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The Amazon invasion begins?

24 November 2017

NZ retailers are begging for relief from the effects of offshore online shopping sites.

They claim that the failure of government to effectively levy GST on these purchases has put local sellers at a huge disadvantage. Of course we (the informed) know that this is not really true.

What does put the local Kiwi retailer at a huge disadvantage is the way the world is changing and the fact that now, customers have an unprecedented choice of products and an ability to shop around for the best prices around the world -- all from the comfort and convenience of their phone or computer keyboard.

Any NZ retailer who thinks that levying a paltry 15% GST on personal imports is going to revive their fortunes is living in a dream-world and will come down to earth with a very big "thud" when reality bites.

NZ retailers may be about to get another nasty shock as the Australian arm of comes online... allegedly today, Black Friday.

I say "may", because it's unclear whether Amazon will be servicing the Kiwi marketplace from its Australian presence.

If Amazon does consider NZ to be part of its Australian arm's territory and if they can keep shipping costs under control it would seem that they'll probably be charging GST on the items they send to us from across the ditch -- but odds are that the prices will be lower than we're used to paying through local sources.

How will local retailers respond to this I wonder?

Will they demand an extra tax so as to restore price parity and keep them in business?

Sorry Mr Kiwi retailer, but it's time you all woke up to the fact that we now live in a global economy. The distinction between "local" and "overseas" has become blurred and eventually it'll probably disappear completely -- eventually.

I seem to recall that New Zealand has been a leader in the push to remove barriers and encourage free trade with our partners. Well guess what, this is just another form of that free trade, except this time it generally benefits companies operating outside NZ, not those operating inside it.

However, you can't have your cake and eat it too. Either you're pro-free trade or you're against it. You can't be selective in how you enforce free trade principles. And, to add one more cliché to the list: those who live by the sword shall die by the sword.

We started this push for tariff-free trade and now we have to live with the consequences.

Amazon is pretty smart and their offerings will be very attractive to most people.

Unlike AliExpress and the raft of other online outlets, Amazon has some really strict consumer protection rules and that means people feel far less trepidation when making even big-ticket purchases. If it doesn't work or isn't what was advertised, Amazon has no hesitation in reversing the transaction and giving customers their money back. You won't get that guarantee from TradeMe or AliExpress.

So let's watch and see what happens over the coming months. Even if Amazon Australia doesn't consider NZ to be within its scope of coverage to start with, I'm expecting that they will reach out to us in the fairly near future and that's when local retailers will really start squealing with pain.

Oh... but don't blame the local retailers -- blame NZ's wildly distorted property market.

Why do Kiwi retailers have to mark up products by 100% or more before they go on their shelves?

Simple... the cost of property means they're paying enormous overheads in terms of leases or rentals. That money has to be recovered somewhere -- and it comes from you, the consumer by way of these massive markups. Never confuse markup with profit -- most retailers aren't making nearly as much profit as the landlords to who they must fork over enormous amounts of money each month.

When so much of NZ's wealth is tied up in non-productive sectors such as property it becomes easy to see why our actual productivity is so low when compared to other OECD nations. What a shame that most of our politicians have their own little portfolio of property investments such that they're not deliberately going to "fix" the problem because of the personal hurt they'd feel in doing so.

So to Amazon I say: Bring it on!

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