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A.2 Shocks
To evaluate the economy wide implications of e-commerce the analysis
draws on 14 sets of direct changes to the Australian economy. These
changes are often referred to as ‘shocks’ because they change the
balance that would have resulted without change. They cover four
broad categories:
• retail and wholesale trade changes;
• selected sectoral changes;
• international trade related changes; and
• reintermediation costs.
All of these shocks are hypothetical values that seek to represent the
broad nature of changes that are expected. They are informed by the
limited data that currently is available. The study approach is basically the
same as the MONASH model uses to estimate a change in policy such as
taxes or tariffs, or the impact of a major piece of new infrastructure. It
has proven to be useful in conveying the broad pattern of structural
change in the economy. An overarching challenge in this area is that
reliable data is not available to provide even more concrete values for
these shocks.
These are discussed in detail below.
Timing
To simplify the analysis, the financial year ending June 1998 was selected
as the base year for the study. All prices are in 1997–98 prices (constant
dollars, unless indicated otherwise). It is assumed that the direct impacts
are phased in over ten years, that is each operates in year 1 (1998) at a
tenth of its eventual strength, in year 2 (1999) at two-tenths of its
eventual strength and in years ten (2007) and beyond at its full strength.
(s1) Saving of margins by consumers
The main thrust of these changes is that greater use of e-commerce leads
to a reduction in retail margins in those goods/industries that are
identified as being amenable to sale via e-commerce. This is largely driven
by disintermediation through business to consumer e-commerce. The
reduction in retail margins ranges between 0 and 20 per cent over ten
years. Books are viewed as being particularly susceptible to this impact
and so margins in that industry fall by 30 per cent after ten years. For
other goods, reductions in retail margins are forecast to be between 0 and
20 per cent (see Table A.1). Overall, the average reduction in retail
margins is 12.8 per cent. This is a saving to consumers of about
$4.7 billion in 1996–97 prices, equivalent to about 1.6 per cent of
consumer spending or 0.95 per cent of GDP.
Shifting sales activity away from retailers is not costless. Firms that fulfil
e-commerce orders still require resources to do so. It is assumed that
reductions in retail margins require increases in wholesale margins. That
is, rather than dealing with retailers, consumers deal more directly with
businesses that fulfil a wholesalers role (i.e. logistics, storage, etc.). It is
assumed that the savings of retail margins are lost to consumers via
increases in wholesale margins. This is a loss to consumers of about
$2.35 billion in 1996–97 prices.
Taken together these changes in retail and wholesale margins generate a
direct gain in GDP of about $2.35 billion, that is 0.47 per cent of GDP.
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