Soaring online sales set to hit $13.6bn in 2011

Australians will spend more than $13.6 billion online in 2011, with almost 45% of sales going to offshore online retailers, a new report reveals.

New research by PricewaterhouseCoopers and Frost & Sullivan reveals sales to offshore online retailers is estimated to hit $6 billion this year, a 25% increase on the $4.8 billion spent last year.

The report is based on a survey of 1,200 Australian and New Zealand consumers, all of whom had shopped online in the last 12 months.

According to Stuart Harker, PwC global retail and consumer advisory leader, Australia’s retail landscape is commencing a structural shift as consumers start to spend more money online.

“Large and small retailers alike are facing stronger than ever competition from digital channels, both here and overseas. Lower prices, convenience, greater product range and a growth in mobile devices are all factors fuelling online shopping,” he says.

Over the next 12 months, 86% of respondents said they would increase or at least maintain their current level of online expenditure.

While price and product range remain the key drivers of growth in overseas shopping online, less than 1% of respondents said they shopped overseas online to avoid GST.

Last week, it was revealed the Federal Government has examined the feasibility of halving the $1,000 GST-free threshold for imports.

But Yasser El-Ansary, tax counsel at the Institute of Chartered Accountants, says halving the threshold would have no major impact on Australia’s struggling retail sector.

“The key focus is that lowering the threshold will somehow coerce individuals to move away from buying online and instead drop into their local bricks-and-mortar stores,” he says.

“There are many, many flaws in that argument. Clearly, the move towards online transactions and purchasing [will continue to occur] regardless of whether GST is payable on those goods.”

“The drivers for that behavioural shift are much more to do with the current exchange rate, and the lifestyle and convenience choices that individuals make.”

El-Ansary believes the threshold is set at an appropriate level, claiming the Government should consider increasing it in the future because of the compliance burden associated with lowering it.

“[Lowering the threshold] would shift the compliance burden towards consumers, who would end up wearing the cost of that through higher prices,” he says.

“The retail sector is doing it quite tough but lowering the threshold is not the silver bullet that’s going to turn it around… It could have the effect of discouraging consumer sentiment even further.”

Brad Kitschke, a spokesperson for the Fair Imports Alliance, says the issue is that Customs hasn’t been upfront about the modeling associated with the threshold.

He also rejects El-Ansary’s claim that halving the threshold would be a “symbolic” move more than anything else.

“The Government anticipated that if the threshold was halved, it would cost $38 million to enforce, but there would be a net benefit of about $460 million. I wouldn’t label that symbolic,” he says.

Kitschke says the Fair Imports Alliance is not advocating an anti-online stance but is simply hoping to level the playing field.

“We advocate a multichannel approach… We’re more than happy for retailers to operate online but [in an environment] where overseas retailers don’t have an advantage,” he says.