Furniture, white goods and consumer electronics retailer, Harvey Norman has suggested it could leave Australia and setup in Hong Kong, taking other retailers with it.
CEO, Katie Page, (and wife of Gerry Harvey) of Harvey Norman Holdings (ASX: HVN) has told a business conference that many other retailers were being advised to set up in Asia, and then ship goods to Australia to avoid tariffs, GST and compliance. While Harvey Norman has considered it, as it would solve many problems, Ms Page suggested that if Harvey Norman did that, everybody else would follow.
Ms Page has again called on the government to add GST to online sales below $1,000. Consumers are currently exempt from paying GST on goods purchased overseas, if the value is less than that mark. Harvey Norman is just one of the major retailers agitating for a lower threshold. The NSW government has also echoed the view, calling for the federal government to cut the threshold down to $30. (Which is a similar policy to what the UK has).
Australian retail is in its worst state for 25 years, according to Harvey Norman, and appears to be undergoing a structural change. For many years, consumers were captive audiences to our retailers, until the internet came along and started offering products much more cheaply than local retailers could offer. Much of the blame has been laid at the feet of global manufacturers who offer Australian retailers products at higher prices than retailers in other countries. ‘Global price rationalisation’ it’s called, and now retailers are pushing back at those same manufacturers demanding the same low prices as other countries. Whether they’ll be successful or not is another issue.
Labour costs are also partly to blame. Internet retailers don’t really need sales staff, so avoid that cost entirely.
Retailers are now focused on reducing their costs, selling more products online and generally trying to differentiate themselves from online sites. Several appear to be having some success, including Noni B Limited (ASX: NBL), Super Retail Group (ASX: SUL) and The Reject Shop (ASX: TRS).
The Foolish bottom line
Australian consumers can look forward to a new era in retail shopping, thanks to changes that have been forced onto our retailers. Those that adapt should survive, while others will fall by the wayside.
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Motley Fool writer/analyst Mike King doesn’t own shares in any companies mentioned. The Motley Fool’s purpose is to help the world invest, better. Take Stock is The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it’s still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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