Downloadable and online prices reflect Australian costs
Monday, 30 July 2012
Posted by: Paul Horowitz
Price differentials between
ICT product purchased in Australia and similar product bought overseas reflect,
among other factors, the different operating environments of countries and also
the more robust consumer protection given to consumers in Australia.
Suzanne Campbell, Chief
Executive of the Australian Information Industry Association, the peak national
body representing suppliers and providers of a wide range of information,
technology and communications (ICT) products and services, said it was not
useful to try to directly compare prices in one country with those in another.
"Costs associated with
product and service sales in Australia include GST, customs duty and regulatory
requirements such as consumer guarantees which impose strict warranty
requirements on suppliers and which add to business costs," Ms Campbell
"Buyers in Australia
have a much higher level of protection than consumers in many other markets and
this protection has associated costs."
Ms Campbell said price
comparisons across most categories of consumer goods clearly showed price
disparities were not technology-industry-specific.
"To give an indication
of the range of price variation globally, the latest Big Mac Index compiled by
the Economist magazine shows a difference of 426% between the lowest price of
$1.89 in India versus $8.06 in Switzerland," she said.
"Spot comparisons are
not useful as prices differ from one country to another and across channels for
many reasons. "
Ms Campbell said there were a
range of vendor for downloadable goods costs that often were not initially
obvious to consumers.
"Goods are not priced to
reflect only the cost of producing and distributing them. Goods which are
downloaded still have research and development, product development,
advertising, marketing, and support costs," Ms Campbell said.
"The online store is not
an automated process without any staff. Staff are still required to build,
manage, and maintain the backend systems - so local labour costs are relevant.
"Often these people are
more highly skilled and are therefore paid more than retail staff in bricks and
"There are costs
involved in advertising and marketing services locally. Regardless of the
distribution method of the product – the costs of providing support services
remain and need to be accounted for.
"An additional cost
associated with downloadable goods specially games relates to content developed
by third parties with their own rights, licensing, wholesale and distribution
Ms Campbell went on to say
that the ICT industry was not homogenous and that IT hardware, software and professional
services business models, cost models and pricing mode varied significantly
across markets and geographical boundaries.
"Costs models reflect
the specifics of each business model but in any event the cost of a good is
only a small fraction of the investment the company has made in developing a
product or service," Ms Campbell said.
"The price also reflects
the investment by the company in developing its underlying intellectual
"In addition, the
channel through which the product is sold affects its price.
"AIIA members report
they sell up to 100% of their goods via channels. This might include volume
licensing to third parties, through retailers like Harvey Norman as fully
packaged product, through bundling by original equipment manufacturer or
through online services.
"The variety of channels
used introduces significant product differentiation and pricing tension between
the different channels and also direct sales (where they occur) in both setting
the recommended retail prices and discounting from the recommended retail
Ms Campbell said taking into
account all these factors, prices for some IT products inAustralia may be incrementally more
expensive than some overseas markets, it consumers and regulators need to
understand and appreciate Australia's higher operating cost environment.
added cost pressure, there is a realisation that some issues need to be
addressed," Ms Campbell said.
"As the Australian
market now faces a truly globalised trading environment it will need to adjust.
"AIIA members acknowledge that this will
impact their business models and that market players will have a shared
responsibility to balance their business imperatives, the costs that go with
servicing a local market and the increasing pressure of global markets."