Importing espresso machines

[Barry O'Speedwagon]

We're trailing more off topic, but if this is the case, then how do you explain the differences with digital distribution?

It's crazy how much more we often pay here, even for software purchased online with no physical media the markups are sometimes over double what other countries are charged. And, not only do they just try to sell these items at such wildly high prices, they geo-block people from trying to purchase them at the cheaper prices they offer elsewhere.

A classic example is Valve's Steam platform. Have a look at this site and it will quickly become apparent the extent of price gouging here. Top Rip-offs « /au « SteamPrices.com (If nothing is displayed, you may need to set the region to compare with, USA is a good start.)

When the government launched an inquiry into the matter, they subpoenaed a few of the worst offenders (Adobe, Microsoft, Apple etc.) who didn't even bother to make an appearance. Their reason why? Well if it isn't obvious enough already, they have no reason. Simply, they charge higher prices here because they can.

.

Of course they charge what the market will bear. Why do you (seem to) think this is peculiar to Australia? Take the site that you mention, change your region to US, and compare their to prices in Russia, and you'll see even more stark price differences ('ripping off' US customers). Jump on a plane, and look at the bloke next to you. Odds are that you paid a different amount for your seat, largely (but not entirely) as a function of some indicator of willingness/ability to pay. They call it yield management. And so on across multiple industries/products. The obvious alternative to price discrimination is a long-run fixed price results in lower profit and fewer total sales (i.e. some mutually agreeable transactions don't happen). If people don't think a good is worth the offer price....don't buy it. Keep buying the goods, and they'll keep charging that price.

Bringing things back on topic a little....the higher wages (which lead to our greater capacity to pay) also significantly affect our traditional retailers cost of doing business, not to mention higher interest rates, rent etc.

[brendogs]

I might register the domain www.taxsnobs.com.au

[chron]

I have always convinced myself that our problem is isolation, distance and market size,
with associated problems of importers holding excessive stock, in other words, simple economics, am I wrong?

We're trailing more off topic, but if this is the case, then how do you explain the differences with digital distribution?

It's crazy how much more we often pay here, even for software purchased online with no physical media the markups are sometimes over double what other countries are charged. And, not only do they just try to sell these items at such wildly high prices, they geo-block people from trying to purchase them at the cheaper prices they offer elsewhere.

A classic example is Valve's Steam platform. Have a look at this site and it will quickly become apparent the extent of price gouging here. Top Rip-offs « /au « SteamPrices.com (If nothing is displayed, you may need to set the region to compare with, USA is a good start.)

When the government launched an inquiry into the matter, they subpoenaed a few of the worst offenders (Adobe, Microsoft, Apple etc.) who didn't even bother to make an appearance. Their reason why? Well if it isn't obvious enough already, they have no reason. Simply, they charge higher prices here because they can.

Now whether it's companies/manufacturers like these hiking up the prices, or the local distributors, someone along the line is getting screwed. In the end it's both the consumer and retailers that suffer. The sad thing is, it's not just software and espresso machines, but nearly everything. From cameras and other electronics to alcohol and shoes, even some Australian made products are offered cheaper overseas. Nothing is safe from the dreaded Australia tax.

[Jonathon]

Importing espresso machines

Off topic but the accounting profession is no stranger to this either.

From the CPA talking about it...
http://www.cpaaustralia.com.au/cps/r...profession.pdf

To an Australian registered businesses that will pump your work into India at a fraction of the hourly rate
BOSS Increases Your Profits

That has to be better than paying the greedy hourly rates of those Australian capital city accountants.


Of course, I don't use one of these services and have a blind loyalty to a local guy that that takes my electronic files and submits them to the ATO (which could be done by anyone with an Internet connection). I would be sad to see Roger's long term small business fold under the pressure of "you can get the same off shore" mentality.

Not wanting to stray OT, but 2 things:
1) Every large firm of accountants in Australia either uses or is considering using off shore resources.
2) Your trusty accountant, as a registered tax agent, has a legal responsibility to satisfy himself that your tax matters stack up. That's not to say he's auditing your tax affairs, but he does have to perform a certain amount of checking, so couldn't be done by just anyone, on or off shore.

[mcm991]

All good in theory, but Australia is not Canada and neither is our warranty law nor taxation system the same...

The ACCC would would rapidly put the kybosh on that and chances are that more than lack of bathing attire and a swimming pool might be called upon.

The model which is legal is ex. Europe using a logistics company. It's easy enough to do and we have the business model ready to go. We'd also avoid a whole heap of Australian taxes and charges. Most Australians demand a far higher service standard. Some want it for nothing!

I'm not conviced that the ACCC would put the 'kybosh' on it. I read an article recently (I'll try to dig it up) on a ruling by the ACCC against Nestle Australia in their fight with Aldi - where Aldi was parallel importing coffee. IIRC, the ACCC told Nestle to go jump. So long as the product was clearly marked as such and consumers were able to make an informed decision, the ACCC had no issue with it. I've read other similar decisions. The 2011 Productivity Commission retail inquiry found that the arguments made by big companies in favour of price discrimination was a non starter.

