Four years ago the article ‘A Grey Cloud Over the Industry’ critically analysed the effect of Grey Imports on the legal and economic seascape of the Industry. This article will revisit those issues in the context of today’s seascape.
Indeed the global financial crisis is still referred to as a major game changer across all economic spheres with the Australian maritime industry not being quarantined from its affect. While sales across the board still remain slow, there is a glimmer of hope as the Australian dollar looses value against the greenback. While this may make those overseas purchasers less enticing, consumer confidence in online shopping has opened up more options for consumers. So do ‘grey marine products’ still offer an affordable alternative to consumers and have industry fears come true in that they would flood the market?
The grey, or parallel market is a term originating in the automotive industry. Traditionally it referred to the process whereby vehicles were imported legally into Australia through means other than those of the manufacturer’s official distribution channels. This was not originally of great concern to suppliers, as it was a costly process and people were only importing rare and foreign cars that were not available for purchase domestically. However, as it became cheaper to buy from overseas the grey market grew to encompass familiar and commercially available vehicles, as well as variety of other products that directly competed with domestic sales. Further, the depreciating American dollar amplified this process, as for the first time since floating in 1973, the Australian dollar hit parity with the greenback. At this time it seemed the perfect economic storm, as goods purchased from the US became a more attractive option.
The issue for industry was and still remains how to best respond to the increased competition. A political option requiring a legislative response (of some description) would take time and may not be politically feasible given the size of the marine industry and that economic rationalism in government was well entrenched with free market ideals. Market deregulation by governments around the world has encouraged competition and free market economies, whereas tariffs or other protectionist measures are seen as product of a bygone era; an unsustainable Band-Aid solution.
It is also worth considering the public response, which retail giant Gerry Harvey didn’t do, before advocating for a GST on imported goods under the value of one thousand dollars. This highly unpopular and unsuccessful campaign was doomed to fail for it targeted the very consumers it relied upon. Somewhat ironically, the publicity that came with the campaign also did more damage than good, as consumers who had not previously been aware of online savings and the loop hole in our tax laws were now fully aware, and perhaps more eager to take advantage of the savings. A well-publicised survey in 2011 found that only 5% of retail shopping in Australia was done online and around half of these were to domestic websites. This figure has now increased to 50% in 2014 according to Roy Morgan’s research that surveyed 50,000 people. While price largely remains the driving force behind growing Internet sales, it is also important to recognise that the consumer will make decisions to buy based on many different criteria including customer service, legal recourse options and the ongoing relationship of trust they have with a retailer. Therefore, the marine industry needs to look to the future and one possible avenue to assist the industry is to educate consumers further in the pitfalls of purchasing over the Internet.
Three feasible options previously suggested that could still be applied to assist industry are:
- Approaching your marine industry representatives to fund an education marketing campaign,
- Educating the consumer in the legal risks of purchasing grey products and benefits of purchasing from suppliers in Australia, and
- Individual businesses reviewing the terms of supply, distribution and licence agreements with their principal.
Two new editions to this list are;
- that the savings once made are now diminished and
- at what cost with the loss of follow up service
- legal benefits
The effect of grey imports long term damage across the marine industry was headed with the BIA publishing brochures (these included most of the original articles suggestions) to spread the message out in the boating community of the risks of grey imports. Useful information regarding the pros and cons of the grey market was made accessible and available across various mediums. The choice was then in the hands of the consumer, who could decide against their purchase if fully informed of the legal issues surrounding grey products. While many in the industry are well versed in the issues, it is worth once again emphasising the benefits of purchasing from reputable dealers and supplier.
While grey imports are generally legal in Australia, the status of individual products as they enter Australia need to be assessed and these Grey products may not:
- be compliant with Australian laws
- meet mandatory safety standards: for example engines without the c(√) standard may be withheld from the owner.
- Be covered by a warranty in Australia as the importer is responsible for the warranty
Adding to these issues is the customer’s potential inability to make a legal claim against the importer when it all goes pear shaped. As far as the consumer is concerned this all adds up to lots of lost money and heart ache.
Additional concerns that may invariably form the part of any legal claim are:
- Manuals may not be preferred language
- Importers may not be situated to be able to service or repair the product
- Products may have to be freighted back to importer for any work
- As the product is not able to be seen before purchase, the consumer may purchase a lemon
Review of contracts
In addition to the continuing education of consumers in the importance of buying officially endorsed products, it may be the case that the marine industry needs to revisit supply, distribution and licensing contracts to ensure more competitive pricing policies. The arrival of grey imports was and still is an issue affecting manufactures, distributors, wholesalers and retailers alike and may alone be the driving force behind a re-evaluation of international price differentiation practices of major multinational suppliers. While basic economic principles of supply and demand can account for cheaper goods in larger western markets, companies cannot continue to ignore the significant price differences of often thousands of dollars between identical goods in increasingly interconnected markets. On a smaller scale in lieu of dwindling sales, individual businesses may be able to negotiate with wholesalers to limit onerous terms and penalty clauses such as those relating to the required minimum number of units sold in a given time. It may be worth seeking independent legal advice about your options to renegotiate your contract.
It can be said that the Halcion days are gone and the economic playing field what we have now is the norm. If Businesses were not questioning decreasing profit margins, thinking that the good old days would return, they need to in an ever-expanding global marketplace. However retailers must still tread very carefully in order to avoid any action that could alienate customers and send them in search of better deals elsewhere. To help with this delicate balancing act, it is worthwhile looking at some legal options available to the marine industry in Australia that may have the effect of encouraging consumers to purchase locally and allow businesses to remain profitable.
While greater convenience and range may still play a large part in the decision making process, increased prices due to the falling dollar may make overseas internet shopping less attractive. However, retailers cannot be complacent and will have to offer new services and comparable prices to ensure they remain relevant and competitive. However, this is not to say that businesses must abandon their core business practices and simply embrace the largely online world of grey imports. The balance between traditional services and the online world is difficult and for those caught in the perfect storm or wanting to enter, this passage is not for the faint harted.