Retailers threatened by online sales

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Norwegian consumers have set off an “explosion” in online sales over the past year, and conventional retailers are responding with cries for protection. Norway’s major retail trade association claims its members are threatened by foreign competition from overseas suppliers, for example, which have much lower costs.

Norwegian Broadcasting (NRK) reported on Thursday that online sales were up as much as 16 percent last year, according to figures from local credit card companies. Their customers are using their cards more and more at “online boutiques,” buying everything from clothing to sports gear and other goods over the Internet instead of inside stores.

No big surprise
“When we look at items like books and some other goods, the increase is even bigger, around 30 percent,” Even Westerveld, communications director for Norway’s largest bank, DNB, told NRK. “The explosion in trade over the Internet has been expected for a long time, but we think it’s now arrived.”

That’s set off alarm within the retail trade, from shopping center owners to the retailers themselves. The initial response seems much like that of Norwegian farmers, flower growers and other producers who demand to maintain local market share in an increasingly global world. They want to keep less expensive, often better, goods out of the Norwegian market by making them more expensive.

The retailers’ trade association Virke told Norwegian Broadcasting (NRK) on Thursday that they effectively want to make online purchasing (called netthandel in Norge) more expensive, in order to save their retail members from online competitors. One way of doing that, according to Virke, is to eliminate a current VAT exemption on some foreign goods.

Consumers at present are exempted from having to pay Norway’s 25 percent VAT on items ordered from abroad that cost NOK 200 (USD 32) or less. Even though there have been calls to dramatically increase that amount, which hasn’t been changed since the 1970s, Virke wants to eliminate the exemption completely, so that any and all orders for goods from abroad will be subject to VAT.

Political challenge
The Conservative, Progress and Liberal parties campaigned last year in favour of raising the VAT-exemption to NOK 1,000. Virke is lobbying for the opposite, and the government, now made up of a Conservative-led coalition, has decided to review the consequences of changes in the VAT exemption. One member of the Liberal Party, though, told NRK he hopes the government follows through on its campaign platform.

Harald Andersen of Virke, meanwhile, called the increase in online sales “dramatic,” and believes it threatens retail jobs in Norway. He claimed that the current VAT exemption already “costs Norway 5,000 jobs in local stores. It should be reduced, preferably to zero.”

It’s unclear what other kinds of measures can be used against domestic online sellers of products that don’t involve any extra customs fees or VAT at the purchaser’s end. Their costs are still much lower than those of a conventional retailer who must pay for rent, furnishings and sales help.

Not all is gloomy for the retailers, though. While some projections call for an economic slowdown in Norway and, presumably, less shopping by consumers, Virke’s own projection for 2014 estimated 4 percent overall growth in retail sales, up to as much as 5-7 percent in some branches. Berglund