Why Big Aussie Businesses Fail Selling Online

It's not hard to see how large Australian businesses remain delusional about online sales: most people looking at them can't recognise the simple truth. Consumers usually buy products at the cheapest possible price. That's actually all you need to know.

Picture by R Walker

Flying back from Melbourne on Sunday night, I was reading the Australian Financial Review on the plane. I enjoy the AFR — it offers good writing and in-depth research, even if its business-first world view is somewhat divergent from my own. But it's hard to escape the conclusion that its view is also sometimes hopelessly out of touch.

Unusually, I can link to the specific article that inspired this view — 'Land of plenty online'. The AFR has a paywall that blocks most of its content from non-paying subscribers, but this particularly article is freely available. It can absolutely set those rules if it wishes, but the very decision to restrict access in a world filled with free content is rather symbolic of how it approaches business and how it reports this issue. (It's also why I only read the whole paper when I get a free copy during a flight.)

'Land of plenty online' examines challenges that local retailers (especially those listed on the Australian Stock Exchange) face in an effectively global marketplace. It mentions, in passing, price competition from overseas retailers, referring to listed giants such as JB Hi-Fi and Harvey Norman. But it never once embraces the obvious truth of this space: that for a huge proportion of physical goods, buying from offshore is massively cheaper than buying locally, which is why we do that rather than hitting local stores.

Not just slightly cheaper but — as we established last week — a lot cheaper than simply a 10 per cent GST. And in the case of purely digital goods such as music and movies, it seems hyper-evident that you need convenience and a low price to even compete with torrent-based piracy, which costs us nothing at all in bank account terms, whatever the ethical considerations.

If you have invested your life and your energy into physical retailing, I can understand that this a depressing development. But there is no point in being an ostrich. Markets change frequently. If you don't change as well, you're already obsolete. So get relevant, or get out.


Comments

    I'm amazed that the ABC Store has no digital sales capacity and hardly bothers to push its catalog of audio or video product to iTunes or other etailera with any regularity or reliability.

    Overall I think our media content producers fell asleep at the wheel five years ago.

      They were never awake to begin with...

      This is a very good point, BBC has been doing exactly this with its iPlayer and such. How have ABC fallen behind when their iview service is so good.

        To be honest, I don't really get why everyone raves over iView so much. I mean, it's better than nothing, and it's certainly better than any of the other channels' online offerings, but the picture quality is terrible, at only 360p (for reference, SD is 480p). For comparison, in the US, the online streaming services for most channels show at least 720p.

          I like its resolution because my crappy connection can handle it without any buffering issues. I play it on my HD 40" TV and if I'm far enough away, I hardly even notice the poor picture quality.

          Not in this country - SD is 576i.

    Yup - if I'm buying online I'm generally going for the lowest price. It's rare that AU stores can compete so I'll look at them but 9 times out of 10 I'm going straight back to Hong Kong, The UK or the US to make my purchase.

    Not only cheaper - now that they lost the ground already - they must offer something that overseas companies can't - out of top of my head:
    - service and warranty --> free returns - if Amazon can do for my books here, why local can't?
    - free the postage -- local postage in UK and US is mainly free - what's so expensive here in AU that we can mirror them?
    - fast postage - 5-10 business days for postage won't bring any advantage against overseas companies.

      What's really sad is that often, not only can I buy something cheaper from the UK, the delivery charge from the UK to Australia is less than what I'd be paying for local delivery.

        And as if to illustrate your point, I was looking for some dimmerable CFL bulbs for my lounge. I came across a prominent online Australian retailer who is selling them for $41.80 each. Further down the page I found a reputable UK retailer selling exactly the same bulbs for £8.75 each ($13.27 equiv), an incredible 314% difference!!! It's unclear to me whether the issue is down to greed, ignorance, laziness or just treating customers with contempt. Regardless, the retailers can save their sob stories and until they start to offer a range of quality goods at a reasonable price and good customer service, my hard-earned dollars will be going overseas and helping to keep Aussie Post ticking over.

        Frickin' postage. I reckon it costs about 3 times as much to send stuff AU->UK than the other way around. I just can't work it out.

          Try using the Dutch KLM website booking a return flight from Amsterdam to Brisbane. Make sure you have your country set as Holland. Then set your country to Australia and book a return flight from Brisbane to Amsterdam. There's about $500 difference. Both way have a stopover in Singapore. A rip-off if there was ever one.

