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Coming back to Australia after living in London for 7 years was an eye opener into tariffs and duties. Typically people tend to think of London as being very expensive, which it is, but what many people don’t realize is that Sydney is comparable, and for many things, even more expensive. The main reasons for the high cost of buying general retail goods in Australia are tariffs and duties, and it appears that people are generally ignorant about what they are and why they are in place, so I thought I'd write a quick post about it, not to explain all the economics behind it, but simply to point a few things out. This ignorance about tariffs was highlighted when I recently bought my Boxee box and read the outrage on their forums about the different costs of the unit all over the world. I’ll use the boxee box as an example for the confusion.

The boxee box was initially selling for $199 USD in the US, 199 pounds in the UK, and $300 AUD in Australia, to name just 3 of the discrepancies. The boxee forums were in an uproar, as very few people seemed to understand that you can’t just sell an item at the same price all over the world. I won’t go into the economics of it all, but basically every country has it’s own set of tariff’s, duties and taxes, for example the UK has VAT, Australia the GST, then you have the government trying to protect local industries in some cases incurring additional tariffs and the like to try and "level the playing field". Then you have shipping, which is relevant to a place like Australia and last but not least you have what the local market will bear, in the case of both the UK and Australia, they are both used to paying over the odds for the majority of “luxury” items bought, and thus distributors have learnt to take advantage of this and put an additional premium on top. This has reached a point where recently I was looking to buy some climbing gear from Wild Country. Wild Country is a welsh company, that manufactures locally. Amusingly the cost of their products at discounted stores in the UK, was still ~25% more expensive then going to online stores in the US. How’s that for duties and leveraging what the market will bear?

Ofcourse the solution to this is obvious to most people, buy it where it’s cheapest and then ship it to wherever you are! In most cases, for luxury goods, that means buy it in the US. Now interestingly, in Australia, unless something costs more then $1000AUD, you can bring it into the country without any additional taxes or duties, which in effect means that once you cross a threshold of cost where the savings from buying it in America plus the cost of shipping is less then buying it locally, you’re ahead. That mark is typically at around ~$130AUD, which ofcourse means that the majority of things that most people buy would be cheaper to buy from oversea’s. Now I’m hardly the first to note this, and thus enterprising individuals have started business models around this, for example check out www.myus.com, which gives members a US address (many US stores refuse to ship internationally, supposedly due to fraud issues, more commonly because they have agreements with their suppliers who want to ensure that their local distributors have the market cornered), will repackage all parcels, stripping unnecessary packaging, and then collate a number of parcels into one shipment all for express delivery leveraging their scale to get reduced rates from various couriers. All in all I’m absolutely astounded that more Australian’s don’t buy from oversea’s, I guess it’s just the relative lack of net savvy that pervades over here that is the cause, that and concerns around getting “support” for the product you buy in the event that there is a problem.

All of this has recently started to be brought to the attention of the public as local retailers are starting to complain about being unable to compete, and there is now a campaign underway to try and lower the threshold of where duties and tariffs are applied. My advice to anyone living outside of the US, buy what you're after sooner rather then later!