All The Ways Amazon's Geoblock Will Affect Aussie Shoppers

Image: Getty

Online retail giant Amazon’s decision to block Australian shoppers from its US website has prompted an outpouring of anger from its customers. However, economic statistics indicate the actual value of online purchased products entering Australia from international marketplaces is relatively low. While some shoppers will be disappointed by Amazon’s decision, others will simply find ways around the geoblock.

The federal government has been under pressure from legacy retailers like Gerry Harvey, who have called for an end to the GST exemption on overseas online purchases worth less than $1000.

Federal Treasurer Scott Morrison last year introduced legislation for this measure, arguing it will “establish a level playing field for our domestic retailers”. From July 1, 2018, GST will apply to all overseas online purchases.

The Australian Retailers Association has proposed a “vendor collection model” under which foreign retailers would collect the GST at the time of purchase and then pay it to the Australian Taxation Office.

But the fact is that these measures won’t level the playing field. Overseas online prices for many items are so low that that even if GST were added, they would still be far cheaper than they are in Australia. For example, a recent search showed Levi’s 510 jeans for $115 at Myer, compared with $74.85 in the United States; and a Uniqlo Women’s ultralight down jacket for $200 here, versus $154.10 over there.

In 2017 Australians spent an estimated $24.2 billion online. Yet this is just 7.8% of the amount spent at bricks-and-mortar shops. And more than 80% of online spending was through domestic retailers, which are subject to GST.

With only $4.84 billion spent via overseas retailers, a quick calculation indicates that adding 10% GST to those purchases would have added $484 million to the government’s coffers last year.

Why has Amazon blocked Australia?

Amazon has blamed the new GST rules for its decision to bar Australian shoppers, arguing that the vendor collection model would create significant operational difficulties:

While we regret any inconvenience this may cause customers, we have had to assess the workability of the legislation as a global business with multiple international sites.

Yet rival online seller eBay seems to have managed to implement the vendor collection model without undue trouble. It looks as if Amazon, which generated almost US$180 billion in sales last year, views the Australian market as just too small to justify the hassle. In fact, one study has estimated that Amazon will only gain a 16% share of Australian online retail sales by 2025.

Amazon’s view on Australia’s red tape may well be right. Modelling by Australia Post suggests that if the postal service were tasked with assessing and collecting the GST on international deliveries, it would cost almost $900 million to collect $300 million in revenue.

Who are the winners and losers?

As mentioned above, Amazon probably won’t suffer much from cutting loose its relatively small Australian customer base. But what about the customers themselves, and Amazon’s competitors?

When Amazon Australia (not to be confused with the now geoblocked US site) launched in December 2017, just in time for the Christmas rush, 3.8 million Australians visited the site during that month alone. But this is well short of the 11 million Australian shoppers who visit eBay each month.

Amazon’s withdrawal will undoubtedly benefit eBay and other sites such as Alibaba, which look set to attract shoppers who are still hungry for an international bargain.

While some dedicated fans of Amazon’s US site are understandably annoyed, most customers simply won’t notice the difference. Customers will be automatically directed to Amazon’s domestic offering, which claims to stock more than 60 million products.

For Australia’s traditional retailers, the playing field still isn’t really “level”, even without access to Amazon US. Don’t expect everyone to suddenly start banging down Harvey Norman’s doors come July 1. In reality the impact will be minimal.

How to get around the geoblock

For the very determined shopper who demands access to Amazon US, there are naturally ways around geoblocking technology, such as re-shipping services, freight forwarders, and VPNs.

The Beginner's Guide To VPNs

Today we're arming you with everything you need to know to understand and use virtual private networks.

Read more

The ConversationBut given that the average online shopping basket was worth $145 in 2017, it seems like a lot of trouble to go to just to avoid paying $14.50.

Gary Mortimer, Associate Professor in Marketing and International Business, Queensland University of Technology

This article was originally published on The Conversation.


Comments

    I don't see how a VPN would solve the problem, they still need to ship it to Australia. As for parcel forwarding sites, in my experience, they are still way too expensive and Australia Post's service is one of the worst, both in price and customer support.

    The issue is not paying the GST. It’s that many items can not be purchased in Australia at all. Many books for example are only available from Amazon’s US or UK stores. We now can’t buy them at all.

    The problem is caused by the government’s choice of a vendor collection model. Amazon has said too hard. I suspect many other smaller retailers will also just stop shipping to Australia. We have completely lost access to 400 million Amazon products. But we are likely to lose access to many other products as well.

    And what happens if a vendor does ship to Australia but refuses to collect GST for the government? It can cost hundreds of dollars to process a customs clearance. Will you have to do this for a $10 item? Haven’t seen anything about how this works yet.

      Scott Morrison and Mr. Harvey havenow contributed majorly to the amount of pirating in Australia. The top reason that people pirate content is lack of availability, and without the American and UK Amazon, there are going to be a whole lot of people who will start using pirating services such as The Pirate Bay to get the content they would have otherwise obtained legally.

    Didn't Australia post conclude that under the vendor model the cost impact would be minimal?
    As members of the EU are looking at changing import duties and levies Amazon could be kicking up a big stink here to try dissuade other countries from following suit.

    As someone who works in the purchasing department of a library, this is really going to affect our offering. For us, it's not about "avoiding paying $14.50". It's about the fact that a large portion of books we need to supply our patrons with are ONLY available through Amazon US, Amazon Japan or Amazon Germany. A lot of small print and self published books are only available on these sites, and not on eBay or anywhere else for that matter. Amazon started out as an online bookstore, and it is still the thing they are best at, offering books you just can't get anywhere else.

    This started off as an interesting article, he even points out price difference being a reason people shop overseas, I would have assumed that most people shop overseas because of price and selection
    It's the last paragraph, his summary that trashes the whole lot, people are not upest because they have to pay gst, they are upset because of the price we have to pay here in Oz for the same thing in the US. I have just bought a new phone case and wallet from Amazon, if I bought them locally it would have been twice as much!
    Why are prices here so much more? This seems like the biggest issue that needs to be sorted, rather than complaining about consumers shopping overseas

    When I first got here in '99 the lack of availability, cost and more importantly the quality of the stuff that was available left my gob well and truly smacked. This was apparently the result of years and years of AU retailers being able to control what suppliers were allowed to import what and enforce rules that meant that retailers could only buy through a limited amount of 'approved' wholesalers and other retailers at a VAST markup and of course they passed that on with their own huge markups. Then the internet came along and showed them up for exactly what they were, a cartel (by the way Gerry, charges being laid against the financial institutions owners, personally, for cartel behaviour today - just sayin'.). Trouble is, that genie isn't going back in the bottle we have tasted the good stuff, and it costs less and the quality is better, no more European cast offs or out of season fashion, end of run electronics etc etc we want more of the good stuff and someone will come up with a sensible solution to get it to us from another country. Buy a warehouse and get a USPS contract, got to be a winner right?

Join the discussion!

Trending Stories Right Now