      Retailers need to re-focus on their customers, and on how to make the most of their key strengths: Service and Stock.
      They have to move away from offering commodities - to offering "complete" packages with goods & services that keep the customer coming back for more. The ideal point that a retailer should aim for is to be able to provide a lifestyle to their customer.
      For example - just imagine if Harvey Norman or your Apple Store learnt how to sell a complete package e.g:
      for secondary school kids incl.: notebook, desk, chair, iPod, iTunes card, printer + scanner, NBN subscription - with bonus classes on how to use the web to research school projects, and stay safe online (on interest-free, monthly payment terms)
      for small businesses: smart phone, notebook, phone plan, mobile broadband plan, carry case, accounting software - with bonus classes on how to use smart phones & accounting software (on interest-free, monthly payment terms)
      While it's a fundamental rule that when you shop for something, you can only choose 2 out of 3 ways you get it: Good, Fast, and/or Cheap - anyone offering something that gets as close as possible to all 3 is going to be a winner.
      Online retailers tend to be on the Good & Cheap - which leaves IRL retailers the Good & Fast end of the spectrum to work with... but, too many are forced (particularly in bad economic times) to gravitate to the Fast & Cheap instead.
      Fast & Cheap is not a solution, though: it only creates rubbish & waste that costs even more money for consumers, retailers, and taxpayers in the long run (and creates bad economic times).
      Mind you - I think the economists should stop blaming "poor consumer spending" for the state of the economy when it's the other way around. People won't be able to spend more money unless they earn more money... and we need to use our minds (not our mines) to come up with more ways to earn it.

    Also, most of the Aussie retail giants have TERRIBLE online stores with appalling navigation and dreadful use behaviors. If they can't grasp that UI is important, no wonder they can't make a dollar online.

      It's odd - for a country that's supposedly young, dynamic and the very model of a cutting edge western society, online presence in general is probably 5yrs behind the UK and US. I can hardly bear to use most sites.

    Yeah, often the price is good but the cost of postage kills it. The thing is, they think we are stupid enough to believe we are saving money, when in fact they are trying to recoup cost by inflating the postage in the first place. If Gerry Harvey could get this mega profits for the share holders bullshit out of his head, he might just be able to increase sales and still make mega bucks, because he would increase sales via on line shopping.

      Ah, but it's not just Australian e-tailers that play the postage/freight rip-off scam you know. i am wondering if the e-tailers just do it to Australians - anyone have any info about that? i noticed that when buying items from the USofA, China, Hong Kong that an item may be bought for .99 cents with $60.00 postage - have a look at eBay or Alibaba (buying from China)

    I'm pretty disappointed with the online stores here in Australia. I went to buy a book off the Collins Bookstore website and was horrified to discover that the book was going to cost me double what it was on Book Depository, then I was also going to have to pay $6 postage and it was going to take the same amount of time to get here as it was from the UK. Why would I even bother!?

    How can it be cheaper to buy clothing in the US and have it flown here than bought here directly when they're both probably made in India or Turkey? The costs to the retailer in both cases are comparable.

    The 25% appreciation in the AUD over the last couple of years hasn't been passed on by those retailers who import their goods. They're quite happy to pretend that their stuff still costs them the same as it did a couple of years back and stick it to us for even more profits. Unfortunately the public isn't that stupid and has seen how much cheaper the products are from overseas so decided to cut out the greedy middle men.

    And before businesses moan about their overheads, they had those overheads prior to the AUD appreciation too so it doesn't wash that prices for products sourced from overseas haven't gotten cheaper.

    Oh how low our expectations of journalists has fallen, when someone considers the AFR to have "in-depth" research it is surely a sad reflection on our society.

    Yesterday I had to buy a DSL router for my parents, and I was preferencing to Harvey Norman, simply because my CC gives be gift cards from them in it's rewards scheme. But obviously, I'm not going to pay the ridiculous ticket prices that they want for their hardware. So, the idea was to get the cheapest price using static ice or google shopping, then go into HN and ask them to beat it (or match it). HN seem to have no problem doing this every time (they might complain that it's below cost or some rubbish, but they'll still do it). You're only option with places like HN is to go in, even though they've got an online shopping site, there's no way to negotiate a decent price, you'd have to pay the usual insane prices. So why would anyone bother using it, there's simply no point. My purchase was a TP-Link 8960 modem router, paid $62 but their ticket price was an absolutely insane $169.95.

      +1

      Many times i have mentioned this - (mostly WP and OzB forums). HN has the most haggle-able staffs, far more compared to traditional stores like TGG, or DJ.

    The common problems I find with the online store portals offered by the larger Australian Retail Companies include: only stocking a fraction of their product range; the online prices not matching what is on the shelf; store sales and online sales not matching; not providing enough information - especially model numbers; not providing stock levels (or that information is very unreliable); not making enough use of being able to pick up purchases directly from a local store, and delivery times that suggest a lack of urgency. If they don't take their online shop seriously, why should we?

