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.

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