Study shows most Australian shoppers won’t pay a premium just to buy local as international price comparisons bite

Customer awareness of cheap prices available on international websites has put retailers under pressure to reduce the 25% to 50% price gap between local and global prices.

A survey of over 1,000 Australian consumers by management consultants Bain & Company has found that 68% of consumers are unwilling to pay even a small premium to purchase goods from an online store. 

Just 24% of consumers are prepared to pay 5% premium to buy from Australian stores, but 31% were not willing to pay a 5% premium.

Prices for products such as books, clothing, footwear and electronics are estimated to be 25% to 50% higher than those in the US and UK, reflecting higher wholesale prices paid by local retailers, higher cost of wages and rent, and higher taxes.

The Bain & Company survey has not yet been published but SmartCompany has seen preliminary results which show that 68% of consumers say they buy the cheapest product whether it is from an Australian or international store.

The survey found that online shopping continues to increase, with the most heavily penetrated categories as travel, digital content, books and magazines.

The least heavily penetrated categories are gardening products, furniture and whitegoods.

The survey found most online shopping is at Australian websites, but the share of spend at overseas websites has increased in the past 12 months.

Almost 50% of those surveyed said they chose an overseas website rather than an Australian one for the cheaper prices while product selection and delivery were also factors. 

Bain & Company warned there are signs that online shopping may be plateauing in some categories such as footwear, hardware, clothing, toys, books and magazines.

While many of the survey respondents said that they expected to increase the amount of money spent online, this number was slightly down on survey results from the previous year. 

David Zehner, Australian retail partner at Bain & Company, warned that shopper behaviours have dramatically changed and retailers cannot afford to ignore the shift.

Zehner said the internet was not just another shop and while “online” may be the short-term priority, the future will require thinking.

Brian Walker, retail specialist at The Retail Doctor, told SmartCompany there was pressure on retailers to reduce the gap between local and global prices.   

“Yes retailers are under pressure to cut prices because there is much greater transparency but they are under even greater pressure to offer some value equation that is meaningful,” says Walker.  

“In many cases if it is just based on price they are not going to compete.

“They need to provide services such as much faster delivery service than an overseas site can provide and offering an in-store service otherwise they are simply not going to compete.

“It is a lot about retailers building their story, brand and position and taking consumers into an experience rather than a price comparison.”