Overseas Information

Australia – A guide for Exporters to (Continued from previous issue)

Import Channels and Distribution “cash and carry” importer/wholesaler opera- However, from an overseas supplier’s point import channels are very tions have not established a strong presence of view, it must be noted that most of these similar to those applying in other developed in the market. Overseas suppliers of consumer retail chain subsidiaries compete against markets and for most products from products attempting to sell to Australia will each other in the marketplace. therefore normally have only two options for Developing Countries, the customers will be The buyers at Target and K Mart, for example, sales - the importer/wholesaler or the large the specialist importers or the major retail are completely different and are responsible retailers. Overseas suppliers of commodities, chains that purchase through their overseas for their own ordering and merchandise industrial inputs, machinery etc. can some- buying agents. selection. There is a combined board of times have more options but are usually limited In general terms Australian importers can be to the specialist importer or the manufacturer/ management for the Coles Group but, divided into the following categories : end-user. until now, there is as much competition • Importers/wholesalers : who import between K Mart and Target for a share of the either a specialised range of products or Role of Overseas Buying Agents market as there is between K Mart and the operate as general importers and whole- An increasing number of Australian importers Woolworths group. However, new top-level sale their merchandise to retailers or of consumer products use the services of an management at Coles Myer has recently end-users; overseas buying agent to source the right undertaken a review of group operation, which • Commission agents : who source pro- suppliers, assist in negotiating the purchase, may well result in much closer operational ducts for other importers or end-users, check quality and arrange shipment and interrelationships between the constituent but do not import directly themselves payment. This is particularly the case when companies in the next year or two. (these agents normally receive their importers are buying from an unfamiliar The second major retail chain in Australia is commission from the overseas supplier country and they are not sure about the Woolworths Ltd. (www.woolworthslimited.com.au) and their activities are mainly limited to reliability of the various suppliers. with the affiliated discount department store commodities and textiles); The major retailers have a long established group . Woolworths also owns speciality • Manufacturers/End-Users : a number of policy that they will not import unless all the chains such as Tandy, Dick Smith Electronics, manufacturers or end-users will import arrangements are handled through their BWS and First Estate. The group has total their raw material or input requirements appointed overseas agent. The large Australian annual revenues of about A$ 26.321 billion. directly from overseas suppliers, but it retailers have buying agents in all the But like the Coles Myer Group, the is more common for these companies to significant supplying countries and in some Woolworths and Big W organisations have source through specialist importers; and countries they may have more than one agent. their separate buying teams and should be • Retailers : the large retailers import up approached as individual organisations by to 20% of their merchandise requirements Most overseas buying agents for Australian overseas suppliers. through their buying agents overseas. importers and retailers operate on a Both the Coles Myer and Woolworths organi- The balance of their stock is sourced commission of between 3 and 5% on the sations maintain large chains from either local manufacturers or FOB value of the orders. and these account for the bulk through specialist importers. Few of the Importance of the Major Australian Retailers smaller retailers do any direct importing. of their retail outlets. The Woolworths Another important feature of the Australian organisation has managed to increase market Role of Importer market for consumer products is the domi- share over the last few years. There are relatively few general importers or nance of the major retailers. It is therefore The leading hardware retail chain is ‘Bunnings commission agents operating in Australia. worthwhile to briefly cover these retail chains Warehouse’ operated by Bunnings Building operations and attitudes. Most importers will also insist on having Supplies Pty Ltd. (www.bunnings.com.au), a division exclusive Australian rights to either the full The largest single retail chain in Australia is of Limited (www.wesfarmers.com.au), range of products from an overseas supplier Coles Myer Limited (www.colesmyer.com.au) a major Australian public listed company or at least to particular models. This is a reflec- and even by world standards this group’s with annual revenue of A$ 7.753 billion. tion of the small market and the high cost of sales revenue of over A$ 27.017 billion makes Other major hardware chains include national distribution. The thing importers/ Coles Myer a formidable retail organisation. Mitre 10 (Mitre 10 Australia Ltd.) (www.mitre10.com.au) and Blackwoods wholesalers dislike most of all is being Included in the Coles Myer Group are : embarrassed when offering an “exclusive” (www.blackwoods.com.au). • Coles (Variety and Supermarkets) product to a retailer only to find that the Other retail chains include : • Myer/Grace Bros. (Department Stores) same product is being offered by another • Automotive Holdings Pty Ltd importer or wholesaler. • K Mart (Discount Department Stores) (www.repco.com.au); Automotive replace- Because of the small size and competitive • Target Australia (Discount Department ment parts; Revenue A$ 1.095 billion nature of the Australian market, commission Stores) • Betta Stores Ltd (www.betta.com.au); agents, general trading houses and bulk • Bi-Lo Supermarkets Home appliances; Revenue A$ 66 million