Australian warranty law allows for in-house warranty offered by parallel importers. (JB Hi Fi does this on a regular basis on its own imports.) As for taxation issues, so long as duty (5% on coffee machines, I'm told) and GST is all accounted for... tax law is satisfied.... (tax experts.. please jump in if I am wrong)

As for Australians wanting a higher standard of service...... You already provide that and there is a cost associated with it.

I'm playing the devils advocate because I think this is a valuable and interesting discussion.

MCM.

[Andy]

Off topic but the accounting profession is no stranger to this either.

From the CPA talking about it...
http://www.cpaaustralia.com.au/cps/r...profession.pdf

To an Australian registered businesses that will pump your work into India at a fraction of the hourly rate
BOSS Increases Your Profits

That has to be better than paying the greedy hourly rates of those Australian capital city accountants.


Of course, I don't use one of these services and have a blind loyalty to a local guy that that takes my electronic files and submits them to the ATO (which could be done by anyone with an Internet connection). I would be sad to see Roger's long term small business fold under the pressure of "you can get the same off shore" mentality.

[Jonathon]

Importing espresso machines

Hello Jonathon,

I suspect that as an accountant, you'd be reluctant to get out of bed for the margin we make on most of our top sellers. In fact if you are running your own show, I'm pretty sure you wouldn't. We frequently put many uncharged hours into each lead only to have a sale go elsewhere- regardless of highly competitive pricing.

Just the other day, a potential interstate client discussed a machine with me for an hour. At the end of the conversation he then asked, given I live in XYZ, why should I purchase a machine from you?" I replied that it was his choice. What I wanted to say, but didn't was "Why is it that you called me, not someone in XYZ?". Who picks up the tab for that uncharged hour?

Might I suggest that it's inappropriate to speculate on topics when you have no factual information to support your argument. My accountant is doing a whole lot better than we do and I don't reckon it's isolated.

Chris

Chris

As I mentioned in a post a few days previously, I don't envy the margins made in your business. I don't doubt for one second they're tight, given your cost base and the owners' profits in your line of business are no doubt subsidized to a large extent by the lifestyle, i.e. people like you could make more money doing something else, but enjoy working in this line of business enough to put up with lower profits.

And I wasn't speculating, I have many clients in similar industries who have issues with operating costs that are significantly higher than equivalent businesses in the UK and US, yet their local customers whinge when the retail price is higher than they see advertised online. They also have to deal with local distributors who are more interested in protecting margins than expanding their business.

If your operating costs as a coffee retailer aren't high then well done, although I do acknowledge that in your specific case you had the good sense to locate your business in a sensible location, off the beaten track.

If you're not frustrated at the difficulty of attracting and retaining staff, then you're lucky.

And if you're not frustrated by the actions of at least some local distributors then I'd be truly astonished.

[Jonathon]

Importing espresso machines

We'd also avoid a whole heap of Australian taxes and charges.

And ultimately a whole load of Australian jobs as well.

[TC]

..... Warranty will be only in-house and will be stated as such....

All good in theory, but Australia is not Canada and neither is our warranty law nor taxation system the same...

The ACCC would would rapidly put the kybosh on that and chances are that more than lack of bathing attire and a swimming pool might be called upon.

The model which is legal is ex. Europe using a logistics company. It's easy enough to do and we have the business model ready to go. We'd also avoid a whole heap of Australian taxes and charges. Most Australians demand a far higher service standard. Some want it for nothing!

[mcm991]

In general terms (not coffee specific) we are noticing similarities between Canada 15 years ago and Australia today.

Canada too has a relatively small population and very large distances between population centres and lots of very small markets in between. Canadian business had to learn much earlier how to survive with a 500 pound gorilla (USA) living next door. The nimble ones did but some did not.

At the retail end, the smart ones innovated and are thriving today - picking up market share from the ones that failed. A lot of very hard work was done at the retail level and I have great respect for the guys at the coal face.

If there was any finger pointing to be done what we found (and are finding here) is the fat and inefficiencies are at the importer and distribution end. At some point this becomes an existential problem and that forces innovation. Again, I stress, these comments are not coffee specific.

As I mentioned previously, in a market where an arbitrage exists, it will be filled.

It would not surprise me if a company with deep pockets, a strong online presence and a well developed marketing strategy targeting the local market here- will offer high end appliances sourced offshore. They will have an Australian plug and and English manual. They will be sold as parallel imports and will have a proper tax invoice. Warranty will be only in-house and will be stated as such. No expert advice available nor offered. ( or something close to this)

Then the tide will be out and we will see who is swimming naked.

MCM.

[Fresh_Coffee]

Well said Chris.

