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."


Comments

    croc of shit!

      Exactly. Don't listen to Gerry.
      Think of it this way - only 3% of retail purchases made by Australians were made online. Of that 3%, only 1/5th to max. 1/2 of that is made up of purchases made via offshore online retailers. Now consider that this only affects those purchases under $1k because those above already pay tax.

      So how small does this make all retail purchases? Perhaps 1%? Less?

      And Gerry is trying to convince us that somehow this will cause retailers to shut down, and jobs lost?

      BULL.

      I've worked for two business mentioned below...margins are low in games and over heads are hi. Companies need to get beter at what they do like Greg Says. So shop around what ever, just dont come into my store when you import something asking for help when you got it else where $10 cheaper and ask me to fix your problem. Bad luck pay for the survice...this has happend to me 9 times today alone. Buy aussie = keep stores n' jobs or dont, ask bob ehydteheyfh from india to help get your psp to work..

        I've worked for EB and aside from anyone spewing toxic waste directly into the ocean there aren't many "more evil" models to base a company on that I've seen.

        I agree with most of the comments here. Where does the money go? Not into the hands of the employees who work at the stores, and not into delivering great, friendly, and consistent service.

        Have you tried returning a game anywhere lately? It's impossible. Are you constantly assaulted by Trade & Save and extended warranty junk like you're a drooling moron? Yes.

        Where does the money go? Into the fat pay cheques of the owners, and the companies that make the games and give ridiculous prices to the local arms and distributors.

        Stuff those guys. They employ a couple Australians, sure. And how about the people who are selling from their backyards? They're self employed and actually earning their money by providing good service at a price that doesn't break the bank. Where's the TV interviews for them?

        God this stuff makes me angry.

    How many Australian manufacturing jobs were lost because Harvey Norman, Myer and the like chose to stock cheaper foreign imports rather than locally made products?

    Now that consumers are choosing to do exactly the same thing with their retailers that Mr Harvey et al did with their suppliers, they suddenly expect us to turn around and have sympathy for them?

      You're on fire today man. Couldn't agree more.

      He's one of Australia's most public benificiaries of free market competition, now condemning the same principles which have made him so wealthy, what an asshole.

      Might I also add: http://thingsboganslike.com/2010/12/13/202-gerry-harvey/

      I want to marry your brain.

      That was great!

      I just wish that there'd been an interview for you to slam him with that question.

      It looks like I'm just the next in line to say: what an excellent and well made comment, Braaains!

      “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.”

      ...no, sucker, you just don't make as much money as you've always done in the past. I hope your empire comes crashing down to the ground, you sitting on top of the rubble, crying your eyes out.

      This. So very much this.

      Gerry Harvey et al scream hysterically about a fair go (and "Australian jobs") when it suits them, but otherwise would do anything to cut costs - including buying cheap stock from overseas. Goodbye Australian manufacturing sector.

      I know it's been said but wow. Good comment mate. Awesome point.

      Just had to say that.

    When the wind of change blows, some build walls, others build windmills

    I can't believe you quoted Harvey's 'for the good of the country line' - the guy is a hyprocrite.

    As Braaains said... I don't recall Gerry Harvey calling for protection of the Australian manufacturing industry when he could source cheaper goods overseas.

      It doesn't even make sense. I'm pretty sure the cost of foreign-purchased products is in no way dependent on the Australian retail sector.

      Unless there is some secret cabal of diffuse online retailers scheming to destroy Australia's retail sector so they can jack up prices and no one will be able to do anything about it! Ahhhh hahahaha!
      ... except open a retail store.

      There really is nothing they can do about it.

      They can't add 10% GST to imports for a personal nature because what is the 'service' being applied. Overseas sellers have to pay their own tax on sales. GST gets applied to larger purchases (such as a car or laptop) as they enter the country because they carry such high resale value.

      The biggest problem here is, if they add 10% to imported games, they're still ~40% cheaper than the retail price here. If markup is only 25%, who is getting shafted? Australian consumers are.

      Nothing to stop a friend from sending you a game from overseas with 'gift' on the customs declaration to bypass the tax either.

      Retailers need to put pressure on game distributors in Australia to keep up with current pricing. Games have been far cheaper ever since the US$ near matched the AUS$, but none of these changes were reflected in retail costs here.

