Gaming And The GST: A Problem With No Solution?

The issue of GST and online purchases has exploded into the mainstream as of late, as more and more consumers head online to shop. But what does this mean for gaming? We speak to Greg Stock, General Manager at GameTraders about the issue.

“Yes, you might have to pay more,” claimed Gerry Harvey, playing the quintessential bull in a china shop, “but it’s the right thing to do. You’ll pay a lot more if we lose jobs and retailers close down.”

The GST debate as it relates to the rapid increase of online shopping in Australia is big news. And the PR disaster zone that was the retail coalition’s demand that government apply the GST to online purchases has opened a can of worms that not even Gerry Harvey can close.

The dilemma is relatively simple: while retailers in Australia have to bear the brunt of the Goods and Services Tax, online retailers selling from overseas don’t – and Gerry Harvey et al are taking issue with that. But the attempts of retail to force the Australian government to add GST to imports has backfired – drawing attention to the fact that Australians pay far more at retail for practically everything.

Sadly, this is hardly news to Australian gamers, who have long complained about the price of video games in this country. We wanted to discuss this fresh debate from a gaming context, so we called up Greg Stock, the General Manager of GameTraders to get his perspective on the subject -are retailers right in this instance? Or are consumers once again being asked to bear the burden of a dying retail sector.

“You know,” sighs Greg, when asked about online shopping, “like any other retailer, it affects us. I’m reading a report right now, and 31% of customers are now buying their games online – we’re concerned about how this will effect business.”

Despite retail’s recent slump, GameTraders, as a company, are doing pretty well – opening three new stores in Sydney towards the tail end of last year. Greg attributes this to GameTraders’ willingness to adapt to changing consumer demands.

“Retail is changing, and retailers need to change with the times,” claims Greg. “Like it or not, online is the way of the future and we’re trying to grow our online model to adjust for that.

“Personally, I’ve even changed my shopping habits, and I’m in my 40s! The consumer is changing and retailers will have to appeal to an online audience if they want to survive.”

Greg Stock and GameTraders are willing to adapt to an evolving market, and that attitude has brought them success – but regardless he still maintains that the GST rules as they stand unfairly burden Australian retailers.

“I honestly think that GST should be applied to products brought overseas – but would that change anything? Would that change prices? Probably not. The cost of the GST is absorbed by the retailer, so applying it to online purchases wouldn’t change a thing.”

That seems to be the argument of consumers, who have railed dramatically against the Gerry Harveys of the world. There is a public perception that retailers are simply being greedy – they already pay over the odds for goods purchased in Australia. Why should they pay more for goods bought overseas?

“Gerry Harvey and the big guns, they have a point – but consumers don’t really see the bigger picture. Consumers think that because they pay more for a product our margins must be huge, but they’re not. In video games the margins is 25% on a full priced game – if you’re lucky.”

We protested – if that’s the case, if the margins are so low, where does all the money go? Australians are clearly paying over the odds for the same products being sold cheaper overseas.

“Well, the cost difference comes from the fact that retailers, particularly the EBs of the world, have a lot of mouths to feed. The consumer doesn’t always realise that. Your brick and mortar stores have a lot of overheads, but some of these online stores have none. Some of these guys are running their stores from their own backyards.”

So yes, the bigger stores like your Harvey Normans have more at stake here, but catering to a niche market, in a more focused manner, does GameTraders have a better shot at manoeuvring this retail slump?

“Yes, I think so,” claims Greg. “We’re better positioned because we can diversify. In that way I enjoy being smaller, because it makes it easier to quickly change our business model and our business strategies. We’re online and that’s going to be an increasingly important part of our business. The store model will still exist, but online is important.”

But what is the end game of this mass move to online shopping? We asked Greg Stock what adjustments would have to be made if traditional retail is to survive long term.

“Well, we think that the Westfields of the world will have to adjust. But people will still want to shop in stores. We believe that smart operators will continue to succeed. That’s what we’ve seen in our business at least.”

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