Read This BS Pro-Retailer Herald Article On Online Shopping Taxes

I was disappointed with the pathetic pro-retailer Herald article that seems like a rewritten press release from a Retailers Association moaner. I’m going to add my own comments and have some therapeutic ranting against stupid people who can’t figure out how to build sustainable business models in the easiest era to do business because of the internet.

Good news for New Zealand retailers now the Government has committed to look at taxing purchases made on overseas websites.

Oh really? Good news for a special interest group who suck so bad at business they can run to mummy & daddy government to prop up their failing business model, like Hollywood studios?

Inland Revenue and Customs will work together to review whether GST can be levied on international purchases worth less than $400.

They already work together. It’s called data sharing. Of course the government can impose a tax on all online purchases – we have one of the most excessively restrictive customs services in the world – which is why our drug market tends towards “home grown” products like cannabis and P.

A recent report found Kiwis have spent nearly $4 billion online in the past five years but more than a quarter of that is going offshore.

So this is a $200 million dollar per year “problem” for a special interest group? That implies 75% of online spending (before taking into account TradeMe purchases which includes Pay Now at actual retail stores who use TradeMe as an outsourced distribution channel) is with NZ retailers.

Retailers Association spokesperson John Albertson says that is making hard work for local retailers who are facing taxes on all sales regardless of whether they’re online or not.

Oh? So you finally get exposed to some competitive forces and your weak, inferior human being response is to have a moan instead of improving your business model? The internet has been around since the early 1990’s. Being a late adopter is not a reason to get protected from reality.

“It’s often quoted that some New Zealand retailers aren’t competitive, it’s far cheaper to buy overseas, etc.

“Well in some product categories that may well be true, but let’s start from the same starting point where we’re both paying GST.”

Part of the reason almost everything is cheaper overseas is because of fixed costs. When the UK has a population of 60 million and the US has a population of over 300 million then of course things will be cheaper there. The per-unit cost of a distribution centre or factory is negligible in larger markets.

Albertson says this is a fast growing problem for local retailers and it’s great to see something being done about it.

OK, this is exactly like the exporters vs consumers. But it’s the retailers vs consumers edition.

Everyone is a consumer, everyone can benefit from lower prices and higher consumer welfare. Most retailers are horrible people who suck at business management and on top of that do lame things to their employees like force them to purchase their products to wear. (Talk to girls who work retail fashion – and then be glad that ASOS is driving retail fashion out of business shipment by shipment).

The Retailers Association says GST needs to be introduced on purchases made on overseas websites immediately, or more Kiwi retailers are going to suffer.

OMG! Kiwi retailers are going to suffer! The humanity! A collective class of people who have failed to change their business model are earning a lower rate of return on their deployed capital! Oh wow! Sunset industries must be protected!

Albertson says the Government’s decision is a step in the right direction but the longer it takes to bring it into play, the bigger the problem will get.

“If you’re running a website in New Zealand, and selling online in New Zealand, you’re paying GST.

“It’s not a matter of bricks and mortar versus online, it’s actually within New Zealand versus outside of New Zealand.”

And there’s the kicker! 75% of online spending by your own figures is going to local retailers anyway. If you really dug into the “online shopping” data what you’d probably find is that those overseas purchases are for stuff that isn’t on sale locally or has such a price differential that it’s worth going through the hassle of registering at an overseas site and waiting however long for your order to show up.

What is so funny is that most of the biases are present in this guy’s deluded thought process: anti-foreign bias, anti-market bias and other indicators of economic ignorance.

There is also a stunning display of what I call “commercial ignorance” or inability to design a profitable business model when it is easier than ever to figure out how to make money on the internet if you have a quality product to sell.

There are a lot of online retail success stories that are New Zealand based including 1-Day, Torpedo7, Fishpond, TradeMe Stores, Barkers Mens Clothing and a lot of boutique clothing stores that sell brands you’ve never heard of but do hundreds of thousands of dollars a year in online sales.