Jonathan, accountant or not your post here is just another personal opinion from a commentator looking in from the outside. If you had been watching what has been happening in espresso machine business here in OZ, you would have noted that the selling prices of many popular espresso machines in this country have fallen markedly from where they were 2 to 3 years ago as our exchange rate strengthened significantly, and businesses adjust/ed to the change in doing busiess due to the influence of modern marketing (ie internet).

The effect of those has been quite real, prices have fallen, and anything else frankly is none of your business as you are not IN the equipment business and last time I checked the professions of accountancy and coffee equipment importing had absolutely nothing to do with eachother.

Londinium machines as far as I understand are only sold direct, so I cant see that importing one of those has anything to do with anything in this thread which concerns people importing machines through the back door into markets where the various equipment manufacturers already have established networks of imprters & agents, and the equipment is configured for the market with a system of warranty and back up service to help the clients.

So yes, lets do have some consistency in argument.

EDIT and declaring commercial interest: My company imports and distributes and sells a range of BFC / Diadema Junior and Unico Splendor semi commercial machines and we have been reducing their selling prices steadily over the last 2 years. The savings we have made from a combination of having a much better import exchange rate, & better rates of shipping (looking around for better deals as well as buying larger volumes) have been passed on in spades meaning, we sell more units to make the same margins as we used to. So atleast in the case of my business, we have been putting our money where our mouth is in so far as this thread is concerned. Our Diadema machines are selling at pretty much euro parity pricing, configured for Oz with the back up required at hundreds of dollars less than they used to.

Despite that, making sales isnt getting any easier as the economy slows and the level of aggression grows both in the competition as well as in the client base.

[TC]

Hello Jonathon,

I suspect that as an accountant, you'd be reluctant to get out of bed for the margin we make on most of our top sellers. In fact if you are running your own show, I'm pretty sure you wouldn't. We frequently put many uncharged hours into each lead only to have a sale go elsewhere- regardless of highly competitive pricing.

Just the other day, a potential interstate client discussed a machine with me for an hour. At the end of the conversation he then asked, given I live in XYZ, why should I purchase a machine from you?" I replied that it was his choice. What I wanted to say, but didn't was "Why is it that you called me, not someone in XYZ?". Who picks up the tab for that uncharged hour?

Might I suggest that it's inappropriate to speculate on topics when you have no factual information to support your argument. My accountant is doing a whole lot better than we do and I don't reckon it's isolated.

Chris

[Jonathon]

Importing espresso machines

As an accountant I see that the problem is quite simply 2 things:
Our retail costs (rent, local taxes and salaries, including the owner's profits) are simply higher than equivalent costs in UK or US; and
Our middlemen (local distributors) make too much of a margin, have done so for years and even more so since the Aussie dollar strengthened and they don't want to give it up.

Talk of market size is a furphy when in relation to retailers, the market size in Sydney or Melbourne is a lot bigger than most cities in the US or Europe. Ditto shipping costs, if you're paying high shipping costs these days you're a bad negotiator.

Am I the only person to find it ironic and amusing that this thread is active at the same time another thread is about how the owner of this site is eagerly awaiting his Londinium? Where are the comments on the Londinium thread about paying gst on a $2,500 machine, or how it's going need adjusting ti stop it running hot, or whether their AU/NZ electricals are going to burn your house down?

Let's have some consistency in argument.

[Barry O'Speedwagon]

Domestic research indicates that Australians will pay more to source locally. However, that premium is shrinking at an alarming rate.

How much of a premium are you willing to pay ? 10%? 30%? 50%? 100%? more?

How often have you required warranty service for any appliance / household goods that you bought in the last 10 years? Personally, I can't remember ever needing any. Now, if a salesman offers to sell me an extended warranty when I buy something, I ask instead how much of a discount I can get if I get no warranty at all.

MCM.

MCM,

Welcome and thanks for your post. The premium in the extract from your quote above conflates two related, but separate, issues (buying from a 'local' and 'service'). To me, the relevant premium is for service. And sure, most home appliances don't need a lot, but coffee machines are not a TV set. I fully agree that the size of the premium can mean that buying o/s is a very sensible choice in some cases.

[chokkidog]

Hi MCM,

Welcome to Australia and CS!

Not quite sure what your point is.
I have no expertise in international economics or trade.
What I do know is that there are only 22.5 million people in Australia.
In Europe there are 739 million. In North America there 528 million people. A combined total of 1.2 billon.
That's a combined market more than 57 times the size of ours.

The cost of shipping one container might be $3000 but how much is 57 containers going to cost to move around
Europe and North America?

If a manufacturer is only going to ship a couple of pallets at a time to Australia, how much extra premium and costs
will they have to pay to get them into shared containers?
Globally, trade is not yet on a level playing field, nor will ever be, in my ignorant opinion.

I have always convinced myself that our problem is isolation, distance and market size,
with associated problems of importers holding excessive stock, in other words, simple economics, am I wrong?