Engineering Export Info-Bulletin, Vol. 6, Issue No. 32 11 Overseas Information

• Rebel Sport Limited (www.rebelsport.com.au); and the mark-ups in the import distribution There are certain non-taxable importations Sporting equipment and other Revenue chain reflect this fact. including repair and warranty-related A$ 313 million importations, goods below a certain value. Like most other markets, the mark-ups applied • Retravision DAD Limited (www.retra by Australian importers/wholesalers and The GST on taxable imports is 10% of their vision.com.au); Electrical appliances retailers reflect not only the level of compe- value. The value of the goods is the sum of : and homewares; Revenue A$ 74 million tition, but also the volumes sold by the • The customs value of the goods; • Tyrepower (www.tyrepower.com.au); particular company. Automotive tyres, wheels and batteries; • The amount paid or payable to transport Revenue A$ 120 million Wholesalers and retailers of exclusive imported the goods to Australia and to insure the giftware lines, for example, will have very goods for that transport to the extent that The large Australian retail chains source a high margins, while retailers of basic this is not already included in the significant proportion of their requirements clothing lines are forced by the competition customs value; from Australian manufacturers or suppliers. to apply the minimum possible mark-ups. • Any customs duty payable on the However, an increasing percentage of their importation of the goods. stock is sourced directly from overseas. In general terms, however, the mark-ups in Smaller retailers on the other hand rarely the various sectors of the market are as Buying Periods and Order Volumes import on their own account. follows : Two of the more important characteristics of • Overseas buying agents/Australian Retailers’ preference for locally made goods, the Australian market which should be noted commission agents : between 3-6% on where possible, is based on a number of by new overseas suppliers are the different FOB; practical considerations. buying periods for seasonal merchandise and • Importers/wholesalers of volume selling the relatively small order volumes by most These include : consumer products : 40-80% on landed/ importers. • Shorter lead times and greater oppor- duty paid price depending on product; Buying Periods tunity to adapt to changing consumer • Discount department stores : 35-40% on preferences; the sell price; The Australian seasons are the reverse of the • Greater ease of communication should • Department stores : 40-75% on the sell Northern Hemisphere viz. : problems arise; price; • Summer is from December to February; • Deliveries are usually more reliable; • Small retail outlets : 50-100% on the • Winter is from June to August. • The opportunity of working closely with sell price; It should also be noted that because of the the local manufacturer in developing the • Supermarkets chains : 15-35% on the most appropriate advertising budget; relatively mild Australian climate, there are sell price. not the four seasons that apply in the US or • No problems with currency fluctuations European markets. Importers and retailers and Overseas suppliers should therefore not consider the high retail prices in Australia as generally think of only summer and winter • An ability to discount invoices with a guide to the lack of competition in the as distinct buying seasons and usually do not quick payment rather than having funds market. The Australian retail industry is buy especially for spring and autumn. Retailers tied up for sometime through the issuing actually one of the most competitive in the may refer to “early summer” or “late summer” of Letters of Credit. world and buyers will try to obtain the best but there is little difference in the products As a general rule the retailers will buy from possible price from overseas suppliers. they buy for the overall summer season. local manufacturers unless a very similar In simple terms, the final retail prices in Overseas suppliers should also note that the product can be imported directly at an into- Australia are generally higher than in the December/January period is the summer store cost at least 15% cheaper than the USA but the price the buyer will accept from holiday season in Australia and a large locally made product. In other words the the supplier is usually lower than US buyers number of companies close down for at least imported product, after freight, import duty would accept. half of January. Also the Australian financial and clearance/delivery charges, must be 15% year ends on 30th June and the period from cheaper than the Australian-made equivalent Goods and Services Tax mid June to mid July are usually not a good before the retailer will consider importing. A Goods and Services Tax (GST) of 10% was time to visit Australia for business. Volume sales of consumer products to the introduced in Australia by the Federal Govern- Order Volumes Australian market will often depend on ment on 1st July 2000, replacing a wholesale achieving orders, either directly or through sales tax and a number of other taxes. As already mentioned Australia’s small an importer, from the major retail chains. As population means that most orders placed by GST is payable by importers on taxable already mentioned the large chains will only importers and retailers will be smaller than importations of goods. The Australian Customs import through their overseas buying agents those for the USA or Europe. There are, on Service collects GST from importers of goods and new overseas suppliers should make the other hand, a number of large importers contact with these agents rather than writing at the time of importation although a scheme and retailers who are prepared to place directly to the retailers. allows deferral of payments of GST for reasonable sized orders for popular products. qualified importers. Mark-ups in the Distribution Channel Other Important Regulations and Standards There is no registration requirement for The costs of operating a business in Australia, taxable importations, and the importer need In addition to import duty and quarantine particularly labour costs, are relatively high not be carrying on an enterprise. there are several other important regulations