This whole thing is so depressing. How weak and pathetic are these people that their solution to their problem of declining retail stores (but only if their product sucks, because some retail stores are doing really well) is to have a big moan to mummy & daddy government to “level the playing field”.

It’s disgusting. Every time a retail store closes because it didn’t have an active online presence, a beautiful unicorn is born and a child is saved from starvation in sub-Saharan Africa. If only “trained and skilled” Herald journalists could write about online retail success stories instead of giving airtime to a hater.

More Flexible SKY Packages Is A Stupid Idea (Premier League Pass Edition)

The SKY TV sports package costs $49.58 per month for basic and an extra $26.45 for the sports channels. That’s $912.36 a year before My Sky and whatever extras you want with your package.This does not mean you get 54 channels at a “cost” of $1.41 per channel!

You would not save any money if you could “just” get sports or the rugby. In fact, because you make it clear you’d previously pay over $76 a month for SKY, you have already revealed to SKY that you will pay up to that much for pay TV each month.

This is basic stuff. The price of each channel will change to maximise profits for fans of that particular channel. If consumers could pick and choose what channels they want it would be fuel for even more Kiwi whinging. SKY Sport is more likely to be $70 a month by itself, for example.

Consumer choice would actually decrease because fixed network costs like programming costs are split over subscribers. Options are valuable – and because you’d only have the few channels you pick and choose instead of 54, you’d have lower utility from television. More content is better.

In fact, niche channels would probably disappear. Packaging news channels together for example means they don’t need to compete aggressively on price. They can spend money on a better product.

Administration costs under a-la-carte pricing would be far higher. Consumer welfare would be lower. You would not save any money! Can I make that any more clearer? You would not save any money!

The comments on this Stuff article display economic ignorance par excellence. Who would have thought it? Also, while some channel prices would go down because they’re not as valuable, have you thought about what would happen to content production?

You know, the content is the reason you get pay TV. If channels have to compete amongst each other aggressively on price, then they have lower profits with which to invest in new content. Oh snap – the quality of content on your favourite channel is likely to decrease under a-la-carte pricing.

This includes less money available to bid for rights for the channel content you signed up for. Yes – some channels are hardly watched at all, but it doesn’t mean you’re subsidising other channels. It means at the margin more subscribers are part of the network which drives down average total costs and lowers your monthly bill.

If SKY actually listened to their subscribers, who despite moaning continue to show through revealed preferences that they value the content they consume enough to spend almost $1000 a year obtaining it, they would not be able to offer any of the content they currently do.

They certainly would not have been in a position to put up a solid bid for English Premier League rights – which have been awarded to a higher bidder as is the EPL’s perogative.

All of the people commenting on that Stuff article forget that SKY has spent an enormous sum of money building a network, becoming an NZ success story and enabling you to get access to content that you sure as hell would not have been able to consume if it was still just channels 1, 2, 3, & 4.

If enormous numbers of people cancel their SKY subscriptions because of EPL no longer being available, they’ll internalise the costs of that decision on their bottom line.

Some days I can’t believe how silly some people are. We should be happy that people take risks and put their money into big upfront costs that enhance consumer welfare over time.

It’s good stuff that there’s more competition in content consumption, it’s something to celebrate instead of having a whinge about in the Kiwi fashion. Comments like “subscribers should be setting the agenda” are so ignorant that I wonder if there is a relationship between economic ignorance, political ignorance and what I call “commercial ignorance” – not knowing that high fixed costs + low variable costs includes the need to recover fixed costs before turning a profit!

I think Premier League Pass is an interesting experiment. But the pricing we’ve already heard of $12.5 per month is almost 9 times what the silly people commenting on stuff think a channel “really costs bro”. (The $1.41 figure).

I am actually quite interested Premier League Pass, especially if they get the French La Ligue. I wouldn’t subscribe to SKY television because I don’t value anything it offers and the opportunity cost of watching TV is writing informative blog posts like this infused with a healthy dose of realistic thinking.

Forget about the people who will ring up or complain on social media trying to get a discount, I feel sorry for the call centre staff at SKY TV for the next couple of weeks.

