Prices slide as Aussie shoppers demand better deals

Rachel Wells
November 19, 2012
The Age

Australian retail prices for hundreds of products, from clothing to cosmetics, have dropped by as much as 50 per cent in recent years, due to greater global price transparency brought about by a boom in online shopping.

While Australian shoppers remain disgruntled about the sizeable price gap that often exists between local and overseas stores, consumers are paying significantly less for many international brands than they were a year or more ago.

Australian retail price reductions: how they’ve changed

Myer, David Jones, JB Hi-Fi and online cosmetics retailer, Adore Beauty, are among hundreds of retailers who have been negotiating with suppliers to lower wholesale prices to enable them to compete on price with overseas websites, while minimising the impact on margins.

The retailers do not claim to have always achieved parity with their overseas counterparts but they say the gap is closing on many items.

“The growth in online has brought transparency not just to consumers but to us as retailers,” says David Jones’ group executive of merchandise, Donna Player. “That has given us greater ability to go back and negotiate with suppliers.”

Ms Player says the department store commenced a program of “global cost price harmonisation” at the end of last year and has negotiated wholesale price reductions of up to 50 per cent across hundreds of international brands and thousands of products.

Rival department store Myer has undergone a similar process and says it has achieved price reductions of up to 40 per cent, primarily across cosmetics, clothing and homewares.

Retail industry fellow at Deakin University, Steve Ogden-Barnes, says the greater transparency brought about by window shopping online means retailers’ motivation for negotiating better wholesale prices has shifted.

“In the past retailers have negotiated firmly with suppliers primarily to increase profit margins,” he says. “Now those negotiations often have a primary focus of reducing prices to prevent losing sales overseas.”

International cosmetics brands have been among the most pro-active in lowering local wholesale prices. Adore Beauty founder, Kate Morris, says those that don’t risk hemorrhaging local sales.

“I believe that regional pricing is now unsustainable and global pricing is inevitable,” says Ms Morris, who in the past year has negotiated price reductions of up to 40 per cent across several cosmetics brands.

Dr Ogden-Barnes disagrees. He says while there is scope for more international brands to improve their business model efficiencies to lower wholesale prices, there will always be a greater cost of doing business in Australia.

“The holy grail of us being as cheap as anywhere else is never going to be realised… We will simply never be the cheapest place to buy from,” he says.

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