Monthly Archives: August 2013

Changed Habits

What Are You Buying On-Line These Days?

There’s a bit of discussion about how soon consumers in Australia are going to head back to local retailers once they realise and feel the impact of the Australia Dollar having gone down.

David Jones boss Paul Zahra said today that he didn’t think consumers would fully register that their online purchases from, say, US rival Nordstrom, had gone up in price until they paid their credit card.
How this plays out for Australian retailers over the medium term will be interesting to watch, assuming the Australian dollar remains at this level or even falls further.

If, after the election, the government decides to impose a 10 per cent GST on online purchases under $1000, the competition game between Australian and offshore retailers will become more interesting. (The GST imposition probably isn’t close. It costs the Treasury coffers $700 million to $1 billion a year – depending whose numbers you use – in forgone tax but the cost of administration doesn’t make it compelling yet.

It certainly wouldn’t provide a cure-all for retailers and the particularly challenged premium department stores. If you exclude the small improvement in the first quarter of 2012-2013, David Jones has been experiencing quarterly sales declines for almost two years.

Now, I don’t know about you, but I was never really a shopper at David Jones or Myer/Grace Brothers so all of this is actually not an area I would dare to claim great knowledge. It seems to me that the impact on retailing of the parity period which we can roughly say was 2010-2013 was that it also coincided with the explosion of on-line shopping. The argument has always run that if the dollar wasn’t so high, the customers would head back to retailers but clearly this isn’t happening and Paul Zahra is clutching at straws as to explaining why they’re not coming back… or haven’t comeback “yet.”

Which reminds one of course of the “yet” dialogue in ‘High Fidelity’. If I said to you that you haven’t felt the pain of the lower Aussie Dollar in your credit card statement ….’yet’ … do you think that will drive you to shop at David Jones? I mean, really…

Jokes aside, the reason I didn’t shop at David Jones before was probably because they didn’t have what I wanted. it seems what I want – judging from my recent purchase is guitar gizmos which I know are not sold at David Jones or Myer – are simply not on the shelves of Australian retailers.

Take this little valve Pre-amp that arrived from China today. It’s a 12AX7 valve preamp for a guitar which I got for $40 including postage. I don’t know if it’s any good yet (there’s that word!) because I haven’t plugged it in, but it goes without saying nobody stocks it in Australia; nobody probably even knows about it in Australia, let alone a buyer; and there probably isn’t a really big market for it in Australia. I can say two more things about it that are certain. 1)  It’s disposable income I didn’t spend at David Jones or Myer or an Australian musical instrument retailer. 2) The opportunity cost of spending it on-line with some weird electronics goods seller in ShenZen China had nothing to do with GST considerations. Zilch. Nada. Absolutely none.

I suspect the real problem for retailers is that they can’t get specialist enough to compete with the truly weird and bizarre on-line sellers. I mean, let’s say on a whim I wanted a Derek Jeter rookie baseball card from 1992. Or a hand signed LP copy of Van Halen I by the guys in the band. Or one of Robert Fripp’s guitars. There’s no way a retailer in Australia is going to be able to meet that kind of demand from a random individual and simultaneously stock and sell enough of what sells to a wider, more general market, to keep trading.

And that’s just me being idiosyncratic. I imagine many other people have experienced the same thing. That they can find parts and things and bits and bobs that were so hard to get through traditional retail that they’d given up – and suddenly the options are there. The world is getting weirder and wilder in its demands and there’s not a shot in hell of keeping up with this change in demand.

So I don’t think it’s really a problem of relative pricing that is driving this move to on-line shopping. It’s actually a qualitative shift in people’s shopping preferences and they’re not coming back any time soon.

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