        Well the GST is the GOODS and Services Tax, so in that sense they can (and do) apply it to goods, not just services.

        But as has already been mentioned, it's completely impractical to implement. You'd have to open every single parcel coming into Australia, figure out if it's a purchase or a gift or a replacement for a previous faulty purchase etc, work out the value, send a bill to the recipient, and then chase after the people who don't pay on time.

        And how do they work out the value anyway? Say you buy something from the US and it turns up 3 weeks later with an invoice in US dollars do they calculate the GST based on the "offical" exchange rate, or the actual rate you got on your credit card, which is different from the official rate and may probably varies from card to card. And do they calculate it based on the rate at the time of sale or the time of arrival? Surely they could only legally do it based on what you actually paid, which means they'd have to find out what card you used (Visa, Mastercard, Amex, whatever) then go back and find out what exchange rate they were giving back on the invoice date. It's a ludicrous idea.

          There is already a well established method of calculating duty & GST based on the set rate on the day of export from the exporting country. It is applied to all shipments greater than equivalent of A$1000 cost, excluding freight.
          The problem is it costs more to collect than is received for low value shipments, which is why the collection limit is set at A$1000.

    If Harvey Norman closed down we'd probably be better off

      But if Hardly Normals closed down, where would we buy our overpriced and outdated pc equipment from?!

        *applause*
        I wouldn't even shop there if I didn't have a free gift card, ugh. I've still got around $17 on it.

    Woolworths and Coles' sales are down this year too. That means everyone MUST be buying their groceries online from overseas!
    Even if a GST is added, people will still import and send their money to overseas markets. Retailers like Harvey Norman need to deal with it and stop threatening to cut staff jobs. Give customers better value for their money.

    “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.”

    as i said yesterday, i can order from Gamestop or EB america's online store cheaper than i can the Australian one and wanna know the kicker there all owned by the same conglomorate

    as for harvey norman if he sold anything that was even competitive with somewhere else then maybe he'd have some justification in all this he's the biggest rort there is

      and its much like australian companys to complain for regulation when they start losing money but when they start charging us more for there issues they have no problem with it.

      like in victoria we get to pay for the installation of smart power meters, if the company actually thought they would save them money they would have installed them themselves long ago but instead they got the govt to mandate it and then charge the consumer

    I don't have much sympathy for the "higher overheads" argument when I don't necessarily benefit from the services those overheads pay for.

    If I am happy to have my goods delivered from a warehouse in a cheap area by mail order, why should I care how high CBD rents are? And if I am getting my products by mail order from an Australian company, why aren't they passing those savings on to me?

    What a croc of sh*t Greg Stock. You used to work for EB games in the past. Your current staff includes people such as Martin (Ex Nintendo). You guys have had a corporate mentality of sucking out from the end consumer to keep your pockets happy. You are in a franchise system that does that same. Get the franchisee's to pay a franchise fees, put them in a shopping centre with high rents, get them to buy stock from your head office and regulate the prices to sell. What is the difference between you and all the other bigger guys? Slave driving your franchisee's and eating your own cake are we?

      +1 Spoken for truth.
      Gametraders are as bad as both their US and UK competitors. Their franchisees get pwned by their own head office and the staff in turn get reamed by the same franchisees. This then permeates through to the consumer who stands no chance of seeing anything close to value for money. My advice; buy online, buy online, buy online.

    I very rarely watch TV, but I was over my mates folks house the other week, and every adbreak had an advert for Harvey Norman.

    Every. Single. Adbreak.

    Maybe they could cut the advertising budgets down a little, and pass on savings that way...

    Brick & Mortar, Aussie jobs etc etc blah blach... why do I have to pay a 200% mark up on steam?

    Getting ripped off has nothing to do with BS like "many mouths to feed", why do big retailers like GAME in the UK charge tons less than Aus stores?
    They have higher taxes and cost in the UK yet they charge a ton less!!!

    And BTW, if others can sell for less and you don't want to, too BAD!

    It is called Capitalism, get over it!

      Capitalism was a sweet game.

    Who will have to implement the GST with online purchases? If the seller has too then there is a real possibility that they choose not to deliver to Australia anymore and if Customs have to do it when first entering Australia then it would be a nightmare for customs workers considering that 10 of the same products could have 10 different prices where one would be slugged higher GST and another lower.