    I do find lots of small Aussie companies - mainly in niche products and computer parts suppliers, who do seem to get this stuff right.

    We often hear that Australia's high prices are down to our high minimum wage levels which, although clearly high by comparison with other developed countries, tell us little about relative labour
    costs faced by retail employers. Limited information in submissions for the recent productivity commission report suggests that labour rates for retail employees in certain larger listed Australian firms are significantly higher than for those employed by comparable retailers in countries such as the United
    States and the United Kingdom . On the other hand, the Commission’s own analysis of wages and broader measures of labour costs , as well as evidence presented by the ACTU , would indicate that Australian *employment costs* are similar (for example compared with the United States) or significantly lower than many developed countries (for example the United Kingdom and several European countries), when expressed in common currency or purchasing power adjusted terms. In short, the "higher wages"argument seems a convenient mistruth to appease the, generally speaking, ignorant Australian public.

    Sure I'll gladly support local stores when they're knowledgeable and can be somewhat competitive on price but with the growing trend of shops being filled with salesmen who barely know a thing about their product, why would I want to give my money to them? Instead it's much easier and convenient to look at reviews for a product myself while avoiding the bias that most shops like to push towards certain brands.

      +1

      If I have to go online to figure out the specs that will best suit my needs for my next purchase, I might as well figure out a reasonable price for it too.

      Heck, I might even avoid having to drive to a major retailer, find a park, and, as if in a live-action version of a Romero movie, to carve a path through throngs of people who are oblivious to the fact that there is more to life than spending all your leisure time in shopping centres, and just buy it online.

      But if I do that, I will probably miss the thrill of chasing a salesperson down to ask them a simple question about if they have a specific model in stock, to have them scratch their heads and feed me a line (some of my favourites being "no, we don't stock that", "we used to stock it", and "we should be getting a delivery some time in the next week or so, check back then") before having to beat them down intellectually to get them to check their stock level on the computer and to give me a reasonable idea of when they can actually get it in their store. Only to repeat the process at least once more, and having to wait weeks or months to get something.

      Here's a guide for any Australian retailer who wants a real online retail presence:
      - Make your website simple
      - Organise your product categories properly
      - Have a functional search feature
      - Make shipping reasonable, or better yet, free
      - Stop making people sign up to your site, confirm membership, enter address and payment details to 'surprise' them with exorbitant shipping prices. Try using a shipping flat-rate or a shipping quote method at least.
      - List all of your products online

      Even big international online retailers are not that user friendly/easy to navigate (amazon-bookdepository, ebay, dealextreme etc.), but most Australian online shopfronts stand out as being exceptionally bad.

      tl;dr? That's fine, I just needed to get all that off my chest anyway.

        It's not as easy as you think setting up all that.. Between supplier systems, our POS system, B2B ordering, franchisees and dealing with distributors, it is a tangled web, so to speak.

    The GST does play a role in reducing Australian companies' ability to compete but it doesn't explain how the same item purchased online from overseas can cost up to a third of what Australian consumers will pay for it in a retail store. Nike shoes for example are ridiculously cheaper to buy from an online retailer in the US than they are to buy from a Footlocker store in your local shopping centre. Why is that?? It's not greed because a lot of our retailers are buckling at the moment so what is it? Labour costs? Rents? Something else?

      Men's clothing in Australia is now cut only for the more delicate-framed so I've found myself ordering from overseas simply to get shirts and jeans that fit. What was labelled an 'L' in 2000 is now a 'XXXL'.
      I've spoken to retail staff who say their stock orderers are completely out of touch with their customers. Others say it's because all the sizes are determined by the factories in Asia - why doesn't make sense as the European and US stores (of the same brands) must order from the same factories and yet get completely different cuts.

        Funny you say that, I buy clothes from the UK and US because I can't find a refreshment Australian retailer who sells tall slim clothes at a reasonable price.

          I'm trying to work out the pre-autocorrect version of "refreshment".

          For my tall but stocky frame the domestic "solution" is to buy skater pants ("clown"pants) so I can get my legs into them past the knees. Shirts need to be a shapeless block of cotton from Lowe's otherwise the sleeves are so narrow I literally cannot get my wrists past the elbow. At least in the US I'm still an "M" for most clothing :-) !!

          I see some haberdashers are now targetting Australian males with free-shipping from the US.

            Yeah I noticed this too. Many American and UK sites are now pimping to Australians by offering free-shipping. I wonder if it has to do with the assumption that we have more money then their compatriots due to our better economy. Or maybe just trying to get to a bigger audience and that more and more Australians are now buying online.

