May 2017

Australian Compliance, Outsourcing

Is a black swan event just around the corner for Australian compliance?

By: Odyssey Outsourcing
Tags: Australian compliance, compliance, offshore

With Mother’s Day just past there has been some interesting online discussion about the commoditisation of the florist industry. There are many similarities to the “Commoditisation of Compliance”.

We are all familiar with Airbnb, Uber and the other connectors in the industry, and their margins are well known. Airbnb offers a more unique product while Uber offers a transport which could be argued doesn’t differentiate (too much) on the quality of the vehicle.

The commoditisation of the florist industry model pushes towards a model where many providers (suppliers) bid for a job. This has been tried several times in the past few years with respect to compliance and professional services, and has had mixed results. Most accountants haven’t bought into bidding for compliance jobs.

However, a black swan event might just be around the corner for Australian compliance, and it’s something that needs to be monitored, thought about and managed.

Online websites are not attached to a physical, bricks-and-mortar flower shops or warehouses. Their businesses are built on websites visible in every Australian suburb through online search listing. For compliance, and with the low cost of starting a website, there is the ability for online businesses to quickly enter many sector specific areas without a demonstrated experience.

As an order is placed it is pushed directly out to the florist, and the online order gatherers are taking a chunky commission. The commissions range from 21 and 55 percent according to the Australian Florists network, leaving consumers and florists with a small margin for the actual flowers.

Herein are the two threats for Australian compliance: Online firms are now competing in your suburb, and online firms don’t have the fixed costs of a traditional firm. Add to this the ease of doing business, good customer service, and a rock solid guarantee, and you could see an online compliance consolidator massively changing the face of Australian compliance.

Local florists are a dying breed”, according to a 2015 article, while another 2016 article mentions florists are “in a wilting industry”. Certainly the online news has been talking about the changes in the florist industry as much as the changes in Australian compliance.

So the florist, the butcher, the corner store, the local GP and the local accountant were all in the past location specific. Their client base was in the local area. Those days are on the way out.

At some point in time we are going to see a specific consolidator website arise and take over Australian compliance. It hasn’t happened yet, but if Airbnb and the other massive online successes are anything to go by, then it is going to happen quickly when it happens. Whilst Airbnb started in August 2008 the real numbers on the take-up are interesting. It took 30 months to reach it’s 1 millionth booking, then only 11 months to reach the second million, and 6 months later had added another 3 million bookings.  Most amazingly, these new entrants can exist for years without making a profit, which I expect local accounting firms can’t compete with — Airbnb first became profitable during the second half of 2016.

Australian compliance is in a continued state of flux. It’s only the lean, agile and modern firms that are going to adapt quickly to the massive upheavals our industry is facing.