HIGHER duties on imports have impacted online retail sales and trends in Jamaica, industry insiders report a week before the start of the biggest online shopping period for the growing sector.

Jamaica’s cash-strapped government implemented a controversial customs administration fee (CAF) — replacing a customs user fee — on April 1 this year to increase revenue flows. But the fee structure has not gone down well with small importers who argue that they have to pay a higher flat fee regardless of the nominal value of their goods. The fallout has impacted the online business community, which has experienced rapid growth in recent years as Jamaicans become increasingly comfortable with doing shopping over the Internet.

MailPac Services, the biggest online shopping company in Jamaica, which claims control for 80 per cent of the market, disclosed that it has observed a slowing down in the growth of purchases since the customs changes, exacerbated by precipitous currency depreciation .

“The concept of price elasticity works very well in Jamaica. Increase the price and less people buy! This has been the case with the rise in duties as well as the devaluation of the Jamaican dollar, a double effect in making imported goods — everything we consume in Jamaica is imported — more expensive,” Khary Robinson, the principal of MailPac, told the Business Observer in emailed responses yesterday.

“With the rise in cost, we have definitely seen a reduction in the growth and adoption of online shopping,” Robinson noted, adding “Just to clarify, the industry continues to grow because it still offers the widest selection of products at the lowest prices. But the reality is that growth has been tempered because all products have become too expensive.”

Denise Leander-Watson, director at the E-Biz Centre, a 12-year-old company that offers international in-bound courier services to the local market, stated that the adverse impact of the duties on sales was noticeable early after the implementation, though there has been some level of recovery since.

“There was a dip in the online shopping activity at first because I think persons were trying to figure out how it will impact them. They have slowly started to shop again because the reality is that we have quite a few customers who are business persons and shopping online or overseas is critical to their businesses,” Leander-Watson said.

Tara Courier Services, which a few years ago made a strategic move to diversify its operations into providing online shopping services, reported that the higher import fees have resulted more so in a change of purchasing trends rather than volumes among its customers.

“With the customs duties going up, we haven’t noticed a downward trend in sales, but what we have seen is clients consolidating,” said Tara’s managing director, Stephen Laing.

Tara Laing, a director at the company, added that “The volumes are still there but (clients) are holding back from the shipping on a regular basis.”

Robinson actually gave credit to the Customs Department for taking “some positive steps” to enable a reduction in importation cost for the typical individual shopper.

“The issue is that most of the ‘mom and pop’ shippers don’t understand the customs codes properly and don’t even pay attention to the changes in legislature that directly impact their business and their customers,” he explained.

Even against that background, however, online shopping companies still expect bumper sales next week during the US Thanksgiving holiday weekend, including ‘Black Friday’ and ‘Cyber Monday’, when customers hunt for the traditional steep discounts on items.

“We have had a lot of queries, so we are hoping for a busy next two to three weeks,” Tara Laing revealed.

“What you will find is people holding back on the deliveries, but I expect the volumes to be the same or even more,” she added.

E-Biz is one player that has ramped up its promotional campaign for the big weekend. It has rolled out its “Free Membership Christmas Promotion” that allows anyone to use an account for free for the period.

“So if you see something online and would like to order same but don’t have a US Mailing address, you are free to use ours for free until the end of the year. All you have to do is to call us for the address,” Leander-Watson said. “In addition, we will be having our own ‘Black Friday’ sale where we will have massive markdowns on the clothing, accessories and Bath and Body Works products available in our retail store.”

The E-Biz director said that while it is difficult to project sales over the period because there are many factors currently affecting spending power, she believes the greatest impact on purchases will be the quality of the deals on popular items such as electronics and clothing.

“People are looking for deals — Christmas is around the corner, gifts are to be bought — so the bigger the deals on the Black Friday/Cyber Monday sales, the better the shopping,” she said.