Distributors and local vendor operations, selling into the Australian consumer electronics and IT industry are facing a bleak future as retailers are forced to source goods from parallel importers as opposed to local distributors.
It’s also tipped that the upcoming Productivity Commission Investigation of online retailing could recommend that parallel importing be approved after Borders and Angus & Robertson were placed into voluntary administration due in part, to the high cost of sourcing goods in Australia Vs directly importing cheaper books from overseas.
Grey or parallel importing which allows domestic retailers to buy stock significantly cheaper from overseas suppliers Vs what distributors can sell the same goods for in Australia is “inevitable” said several attendees at the retail forum.
The head of the Photo Marketing Association Peter Rose, who challenged the Federal Government’s Senator Stephen Conroy on the issue, admitted parallel importing may be the only way for retailers in the future who are selling digital cameras and accessories to go if they are to remain competitive.
“It’s getting tough out there for retailers and the only way that they could survive is by selling parrallel imported goods” Rose said.
Several speakers said that the issue of parallel importing was not isolated to the consumer electronics or IT industries.
Both Senator Stephen Conroy, Minister for Broadband, Communications and the Digital Economy and Senator Nick Sherry (Minister for Small Business) admitted that parallel importing was set to impact the distribution channel in Australia as retailers moved to either, locate their online operations to countries like China, or were forced to sell goods sourced from overseas suppliers in an effort to remain competitive in Australia.
In both scenario’s local distributors are facing a bleak future.
Cameron Poolman, of Greys online told the forum that the margin difference for Australian online retailers competing up against International retailers was around 50% and that the size of the Australian population of 21.5 million was a big issue as Australian retailers had no scale when it came to purchasing goods for sale online.
Currently IT distributors operate on margins of between 3 and 10% while consumer electronics and hi fi distributors are still trying to operate on margins of between 17 and 35%. When retailer margins are added to the distributor margins consumers are being asked to pay for goods that are up to 75% more expensive than what is being offered on overseas web sites.
Another issue set to impact local distributors is the formation of a joint venture between China Post and Australia Post which will facilitate goods being delivered quickly from distributors in Asia to retailers or from online retailer based in China to a consumer in Australia.
Mark Crawford General Manager of Products and Business Development said that the landscape was changing and that parallel importing could become a big part of their business.
“The last mile is changing and we now have to change our model to facilitate the introduction of new delivery systems to suite what retailers and consumers want. Consumers are changing the last mile, they want online deliveries made at work or to a relative or at odd hours. We are now facilitating this. We are working with China Post to introduce fast efficient delivery systems so that importing from China is easy”. He said.
The conference which was attended by senior executives from Harvey Norman, Bose, Bing Lee but not Myer or David Jones heard that 72% of Australian retailers don’t currently have an online transaction capability that allows Australian consumers to purchase goods in Australia Vs from overseas retailers, and that the only way for them to compete is to quickly adopt an online model.
The forum heard that Australians by majority want to deal with known local companies as opposed to overseas entities.
Local companies that have introduced online operations are booming, the forum heard, examples given were Aussie Bum a seller of men’s swimwear. They now have over 200,000 overseas customers, while Birdnest Fashion, a retailer of fashion for girls were getting 10% growth a month and have gone from 3 employees in 2008 to 40 today.