This story originally appeared here in the October issue of Business Review Australia magazine.
Written by Russell Zimmerman, Executive Director of the Australian Retailers Association
Healthy sales growth for the retail sector hovers at around six per cent month on month, accounting for both the rate of inflation and as a result of a healthy economy with the confidence to make discretionary purchases.
In reality, the retail sector hasn’t seen this definition of ‘healthy growth’ for at least the last two years as they are caught in the middle, squeezed from both sides by pressure from consumers tightening their belts and various regulatory pressures.
As usual, there are exceptions, with some retailers posting growth through tough economic times.
Generally speaking, however, Australia’s $240 billion retail sector is facing serious issues which together are acting as an impediment to the growth and innovation necessary to get the industry through the tough times and responding to modern consumer demand.
So far, in 2012, the ARA has been advocating for retailers in the Modern Award Review 2012. The review is a positive step towards real discussion around the practical implications of the General Retail Industry Award (GRIA).
Australian retailers find they have tough decisions to make between meeting the demands of the modern shopper and being able to employ staff to work during hours that currently attract some of the highest penalty rates in the world.
The ARA made a submission to Fair Work Australia calling for sensible and fair variations to the GRIA which take into account the need to promote employment in the sector and consider the modern retail environment.
In a recent ARA member survey about the Modern Award, 71 per cent said they were employing less staff with more than three-quarters blaming high labour costs. Coupled with Thursday to Sunday now being the busiest days of a seven-day retail trading week for 60 per cent of the retailers surveyed, we believe it’s time to make realistic changes which benefit the industry and those employed within it.
The ARA has recommended four main Modern Award reforms to FWA in its submission, including:
- Variation to the definition of ‘general retail industry’ to include online retailingof goods and services, ensuring those employed in online retailing are covered under the Award.
- A reduction in the Sunday penalty rate from 100 per cent to 50 per cent would assist in the challenges facing the industry to trade seven days a week while ensuring employees have access to jobs and flexible hours.
- Removal of unnecessary administration involved in changing the hours of a part time workerby agreement, which impedes both part timers’ access to flexible hours and employers’ ability to ensure hours worked are productive.
- Reducing the minimum shift requirement for employee training sessionsto allow retailers to adequately train staff, which they are currently unable to do without significant costs involved.
Other factors which have hit consumer confidence and therefore retail sales in the first half of 2012 were interest rates and later on the introduction of the carbon tax. Decisions from the RBA to keep clearly unmanageable interest rates unchanged in February and March, followed by a rate rise in April despite the country’s major banks having already raised them independently, were a major blow to retailers in all categories, but especially in those reliant on discretionary purchases.
The introduction of the carbon tax, the third transition to the modern retail award wage and the increase in the minimum wage all added to retailers’ soaring business costs amid weak consumer sentiment.
Looking back at a tumultuous first half of the year, it’s no surprise that there were reports of store closures, downsizing and profit downgrades. Such retailers included Myer, Billabong, WOW Sight and Sound and Sleep City.
Of course, there are retailers who have recently bucked the industry trend and come out on top. Clothing retailer Noni B was one of them, and women’s sportswear retailer Lorna Jane was another.
With the rise in multichannel retailing comes the need to engage with both existing and new customers, Noni B has posted profits where consumers have generally shied away from discretionary spend in Australia. From the success of Noni B, retailers can learn a few things:
- First, moving into the online space is imperative. With Noni B launching its online store last year, they captured customers who cannot always get to the store but nonetheless engage with the brand.
- Second, Noni B’s operations suggest the company has listened and responded to its target audience and incorporated the needs of this audience into its overall marketing and operations plan.
As the retail sector moves increasingly towards multichannel retail models and responds to consumer demand through better shopping hours and integrated access points (between channels such as in store, smartphone and online), the ARA is focused on working with the government to achieve real change in the regulatory environment to allow retailers to adapt and surge forward with success. These changes are through fairer employment conditions, a level playing field towards global competitiveness and investment in education, training and technology in the interests of productivity for a $240 billion retail sector.
Russell Zimmerman was appointed Executive Director of the ARA on 7 July 2009.
Russell became a Councillor of the Australian Retailers Association, New South Wales Division in 1995. He held the position of President of the NSW State Division from 2001-03. From 1997 he held the position of state delegate to the Australian Retailers Association National Council. He served as President of the Australian Retailers Association National Council from 2003-04.
Since 1980, Russell Zimmerman has owned and operated the Spark's Shoes retail chain with his wife Marion. Russell also volunteers as Chair of the Australian Merchants Payments Forum (AMPF), a non-paid position.
