Amazon pokes the Koala

Published on the 08/06/2018 | Written by Pat Pilcher


Amazon Australia

Amazon takes exception to Aussie tax changes, are Kiwis next?...

Amazon has announced that, as of July, it’ll no longer ship goods from its US site (or other non-Australian Amazon sites) to Australian consumers. Announced two years ago, New Australian GST rules targeting online retailers are also due to come into effect in July and are cited as the key reason for Amazon blocking Aussies from its US site.

The announcement has attracted the ire of Australian consumers who’ll no longer have access to the cheaper and larger range of goods compared to what is available on Amazon’s Australian site.

Australian Federal treasurer, Scott Morrison used some fair dinkum strine to describe the situation, saying that Amazon had “spat the dummy”.

Morrison was somewhat incredulous of Amazon’s announcement saying that: “I find it hard to believe that one of the world’s most technologically advanced countries in the space of more than two and a half years now say they are unable to work out a technological solution when it comes to the simple application of a sales tax on their products sold in Australia”.

“Amazon appear to have failed to consider the fact that they are not the only online retailer out there.”

He’s got a point: Several things simply don’t add up. For a start, the Australian Government had signalled tax changes two years ago. It’s fair to assume Amazon have long been aware these changes were coming.

Regardless, the tax changes were condemned by Amazon who said: “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”.

Amazon’s response may superficially appear well-reasoned if you look solely at the Australian market, but outside Australia, Amazon has been collecting taxes on behalf of governments (including New Zealand, numerous US states and Canada) for quite some time. This makes their Australian move, at best, odd.

Tax issues aside, some argue that it could be more a case of Amazon seizing on the tax issue as an excuse to ensure their Australian business isn’t cannibalised by the significantly more competitive Amazon US site.

This theory is seen by Retail NZ’s Greg Harford as a valid explanation for Amazon’s move.

“It may be that Amazon’s plan is strategic – and that the recent decision is intended to bolster its Australian operations. There’s something like 64 million products available via Amazon Australia, which is likely to be the majority of items that Australians are looking to buy. If there are other popular items, it’s likely Amazon will start to stock them on its Aussie website.”

It’s a compelling theory that looks even more credible when Amazon’s lacklustre start in the Australian market is considered. After a much-hyped launch, it was reported that there were significant Australian price disparities between Amazon and local bricks and mortar retailers, one reason for public apathy towards Amazon’s Australian business.

So will Amazon react similarly in the New Zealand market once the government starts charging GST for online purchases in October 2019?

Several factors make this unlikely. For a start, there’s no Amazon.co.nz website and they’re already collecting GST for the New Zealand government via their US site.

Should Amazon decide to block New Zealand customers from its US site, Kiwis could skirt around the block by using NZPost’s YouShop, a freight forwarding service aimed at bypassing geo-blocked shipping to New Zealand for consumers by giving them a US postal address. That said, it isn’t cheap. For a parcel weighing in at 500g and a volumetric weight of 250g, NZPost charge $17.25 for shipping. In many instances, these charges would close the price gap between Amazon’s US and Australian businesses.

Amazon also appear to have failed to consider the fact that they are not the only online retailer out there. Retailers such as Aliexpress and Banggood.com as well as EBay (who agreed to comply with Australian tax laws), and local player, Trademe are popular in New Zealand and could easily fill the gap left should Amazon block Kiwis from accessing its US site.

Longer term, there is also the not-so-insignificant matter of a public backlash. Having already been met with apathy with their Australian launch, Amazon could soon find themselves on the back foot as irate Aussies choose to shop elsewhere as a response to what potential shoppers are calling a “Amazon’s dick move” on social media.

Questions or comments...

  1. Peter McMahon

    What has also not yet been determined is what happens to the hidden raft of Australians who are currently selling goods via drop-selling arrangements globally. Only 1/3rd of Amazon’s global stock is Amazon inventory. The majority is provided on a sell-thru basis to Amazon Markets via 3rd party vendors.

    Amazon has yet to clarify if Australians will be restricted to selling their wares on Amazon.com.au, will need to duplicate their operations to accommodate a split-market model or still have access to a global market. Given that shipping and fulfilment is expensive and that margins on many dropshipped goods are very tight, there is perhaps another explanation for why Amazon wants to localise its AU operation and contain any margin damage inflicted by the GST

    Reply

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