This is why retail is in such trouble
To our surprise, we’ve discovered our youngest has terrible vision due to dud eyes. He’s proven a superlative example of the brain’s ability to work around systems failures – his parents didn’t have the slightest idea his vision was as stuffed as it is. The discovery that something was wrong was made at his 3.5 year overhaul child health check. We got a recommendation to an optometrist who was reportedly good with youngsters; and she determined the exact problem and quantified it (without using any lasers at all, which seriously disappointed me). Medicare covers the entire cost of this testing.
Neither Cathy nor myself wears or has ever worn eyeglasses (I recently complained to my doctor that my vision had deteriorated, and after testing he told me to quit bitching because my vision has dropped to 20/20), so we were lost at sea when it came to acquiring and purchasing.
With a prescription in hand we went shopping, with prices ranging from $350 to $550 for a single set of eyeglasses that will need replacing in six months. These prices seemed dramatically above what the cost ought to be; I’ve bought sunglasses before and paid between $1 and $100 a pair. “To the Internet!” I cried. And lo, the Internet said that if we were willing to wait three weeks instead of one to two, it would hand over the same kinds of vision correction devices for $90 $78; actually that was USD, so it was going to be less again. Not only that, all the stores on the interwebs had memory metal eyeglass frames, whereas the physical stores often didn’t carry that vital (in a three year old) option, hoping instead that arms that were double-hinged might be able to survive (or, given the warranties involved, perhaps even hoping they wouldn’t survive).
Australian retailers are in trouble and want GST charged on all imports into Australia, rather than with the $1000 limit that currently operates; the GST is the least of the problems with retail in Australia. And the cost of collecting GST on imports is high:
The Productivity Commission said that reducing the threshold to $100 would raise an additional $472 million, but, based on the current customs processing charges, this would cost consumers and businesses approximately $715 million.
So that’s not taxing everything, just anything where $10 of tax could be collected. An efficient way of taxing imports would be just to tax everything based on the cost of posting it into Australia; one could argue that if someone’s willing to pay $50 postage on something, the goods must be worth something more than… say $50… to them. So charging Australia Post $5 for the parcel will collect some tax on the thing that we don’t know what the price is, but can make some guesses about its value. AP will just pass on this charge to the postal services it operates with, pushing up the price of posting to Australia. People receiving gifts would be able to fill out paperwork to claim this tax back.
The 55m parcels imported into Australia below the $1000 threshold account for a guessed $5.8b of value, that’s an average of about $100/parcel. My proposal would collect… perhaps $200m, with a very low administration cost – 40% of the tax for 1% of the cost.
But none of this is going to save retail, because the problem retail has with eBusiness is that the fixed costs are so much higher. Once property prices – and rents – drop to a reasonable level, retail will have a chance. And for that to happen, many retail businesses are going to have to fail. Until then, retail is going to need a 50% markup on everything, and will continue to struggle against competitors that don’t need that margin.
Interestingly, our optometrist probably has the right model for a business – they are a service provider providing a service that can only be performed in person, with an adjunct retail business selling glasses etc, ready to mop up consumers who don’t baulk at $550 for a pair of glasses. They can justify these prices because have the right kind of warranty – two years, no question, anything happens and we’ll fix it. Accidentally drove over them? No worries, we’ll replace them. Try getting that from the intertubes.
Of course, this whole discussion assumes capital and materials mobility, and low labour mobility. If fuel costs skyrocket, or immigration becomes just a matter of getting on an aeroplane, the whole ball game changes.
Update: Ten days (six business days) after placing the order, the glasses have arrived from China. That’s right in the delivery window suggested by local providers, and half the delivery time promised by the online eyeglasses retailer we used. Everything looks great; I’ll whine if anything isn’t right, but with my limited knowledge, all seems well at the moment! On the downside, our health insurer says that we choose poorly if we wanted a refund; the cheap Internet places they pay out with want $200 for the same glasses, so screw ‘em – our out-of-pocket’s the same whichever way, and this way has less paperwork.
Walking to the train station from work, saw this big red ad – and I must admit, I think my vision is going – I think it’s degenerated to the point where it’s as good as most people’s. And perhaps I’m slightly dyslexic, but I read the ad as “Australia’s first web chicken”. Perhaps I spent too much time in NZ as a child. In fact, in looking critically at it, and recalling a 