't want the best price then I fail to understand why you frequent ozbargain.
There is a vast difference between an economist and an engineer.
by buying an Samsung or Apple product you are already sending money overseas…
I know it's impossible to ask people to not buy the latest electronics. It's just important they know the consequences when millions do the same. I am not going to be a hypocrite.
I will try that now. I don't really want to buy from Amazon unless I absolutely have to. I've seen Amazon's wrath in France and England when I was living there for work.