What Amazon’s Geoblock Really Means, According to Retailers

April Davis By April Davis | 05 Jun 2018

What’s the real reason behind Amazon’s decision to block Australian consumers from its international sites, and what does it mean for local retailers? E-commerce experts and online retailers share their opinions.

Last week, Amazon told Australian consumers they would no longer be able to shop on the company’s international marketplaces once new online GST laws come into place on July 1.

According to Amazon, this change has been implemented to ensure the company is compliant with Australia’s new laws, which require any business selling to Australian consumers from overseas to be GST compliant if the items are less than AUD$1,000. Additionally, any sellers that generate more than AUD$75,000 in revenue will be required to register with the Australian Taxation Office (ATO), so GST can be collected on any goods sold online by an international retailer.

Since making the announcement, Australian consumers have attacked the move, taking to social media to complain about the lack of choice available on the Australian version of the site and the much higher prices.

“My daughter wanted a jumper from a TV show, and it’s more than double the price on the Australian site, even after taking into consideration extra costs if I buy it from America,” one user wrote.

However, The National Retail Association is happy with the move, as the organisation believes local businesses will now be able to operate on a level playing field.

“Amazon’s announcement demonstrates that Australian retailers are more than competitive with international rivals when operating on a level playing field,” Dominique Lamb, the CEO of NRA said.

“Large overseas retailers have been receiving an unfair advantage over local businesses, but that will soon end when they are forced to pay GST on items shipped into Australia.”

But, what does this actually mean for retailers? Has Amazon really taken this drastic step to remain GST compliant, or just to direct more traffic to its local site? Power Retail talks to local online retailers and e-commerce specialists to find out what they think.

Nicola Clement, Senior Digital Marketer and E-Commerce Professional

Nicola Clement

Nicola Clement, senior digital marketer and e-commerce professional

When approached by Power Retail to comment on her personal thoughts on Amazon’s decision to geoblock Australians, Clement said she thinks the decision is less about GST, more about trying to shift consumer behaviour.

“For years we have been shopping the international range on the UK and US sites, and when they launched here, it was underwhelming for consumers, and I would guess for them too. Many customers, like me, looked once and saw how poor the offering was, and went back to shopping [from overseas] like normal,” she says.

However, Clement says that the pending release of Prime in Australia has likely got Amazon thinking about its long-term strategy.

“Rather than using their marketing money, the launch of Prime, or communicating the improvements to customer experience they are planning to make, they are going to shut down customer’s options, so if we want something from Amazon, we will have to use the AU site, which they are no doubt hoping will help with their numbers.”

So, what does she think this will mean for Australian retailers who have been closely following the e-commerce giant’s movements since long before its Australian launch in December last year? Well, she says it really depends on consumer response.

“This was not a customer-driven decision, so I feel the most likely outcome is that Amazon will just piss more people off, and they will continue to find ways to get what they want.

“For years we have been getting around brands and sites that don’t ship to Australia and New Zealand. When brands put up rules like this, we tend to get creative,” Clement says.

“Amazon’s primary USP has always been about convenience and speed for time-poor customers, but nothing about what they are doing is convenient for customers.”

Although, Clement says Amazon still has Prime up its sleeve, so regardless of what fallout there is over the company’s GST move, things will start to change and the adoption of Amazon will really start to take off once Prime hits Australian shores.

Nathan Huppatz, Co-Founder at Costumes.com.au and ReadyToShip.com.au

Nathan Huppatz

Nathan Huppatz, Co-Founder of Costumes.com.au

“With the GST change, I think [Amazon] was probably put in a position where they thought it would be easier to push traffic and sales back to their Australian domain. This saves them the headache of collecting GST and then remitting it from US website sales,” Huppatz says.

“The other advantage, of course, Is that Amazon may already account for around 10 percent of Australian e-commerce spending (the majority of which, until this point in time, has come from AU shoppers buying on the US website). Pushing these sales to it’s AU website will perhaps provide for a large increase in sales on their AU site, encouraging more sellers to get on board, and fuelling growth in the local market.”

Huppatz also says that its unlikely this decision has formed part of a PR move, as the business typically just goes about its business.

“Australia is probably a five to seven-year plan for them. The announcement of a Sydney FBA centre is the next evolution in this plan, and I won’t be surprised if we see more FBA centres coming over the next 12-months, along with the introduction of the Amazon Prime program later this year,” he says.

According to Huppatz, this could also lead to more Australian retailers looking at Amazon Australia as a viable channel for sales.

“For those sellers that are on Amazon and haven’t had a lot of sales yet, July 1 should change that.”

Dean Salakas, Co-CEO at The Party People and Advisory Board Member at Online Retailer

Dean Salakas on Shark Tank

Dean Salakas, Co-CEO at The Party People

Salakas has a slightly different view on Amazon’s decision to block Australian consumers from its international marketplaces, referring to it as a “ridiculous PR spin”.

“Amazon isn’t stupid, they are not missing out on any sales. They are routing international sellers that ship to Australia to the local site – 22 million listings, I believe. Did everyone miss that part?

“Amazon said they would potentially pull out of Australia if the GST ruling was enforced, and yet they found a way around it, and put a clever spin on it, which has no doubt increased their exposure,” Salakas says.

“Zero to hero in my books for them”, he says, referring to the e-commerce giant’s big blunder when it first launched in Australia in 2017, and the clever move to use the government’s new GST laws in its favour.

Rob Hango-Zada, CEO at Shippit

Rob Hango-Zada

Rob Hango-Zada, CEO at Shippit

Hango-Zada thinks that Amazon’s geoblock is a sign that international giants are out, and local retailers are in.

“The Australian Government’s new online tax will drive profit back to Australian businesses and workers, and present consumers with a more competitive local marketplace.

“Local retailers, such as Kogan, who have embraced Amazon as a major distribution opportunity will stand to benefit from Amazon’s strategy as it drives shoppers to its Australian storefront,” he says.

“Backlash from Australian consumers will be short-lived and the boycott local retailers are hoping for won’t come to fruition. Range and price reign supreme and this will see Amazon hone in on their local offering with millions of products already listed on the local storefront.

“Consumer choice will ultimately be the casualty here, where the only tax-free advantages to be had will now be relegated to the good old ways of duty-free shopping. Amazon’s move underscores the point that ultimately, customers will pay for this move, not international trade,” Hango-Zada states.

Shippit’s CEO also believes that Amazon’s international block could see a resurgence of virtual private networks (VPNs) and freight forwarding services, as consumers look for a way to get around the geoblock.

“One thing is clear”, Hango-Zada says, “the Australian Government’s plan to drive profit back to Australian workers and businesses is working”.

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