    Harvey Norman is expensive for everything, $400 bucks for a lamp that anyone with DIY skills could knock up for less then $50, point is that Shopping has always been about finding the bargain and saving money but going back 10-20 years ago we had no choice but to spend our money in Australian stores. I hate it when they try to play the "it will hurt jobs" argument and all other scare tactics people use when their side has absolutely no support.

      The federal government has been very carefully staying quiet on whether they want to extend the GST or not. (Methinks after the dissonance with public opinion on wikileaks they're being cautious)

      However.

      They've said outright that, regardless of the merits, it's never going to happen because it's entirely impractical, and would probably cost more to administer than it would raise in taxes. (and not change the basic fact that online shopping is still cheaper)

    The more this guy talks, the more I hear "wahh wahh, mummy (the government) my outdated, archaic retail model isn't making me as much money as I should be getting, make the bad people go away"

    Seriously, Gerry Harvey, on behalf of all aussies: SHUT UP

    On a side note - I'm glad GameTraders is doing well - but why did they close down their Geelong and Melbourne CBD stores?? :(

    As a Geelong resident who works in Melbourne, the closure of these stores has removed them from my retail options - which is a pity cuz they had a good range of classic games

      Same at Eastland. They did have to contend with JB, Game and EB Games within 50m though.

      They didn't have much stock, and I reckon 1/3 of the stock was old SNES/64 games.

      http://www.gog.com/en/frontpage/

      This website will hopefully satisfy your need for classic gaming.

        I know this is off topic but thanks for the link man!

        This is because once again the franchisor had put the franchisee in line of fire (high rents, over the top franchise fees).

    Moved here from the states.

    Australians are getting shafted on electronics all across the board. Why the hell should they ever want to shop at HN, which has higher prices than all its local competitors?

      I once read an explanation (it was actually regarding why we get shafted on the price of cars, but it applies across the board really) of this. Which was that the US is a high-volume, low-margin market, while Australia, being smaller, is the opposite. I.e. they sell more units in the US, so they can afford to sell them at narrower margins.

      To me, this argument is bullshit. I say sell at the same margin, and accept the fact that this, being a smaller market, will result in a smaller profit. Don't try to gouge us with massively inflated prices just to bring your profits here closer to those you make in larger countries.

        You forget that businesses don't actually care about people, only their money. They are out to make as much money as possible.

        In a more perfect version of this world it would work, but alas it is not.

        Wages here are also much higher than overseas for retail jobs, which probably ads to the cost.

        your on fire braains with all the comments you said. stupid greedy pigs.

        Yes but you forget that the minimum wage in the U.S is around half of what ours is. It's no surprise that cars, games, electronics are nearly double the price too. The retailers follow the RRP price tag of $109.95 in order to make money according to our wage and our cost of living (food,amenities,bills etc.) It has nothing to do with population.

        In no way do i support or even like Gerry Harvey, but i think the real argument he's trying to convey is that Australians/Consumers are buying from an overseas market and getting the prices of that market at our wage which means it is cheaper, ultimately cutting out the middle man (HN)and therefore he is having a cry.

          Difference in minimum wage doesn't account for anywhere near the price hikes we see here. Minimum wage in the USA is something like $7.25 an hour, while here it's about $14.35. So it's almost exactly double here (interestingly enough, our unemployment rate is also barely half theirs).

          At that rate, EB probably only have to sell about 1 game an hour for the difference in price to cover the difference in wages. Now obviously it's not that simple, there are other differences like superannuation etc, and other people like delivery drivers also getting paid along the supply chain. But they're also selling a hell of a lot more than 1 game an hour.

          Same with cars. A US$40,000 car costs $68000 here. Now I understand paying a bit more due to differences like import tariffs, taxes, etc. But almost 75% more? I don't think care salesmen and truck drivers get paid that much. If they do then I'm in the wrong job.

            I think you may have misunderstood. I'm not saying that the prices are set relative to the wage of everybody involved in the process of getting the game to the store, merely the market of the said nation. This is why American's do not import games from Australia. High game price (AUS). Low wage (US) comparatively. It doesn't make sense. Hence why Australian retailers import goods. Sony, Samsung, Apple etc. So when the product is "localized", (classified, Quality control etc.) the price is also set by Sony, Microsoft, Nintendo etc. as the RRP for the respected market. The margin's are not huge. Retailers in Australia do not buy it for the same price as the retailers in America. Click on this link to understand a breakdown of what a game costs. 2:40 onwards. http://www.gametrailers.com/video/episode-111-pach-attack/64278

        I understand that sentiment, as I'm very familiar with the differences of market. However, we're not talking about a minor mark-up.