12 Engineering Export Info-Bulletin, Vol. 6, Issue No. 32 Overseas Information relevant to selling to the Australian market, • a quantity statement – mass, volume, • There are advantages for everyone in the including the type of packaging and labelling length, area or count of the product. supply cycle – manufacturers, distri- requirements and safety and health standards. The package must not : butors, transport companies, retailers and customers all benefit from bar Packaging and Labelling Regulations • contain less than the quantity stated on the label and units of measurement must coding, as we adopt “paperless trading”; There are several major trends that will be metric; • EAN bar codes must be printed precisely; affect the packaging industry in Australia • packer identification – the label must following clearly stated EAN specifi- over the next decade, and it is important that state the name and address of the packer cations, so they will scan first time, companies seeking to export to Australia are and/or importer. every time. They must also be the right aware of these influences. Packaging sells size and proportions; products and the trends listed below place an Note : It is an offence to knowingly apply or • EAN numbers use three different types even greater importance on the appearance, carry false trade descriptions on goods. of bar codes, designed to suit particular marketability and quality of retail packaging A description that is likely to mislead purposes and conditions. Some types of in the highly competitive Australian market. on matters such as weight, origin, bar codes on consumer products and manufacturer, preparation, contents, Electronic Business Processes trade units also carry supplementary copyright, etc. is considered a false information. Specifications for bar coding trade description and is liable to This technology will eventually link the entire are available from EAN Australia : prosecution. supply chain from raw material suppliers, www.ean.com.au packaging manufacturers, retailers and Specific products consumers. Effective utilisation of electronic Standards processes such as digital artwork will The general requirements for imported Product standards are also an important generate a more integrated approach for packaged products, there are additional factor in the Australian market. packaging from concept through to the final requirements for specific products. These product in the supply chain. include electrical appliances, watches and The Standards Association of Australia clocks and goods that are imported in the (Standards Australia www.standards.com.au) The Environment packages in which they are customarily and the various State Governments have For some time now, consumers’ attitudes offered for sale. developed a range of compulsory and suggested towards environmental issues have had a standards for a wide range of products. strong impact on the packaging industry in EAN Numbering System and Bar Coding Where compulsory standards apply a Australia. To address this issue a range of A high proportion of products in retail stores product cannot be sold without the approval strategies is being adopted which target in Australia use the EAN numbering system of the relevant authority; where suggested recycling objectives for different packaging and the significant benefits to business are Standards have been established, it is usually materials. Whilst there is no current legisla- being realised in many other industry sectors advisable to meet these requirements before tion relating packaging, it is important including manufacturing and distribution. attempting to market the product. nonetheless to be aware of this issue when The importance of standards to overseas considering entry into the Australian market. The EAN Numbering System suppliers varies from sector to sector. In • The EAN (International Article Number General standards for all imported areas such as construction materials, fire Association) numbering system is an packaged products extinguishers, toys, bicycles, crash helmets, internationally recognised numbering electrical products etc. the standards are Federal and State Government packaging system that serves as a global “language” often compulsory and the relevant autho- and labelling regulations are imposed on all for trade in more than 60 countries. rities must approve new products before they packaged products, both locally made and • All EAN users follow the same coding can be sold. The general rule is that when a those imported into Australia for the retail rules, which means that an EAN number faulty product can cause injury or death to a market. A summary of these regulations is as can be recognised not only by local person the standard will be compulsory. follows : trading partner companies, but by Over the last 20 years there has been an All labels must : companies operating overseas as well. increasing range of consumer protection • be written in English • The EAN system of numbering and legislation by both the Federal and State • have wording that is clear, easily read coding identified items by giving each Governments. Most importers will be aware and permanent one a unique number. of the standards that apply to the products • be easily seen by a person reading the Bar Coding they handle but overseas suppliers should be label • A bar code comprises of set of light and aware that these regulations do exist and the • have type face in standard type size of dark parallel bars of differing widths, Australian government authorities recall a minimum 1.5 mm which holds huge amounts of information; number of “unsafe” products each year. • be of a colour that provides a distinct • By passing a light beam over these bars, Selling to the Market contrast to the background this information can be automatically In most respects new overseas suppliers will The label must also display : decoded and entered into, then retrieved, find the Australian market is very similar to • country of origin; from a computer; other developed economies in its require- • a true and factual description of the • Scanning bar codes is an accurate, fast ments but there are certain factors that goods; and easy method of identification; should be noted.

