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Articles from INDUSTRY ASSOCIATIONS (259 Articles)

The strengthening Australian dollar is pushing local consumers to buy branded watch and jewellery overseas for much lower prices
The strengthening Australian dollar is pushing local consumers to buy branded watch and jewellery overseas for much lower prices

Branded product losers in rise of online retail

Bricks-and-mortar retailers who sell branded product are those most likely to suffer in the face of the boom in online retail, according to the Australia Institute. 
Key findings from the independent public policy think tank’s ‘The rise and rise of online retail’ suggested that branded products could be purchased for much lower prices overseas.

A men’s Seiko 5 Sports Automatic watch model, for example, retailed for $395 when sold by Seiko Australia, $119.99 when sold by Timewares Hong Kong on eBay and $118.00 when sold by Watchcultures Singapore on eBay, according to the report.

Similarly, the paper revealed that high-end luxury retailer Tiffany charges Australian shoppers $1,500 for a pair of platinum diamond earrings that costs $1,000 to buy in America.

Australia Institute executive director Richard Denniss said brands that have maintained artificial price differences in Australia have the most to lose as the strong Australian dollar pushes buyers online.

“The losers of the current restructuring will be the traditional retailers who do not add enough value to justify higher prices,” Denniss said.

Conversely, independent retailers that offer personalised service and unique, handmade products stand to gain.

“Thankfully, there will always be opportunities for creative small retailers offering an enhanced shopping experience,” Denniss said.

He advised domestic retailers to enhance the shopping experience by incorporating other services such as repair work and customisation of product.

“Some shoppers will always highly value [in-person] advice and service and the opportunity to serendipitously happen upon a purchase that wasn’t ‘Googled’ in advance,” Denniss said.

The Australia Institute research found that rather than online shopping being predominant in one age group, there were high levels of usage among all ages.
89 per cent of 18 to 34-year-olds shopped sometimes to all the time compared with 86 per cent of 35- to 55-year-olds and 72 per cent of 55-year-olds and over.

Denniss said the statistics demonstrated the importance of domestic retailers maintaining their own online presence, even through an eBay shop.

Above all however, creativity and innovation are key if domestic retailers want to stay competitive.

“Just as digital cameras have decimated photo development labs, so too will online retail transform the way Australians shop. Domestic retailers will need to continue to innovate how they do business to stay competitive,” Denniss said.

Mark-ups a source of consumer dissatisfaction

A survey carried out in the research paper showed that consumers believed a retail mark-up of 35 per cent to be “fair”.

The group polled included both men and women, and people from different income brackets.

Interestingly, the paper found that DVDs and music had the lowest mark-up of 40 per cent – yet that was still higher than the average perception that a fair mark-up should be 35 per cent.

Mark-ups are often higher in bricks-and-mortar stores due to steep rents – costs that online retailers save on.

“Most Australians who buy a $100 shirt or a $1,000 refrigerator believe they are buying an expensive material good, when, in fact, they are buying relatively inexpensive material products but paying a high price for the ‘service’ of retail,” the research paper stated.

As the disparity between store and online prices grows more pronounced, the report predicted that consumers are likely to compromise on ‘retail service’ to get lower product prices.

"While some Australians will continue in their willingness to pay for this expensive service, it is highly likely that a substantial percentage of the population will believe that they are better off purchasing the material product while avoiding the retail service," the report forecast.

More reading:
Online jewellery sales set to soar
Internet is here to stay
Online GST battle gains momentum

Kunming Diamonds

Your Say

An e-tailers perspective
As a large online jeweller we have sold all sorts of branded products over the years; most recently with a range of swiss watches. At first we were of the belief that branded products would help create credibility for our store when in reality the low margins to compete with asian stores selling at near cost just wasn’t worth our time and effort. Since choosing to dump most branded products, I can say that it has done little to alter our bottom line. In fact, the renewed focus on proven sellers with good profits (and no branding) has only served to increase our profits. I can’t see why this lesson would be any different to a bricks-and-mortar store. Branded jewellery works well on everyday items with low value, but for expensive items more and more shoppers in future will simply google for the best price after using your shop as the showroom. A bricks-and-mortar jewellery store is unlikely to go the way of your local video store and become redundant. But the way they operate must change in order for price to become a secondary consideration. A focus on brands won’t help with that.
posted by Anthony Hansen on June 01, 2011 09:07

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Peter W Beck
Duraflex Group Australia
Vital Diamonds International
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