      We have some of the highest retail rents in the world. I think that contributes a lot to the problem. Even more so then labour costs. Also, centre managers try to bleed their renters dry and make it stupidly hard for them when they try to get out or sell the business. I have seen this countless times and how it can ruin families. I will have no sympathy when Westfield finally goes bust because people can't afford to run a business in there. They are the worst of the money-grubbing bas***ds.

    23million people.. says it all. America 320m+ and 62m for UK. Same old debate.

      It's not just numbers, it's attitude. France = 65m and completely woeful internet services, and a business/government culture that strenuously avoids email. Although I was thinking that if the internet disappeared then nothing in France would change.

    Wages do have something to do with it since min wage in UK is just over 6 pounds ( around $9) compared to $15 in AUS. Add on the higher rent and it certainly adds pressure to retailers. Aus Post doesn't seem to be prepared to do the deals that Royal Mail does with some retailers but this might be changing as the public starts commenting on this.

    The biggest problem with reading comments in debates such as these are that the only people on here are the internet savvy crowd, the retail savvy crowd are too busy out there busting their arses trying to pay their bills. So you don't get both sides of the argument.

    For a retailer to import in large quantities to stock shelves they don't only pay 10% GSt, they often pay Duties, then a Formal Declaration Fee, and then they pay a customs broker to tell them how much GST and duty to pay.
    It works out adding about 25% to the cost of items, check out what book depository says about shipping large orders to Australia: http://www.bookdepository.com/help/topic/HelpId/44/FAQs#helpContent

    As for postage, Australia Post has agreements with other members of the Universal Postal Union that offers a flat rate to forward international mail once it gets here, so it evens out the cost of large volumes of mail coming straight into the large cities against the low volumes going to the regional areas.
    This then combined with discount rates that UK and US services can negotiate for their large amounts of outgoing mail (not to mention special rates for printed matter in the UK) means sending a book from London to Alice Springs is cheaper than sending that same book from Sydney.

    And while some reports will say that the "cost of labour" is comparable between Aus and the USA, bear in mind that Amazon worked out it was cheaper to hire paramedics to be on hand on hot days to treat staff that pass out rather than install air conditioners.
    http://articles.latimes.com/2011/oct/01/business/la-fi-1001-amazon-allentown-20111001

    The reality is that any widget has the same cost no matter where you get it from, the only difference is who is absorbing that cost for you to make a saving on your receipt.

      Dude - you can call me thick and ignorance.

      But the bottom line is this: if some other countries and some other companies in the world can do cheaper prices, cheaper&faster postages, better services, then answer me this: why our local stores/companies can't? Then - comes the next question - if our local companies can't compete with the cheaper prices and postages of others - is it customers faults to save money and go with the cheaps?

      Are you seriously saying that the crowd that is 'internet savvy' don't bust their asses too?

        I think what they meant to say is that the retail savvy crowd (i.e. the retailers, I'm assuming..?) are busy busting their incorporated asses to bust the collective assess of their staff and their customer-base, as well as the environment, local and state governments to make the biggest profit margin on a second-rate product (embodied product here, that is to say, packaging, service, support etc.).

        If I am one of the 'internet-savvy' crowd, it's only because I could never seem to get more than one of any of the following at any IRL store: customer service, product support, product information, the product in stock, or honesty.
        So, I shop online now. Big retailers have shot themselves in the foot on this one, and there's no going back now.

    Retailers need to lift their game but local distributors are just as much part of the problem. When are you going to tackle that subject Lifehacker? It's easy to throw out one of these popular articles and enjoy the comments but how about actually digging into the causes?

      Exactly. When you realise that you're not going to get decent warranty support from local distributors of global brands then why pay the local overhead costs?

    JB HiFi - HDMI cable = $69
    Aussie retailer on ebay - HDMI cable = $4.95 + free postage
    Come on malb, this is price gouging, especially when every test I have read from authoritative sources indicates there is NO quality difference. Australian consumers have been royally ripped off for years, and finally they are getting wise to it.

    A huge annoyance for me with many Aussie online stores is not being told the cost of delivery till after you get to the checkout process. If I cannot find the total price, including delivery, before I go to the checkout, I know its going to be too dear so I cancel. The other gripe I have is having to register and sign up for an account, sometimes before you can even put something in your basket. And then be told it's out of stock. [Looking at you Officeworks]. Why is that necessary? I just want to buy something, and I'm paying before I get the goods.

    +1

    Aussie websites are abysmal compared to overseas offerings. Considering that the internet is a dynamic, international community, it almost seems like there's a concerted effort to keep Aussie websites ugly and broken.

    how can aussie retailers compete with the 1billion poor and starving people in china. It's that simple, look at airtasker or dropbox, u can't find anyone to do a super easy job for less than $25 an hr in Australia. In china, $5/hr job, and your flooded with experianced, skilled and motivated applicants.

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