AIIA takes the ‘Australian’ out of price-gouge concerns
Sock-puppetting the case for higher prices
As predicted by The Register, once the IT and related industries lumbered into motion to respond to the Australian Parliament’s inquiry into IT pricing in Australia, the rent-seeking would begin.
As has been amusingly pointed out by local publisher Crikey, some of the submissions read as if they were penned in imitation of Terry Pratchett or Douglas Adams. “Microsoft might grossly overcharge Australians, but it’s consistent and predictable gross overcharging”, Crikey notes.
However, it’s the Australian Information Industry Association that I’d like to take the blowtorch to.
Note that first word in the AIIA’s name? “Australian?” That means, among other things, that it purports to represent the interests of the industry here. And it would seem, from my simplistic standpoint, that the Australian IT industry stands to gain if international vendors are shamed into at least reducing the degree to which they soak the Australian consumer.
In short: those AIIA members in the distribution / resale business get to sell more stuff (without losing their margin) if the wholesale prices are set below the level of “make these idiots bleed”; second, as buyers of kit and software from international markets, their own costs would be reduced.
The AIIA, however, doesn’t see it that way.
Its arguments include:
Vendors won’t sell product here if they can’t gouge – to quote the submission, “The alternative … is for suppliers to only do business in more favourable markets”. In those circumstances, I guess, Australians would be forced to source their products overseas – which, of course, retailers are already complaining about.
”Business costs in Australia are between 5-10% higher than any other” - to which all El Reg will note is that consumers here are suffering 100 percent to 200 percent markups on some products.
”Some members have brought to our attention the fact that they do not set the retail price of their products.” There’s a good reason for this, which the AIIA inexplicably fails to mention: price fixing is illegal. A vendor which did – which, for example, ditched a reseller for offering products at a discount – would be exposed to action from the ACCC.
“The practice of price discrimination is a common business strategy necessary to maximize performance” - which looks somewhat like what everyone’s complaining about.
“The service infrastructure to support [consumer guarantees], while possibly only incremental, are ultimately also reflected in retail costs” - because, of course, warranty support is not offered in markets such as America.
“Vendors have also identified training and marketing costs” - which again we must presume do not exist in other markets.
“Margins applied at each point and in the case of a number of our vendors, dictated by reseller partners” - apparently the supply chain in America operates without margins. Also note the blame-shifting here, which again ignores that it’s illegal for vendors to price-fix (even if you’re only telling partners what margin they can charge).
“Importation costs due to the distance from manufacturing countries” - which is why it’s cheaper to buy something as a single item sent by mail from America, to which it travelled from China, than to buy it in Australia? As a teacher might say, “four out of ten, must try harder”.
“The price of downloads will still reflect the margins required to ensure the locally based arm of the business is able to maintain its presence in that country” - in other words, suckers, even if you download your software, we’re going to bump up the margins to subsidise the bricks-and-mortar operations.
It almost seems as if the AIIA is speaking not for local IT companies, but outfits like Intel, CSC, Microsoft, EMC, Google, IBM, Avanade and Gartner – roughly half of the AIIA’s board, actually. ®
Not only software and IT services
Have a look at clothing.
If I log into Sears in the US saying I am from the US Levi 501 jeans are $US45-$US50 (with the current exchange rates this would be around $AU44-$AU49). If I say I am from Australia the option to view and order Levi 501s from then Sears website is removed. If I search Australian sites Levi 501s are $AU110-$AU150.
In the US there are various fitting lengths In Australia there is only one length.
Levi setup "exclusive" distribution rights for an Australian company and restricts official sellers in other countries from selling on-line and shipping to Australia to protect their monopoly. I wonder what training/warranty infrastructure a clothing company needs to setup to justify 100% retail price markups?
A few years ago the parallel import laws were changed to reduce the cosy "exclusive" import license monopoly a number of companies setup to gouge the Australian consumer. I have a friend of mine who saw a niche. He was able to import a UK product from a supplier in the US and sell them in Australia to his retail customers (and make a good profit) cheaper than the "official" distributor could buy them from the UK parent company. The "oficial" distributor could only buy from the UK parent and because the volume was low they got very little discount. The US supplier was the largest customer of the UK company and got good volume discounts which they passed on to their customers (including my mate who was the largest customer of the US supplier for this particular product). He provides the warranty cover for the products he ships. He has also been known to supply the "Official" distributor when the "Official" distributor was out of stock and unable to get stock quickly from the UK company.
". . . because, of course, warranty support is not offered in markets such as America."
Chirgwin pretty much says what I scream every time I read these half-arsed 'justifications'. Almost every expensive that is blamed for the increased price is one that is paid in every other market as well. A product made in China must be shipped, have import duties paid, be transported to the distributer, be inventoried and warehoused, be ordered, processed and handled by staff for distribution, transported again to a wholesale vendor, stocked, stacked and processed again, ordered, shipped and finally sold. It must be supported by local sales and technical staff and warranties must be provided and honoured.
NOTHING in this is different between Australia and the US. There is consensus that costs associated with selling products in Australia are indeed higher than those in the US but every estimate I have seen puts that difference somewhere between 5-20%, depending on the product.
Those with vested interest never actually put figures on the extra costs they blame, merely saying things like: "market factors", which is just a way of saying: "we charge more because we can".
It's been said before, here and elsewhere but it's not just IT. I play guitar and the markups can at times be extraordinary. One particular pedal I was keen to try retails in the US for $10 (assuming parity) than in Australia. Seems completely understandable until you take into account the fact that the pedal in question is MADE IN AUSTRALIA!!! Seriously. When I can buy and Australian made product cheaper overseas than I can here (DIRECT from the manufacturer - no 'middle men',) there is something dreadfully wrong.
What this is REALLY about
is bald two-faced, double-standard, fuck-you hypocrisy on the part of every business that rips off Australian consumers with differential pricing. Their boardroom mentality, stripped of all the bullshit, is simply this:
"WE want the benefits of globalisation so WE can pay less for cheap labour by outsourcing to third-world countries. YOU lowlife, consumer plebs, however, are not entitled to the same benefits, so YOU will pay full price regardless." One rule for us, and another for them. In. Your. Face.
My response is simply to buy most of my stuff directly from Chinese drop-shipping sites like Chinavasion or TMart instead. They sell more stuff than Amazon at third-world prices to anywhere in the world, from clothing and shoes to office stationery to CDs and DVDs to electronics, and with no middleman markups.
I will not buy anything from these hypocritical thieving bastards. If they can benefit from globalisation, I can as well.