Target joins online rush to Asia to sidestep GST

Blair Speedy
The Australian
May 18, 2012

WESFARMERS’ discount department store Target will begin shipping goods directly from China to Australian internet shoppers by September, allowing them to avoid paying GST.

In an exclusive interview with The Australian, managing director Dene Rogers said the company was setting up pick-and-pack facilities in China, the source of “the vast majority” of its merchandise, and expected to begin shipping to Australian customers in the September quarter.

“We want to be able to offer a broad range of products with competitive pricing, and by locating in Asia we can do that . . . Typically we would have imported everything into Melbourne and sent it out from our main distribution centre, but that was relatively uneconomic,” he said.

The move to offshore shipping follows similar ventures by Myer, Harvey Norman and JB Hi-Fi, which have all set up offshore distribution facilities to allow shoppers to use GST exemptions applying to imported products costing less than $1000.

In preparation for the jump to China, Target has boosted the number of products available through its website from 6000 to 31,000 in the past six months, and plans to increase it to 60,000 by the end of next financial year.

That was below the 90,000 products currently found in the largest Target stores, Mr Rogers said, but the lower number was due to low-value items being packaged in multiples for online sales to offset shipping costs.

That meant that in-store shoppers could buy a single pair of underpants or a three-pack of the same brand, but online shoppers would buy in multiples of three.

Mr Rogers said the online product range would be expanded beyond the in-store offering, including a wider range of general merchandise and bulky products such as bicycles, which generally took up too much expensive floor space to justify selling in-store.

“We want to have everything we sell online, and then get into areas like fine jewellery, furniture, and a broader selection of cosmetics, skincare and fragrances, expanding into areas like camping over the longer term, areas that require square footage we just don’t have,” he said.

Online pricing would be in line with stores, and free home delivery options would be added to the free collect-from-store model being opened up in June, he said.

“Not all 90,000 of our products are available in every store, so there’s an incremental lift in doing click-and-collect,” he said.

By September Target plans to have doubled the size of its 3400-strong range of low-priced basic clothing and homewares sold under the Target Essentials banner, in a push to use product quality as a bulwark against the constant price deflation slashing returns across the retail sector.

“The current discussion in retail is that the lowest price wins, but I would say it’s the lowest price plus quality that wins . . . if you bought Target baby coveralls that lasted for 10 wears and they cost a slight premium to one that lasted for five wears, then the Target item is better value,” he said.

“If we’re selling something like a DVD, you have to match the price of your competitors,” but a higher price was justifiable for an item of better quality.

Backed by a marketing campaign based on the slogan “Target Tested”, the Essentials range will comprise items unaffected by seasonal demand so they won’t be discounted in clearance sales.

The number of low-and-steady prices was increasing, Mr Rogers said, but he did not plan to move to a store-wide low-pricing model.