        At this point in time, we're looking at an equal dollar value. That means AUS prices on a single game are being marked up so high that the AUS price is double or more the cost of identical US products.

        The majority of these games are not localised in any fashion, as the platforms are near-identical. The majority of these games are produced outside of the country. There's no way to cut it that ends up with double cost on individual games.

          Yes in a perfect world it should work based on dollar value. But hypothetically speaking. Say Australia's wage was $7.25AUD/hr. There would be no way we'd be paying $99.95AUD for a game. It would be $50AUD. The industry just would not survive. Same with car's. The issue here is that the middle man has been cut out, and the consumer does not have to pick up the slack for all the costs related to it. It's the manufactures who set the bar, they made the product after all. The retailers are just re-sellers for convenience sake. However now this is changing with people looking to buy from overseas. Which is what this article stipulates and reinforces my point.

    What a load of bull. In the US, I can buy a new release game for about US$50-$60 from a company like EB or Gamestop, and then ship it over here for less than $10. This brings the total to still less than $60-$70. That is up to AUD$40 less than we're paying at the retailer over here, but includes all the taxes and tariffs we're paying to the US government. Even if you then throw 10% GST on top of that, it still comes up short on what we're having to pay here in Australia if we go to a "brick-and-mortar" game store.

    When will these game companies grow some balls and just admit they're overcharging us for games, either deliberately or as a result of the distributors, and don't like being undercut by reasonably-priced competitors from overseas?

    We're sick of the prices here in the retailers, so we go elsewhere. We have that option now. In this day and age, companies really do have to compete in a global market. We've been overcharged for years, and retailers have come to accept that as the status quo. This is simply the result of that no longer being the only option.

    So this means that the big stores want an ideal world where online stores are charged GST just the same, and that we can walk into Harvey Norman or JB and have them match the price of an online store, right? Isn't that what they;re saying? They once the GST is applied, they'll start matching and being competitive with online prices?

    This is all a bunch of bull. The only thing they are worried about is making less money. That is all they care about.

    'The right thing to do'?? Yeah, coming from a guy whose working conditions failed the workchoices fairness test as if workchoices laws weren't bad enough. The man is a billionare and was a great business mind of the last centry but with film and digital cameras, this is simply a new evolved step in shopping that isn't going away unless they adapt.
    Plus Harvey norman have no idea when it comes to games, they always have three year old titles still sitting there at release date prices. You'd think for such a big piece of the market that harvey norman would look at gaming a little more seriously. EB used to be great but try getting them to match a price, its a slogan but it's like pulling teeth and their stuff is always overprices. Big W has good prices but new titles are always late to the shelves, JB is pretty good but still the old internet is half price and UNCENSORED! Good to throw in to the old R rating debate while we're at it.
    And go agree with BRAINNS, yeah harvey normal doesn't care about australian jobs, great point man, I wish someone could say that to his face and see what answer he would come up with.
    And one last point, I've been shipping stuff from overseas for getting on a decade and the try price for some reason is never declared, it costs the shipper less to ship it with a lower value declared so good luck putting the GST on it. The governments just going to do what they do best, stall and make out like they're on the case when they are doing nothing just like the R rating.

    “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.”

    Greg is living in a dream world. As if the retailer won't pass on that cost?

    Australian retail charges way above everywhere. I've lived in London, Paris, Tokyo and LA- and all of those places, which we always get told are expensive cities- all of them are much cheaper when it comes to consumer products to here- it's like everything here has a 20-30% premium.

    When will Harvey Norman's and other Computer Game retailers maintain a stock of older games for all platforms at a reasonable price, (i.e. discounted relative to the age of the game) also how does he suggest that iTunes Applications are impacting the in-store sales and costing HIM money?

    I must say that although I certainly don't agree with the big CEO moneybags here in any real way, I am quite appalled that the general message I'm seeing in a lot of these posts here are: "As long as I get cheaper games I don't give an absolute shit about the people whose livelihoods are tied to ordinary retail."

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