Engineering Export Info-Bulletin, Vol. 6, Issue No. 32 13 Overseas Information

Quotations and Payment One copy of relevant documents should be distribution centre : up to 3 months if sent via airmail or courier direct to the warehoused by importer/wholesaler. Most Australian importers have experience Australian importer or the appointed Customs in dealing with a variety of overseas suppliers Freight and operate in a number of currencies. Broker at shipment and the original docu- ments forwarded or negotiated through the The great majority of Australia’s imports are By far the most common currency and still exporter’s bank by the quickest method. sent by container sea freight to either Sydney the basis of import negotiations is the US Costs for storage of imports at wharfs and or . There are, however, important dollar and most new overseas suppliers will terminals are high and add to the price of the ports located in or near the other major find that their quotations in US dollars are imported products. The importer can conclude coastal cities of the country, e.g. Fremantle quite acceptable. Importers are also interested most Customs formalities before the products (Perth), Adelaide, Brisbane and Darwin. in suppliers who can quote in Australian reach Australia. dollars but do not expect new overseas Only a very small percentage of Australia’s suppliers to do so. Developing Country Preference imports are airfreighted, but this does provide an efficient alternative for overseas The type of quotation for Australian importers To qualify for the Developing Country Tariff suppliers. varies according to the product or commo- Preference the final process of manufacture dity being sold. of the product must have been performed in The normal shipment time from Asia to an Australian Customs Service (ACS) Australia is 4 weeks and from Europe a The majority of imports into Australia by vessel normally takes 6 weeks. Port and retailers and importers are financed by Letter defined eligible Developing Country. In addition, not less than 50% of the factory or waterfront reforms since 1992 have seen of Credit (LC) for 30 to 90 days. Where a improved container handling and ship close relationship exists between the exporter works cost of the product must be represented by the value of labour and/or turnaround times in all Australian ports, and the importer, payment may be by although clearance times for LCL (less than telegraphic transfer (T/T) at the request of materials of the country or of the Developing Country and Australia. full container load) shipments are greater the exporter. In such cases, the importer than FCL (full container load) and a growing usually transfers the funds once the goods A statement as below must then be made on number of Australian importers will not are loaded on the vessel. In both cases, all invoices signifying compliance with the import unless it is in FCL lots. however, the applicable rate of exchange is requirements : that prevailing at the time the funds are Australia in not a major user of 40-foot actually transferred between the two banks, Declaration : “I declare that the final containers and over 75% of all cargo is in the normally within three days of shipment. process of manufacture of the goods for 20-foot size container. which special rates are claimed has been Overseas suppliers should not expect any performed in ... (Country) and that not less Warehouse Packaging problems with the remittance of funds to or than one half of the factory or works cost One of the most common complaints about from Australia, as there are no cumbersome of the goods is represented by the value of foreign exchange controls. overseas suppliers from Australian importers labour or materials, or of labour and is the lack of attention given to the inner Documentation materials of ... (Country), or of... packs in the shipment (these are known as (Country), or of ... (Country) and The following documents are required when the “order multiple packs”). Australia.” exporting to Australia by either sea or air The export cartons from overseas suppliers freight : Lead Times in Import Transactions are usually acceptable but the order multiple packs are often not according to specifications. Documen- Sea Air The lead-time for overseas merchandise tation Freight Freight varies considerably from country to country Australia is a large country and a shipment and product to product. imported into Sydney may be broken down Commercial into smaller lots and sent several thousand Invoice Yes Yes As a general rule, however, the following kilometres to a small retail outlet. The order Bill of Lading/ 3 Negotiable 1 Original lead times apply to imports of consumer multiple packs should therefore be strong Air Waybill 3 Non-negotiable 3 Copies- products into Australia : enough to survive this treatment and they Negotiable • Price negotiated, orders placed, finance should also be exactly as the importer Certificate of arranged : very flexible, but for most requests - that is, if the order multiple pack Marine imports 8-12 months before shipment. is supposed to contain one dozen red, one Insurance Yes No • Payment made : on departure of vessel dozen blue and one dozen green items this (if the exporter or within 3 days. is what must be inside. The cost of has responsi- • Shipment time : Asia 4 weeks; Europe repacking/sorting multiple order packs can bility for 6 weeks. be very high and problems in this area will insurance) • Freight paid : 3 days before arrival of discourage the importer from dealing with a Quarantine vessel. particular overseas supplier. Treatment • Clearance, delivery to warehouse : 3 [Source : Australia – A Guide to the Market, 2004 Certificate days to 2 weeks after arrival. Edition published by Chamber of Commerce and (if applicable) Yes Yes • Placement on retail shelf : usually Industry of Western Australia (Inc)] Packing List Yes Yes within 2 weeks of delivery to retailer’s (To be continued)

14 Engineering Export Info-Bulletin, Vol. 6, Issue No. 32