They will get exposed to the very worst of Kiwi cheapness and unwillingness to recognise a sweet deal which they would never acknowledge because they are ignorant of how millions of dollars in programming expenses alone gets transformed into a monthly bill that would not be paid if it did not deliver at least as much value to the people paying it.

Just like Kiwis refuse to accept that water costs in what we forego in alternative uses like irrigation, Kiwis refuse to accept that companies should be able to make a profit.

Watch Out! NZ Inc Is Everywhere (Especially In NBR Comments)

Over at an article highlighting the Twitter spat between Rod Drury and Russel Norman, NZ Inc is used in the comments. I almost spat out my midday coffee.

The Green/Labour NZ Power announcement didn’t sabotage NZ Inc. It sabotaged the government first and taxpayers second. It did not sabotage “NZ Inc”, because as I wrote the other day there is no such thing as NZ Inc except in the minds of those who came up with the concept and benefit from its implementation.

A clear explanation of why a single buyer model for electricity won’t work is given by Professor Lew Evans at the Institute for the Study of Competition and Regulation, whose ECON330 paper I’m taking this trimester. Snippet:

In recent years there has been a goal of promoting renewables; and since the cost of renewables plant is generally higher and quite volatile – depending as it does on resource consents and the volatile cost of equipment – one would expect the wholesale price to rise. The wholesale electricity price has risen reflecting determinants of cost that include an increasing proportion of renewable plant.

The ETS scheme has additionally increased the wholesale price because thermal generation that has an ETS charge affects the price directly in peak and water scarcity periods.

Paul Walker pointed me to the Paul Krugman essay “A Country Is Not A Company“. I can’t find an ungated copy though. Krugman talks about how what makes a good businessperson doesn’t necessarily make a good economist. It is a shame that Krugman is good on international trade, but not so good on what he writes in the NY Times.

Matt Nolan pointed out that the interests of those who are involved in pushing the “NZ Inc” agenda are not necessarily aligned to the interests of everyone else. It’s really hard to compete with the power of interest groups – it is easier for them to organise and lobby for marketing assistance from the government. The interest group that benefits from cheap imports – essentially every single NZ household – doesn’t have a lobby group because the benefits aren’t even realised by many people of how cheap imports are a substantial enhancement of welfare.

When you add in Eric Crampton’s work on political ignorance and economic ignorance in New Zealand, we should really be concerned at this stuff. The story that National tries to sell the electorate is “we’re generally successful businesspeople, we can successfully manage the economy too!” but then they do things like turn our biggest city into a bigger nightmare than it previously was and aggregate separate functions of business-related administration into a behemoth government department on Bowen Street.

This can be brought back to the perils of folk activism. Trying to have a rational discussion is difficult when some people don’t want to acknowledge that the “other team” can empirically prove that you are wrong and point to numerous examples of how the policy you are proposing hasn’t worked elsewhere.

While Arnold Kling would implore us to accept that we all have different ways of looking at the world, I would posit that the “NZ Inc” phrase is something that puts someone on the conservative axes. The goal of NZ Inc is to increase exports that depend on commodity prices where we are price takers, not price setters, and that’s not in any way close to how an economist would think about exports. Our most successful exporters are getting there anyway and don’t need any form of taxpayer assistance.

Exports are the price we pay for the things we want. I go to work in order to earn money to pay my bills. We sell milk products to China so that we can get foreign exchange with which to buy smartphones from South Korea. If we could get that stuff for free, we wouldn’t bother exporting. Both consumer surplus and producer surplus matter – but preferring one of them blindly is insane and that’s what NZ Inc seems to be about.

Like the central bankers want to sacrifice the world on a cross of bonds, the NZ Incistas want to sacrifice consumer welfare on a cross of exports. There is a trade-off that we face if NZ Incistas get their way. The trend for any government program is to increase over time – subsidies or tax credits for exporters are the sort of silly stuff we could be in store for if we don’t highlight the risks of preferring one sort of surplus to another.