If you can't beat the whingers, join 'em

Michael Baker

In mid-2010, at a conference attended by the CEOs of Australia's biggest retail chains, Gerry Harvey took his counterparts to task for whingeing about how bad things were when Australia was in the throes of an economic boom.

The problem for many retailers then is not so much consumers as inertia.

But hey, if you can't beat 'em, join 'em.

Solomon Lew came under fire from many for his comments yesterday. Photo: Angela Wylie

It's taken Harvey more than two years to come around, but now he too has joined the ranks of the whingers. His comment to the effect that retail conditions were the worst in 50 years were widely reported in the media last week. As were his musings that maybe some sizzling hot weather could save his bacon by enabling him to sell more airconditioners.

Advertisement

Meanwhile, Solomon Lew over at Premier Investments seems to have a different view of what will save his bacon. For him, a 10 per cent increase in the cost of merchandise purchased from offshore internet sites will surely do the trick. And save jobs. Yesterday he renewed his call on the government to lower or eliminate the tax-free threshold on purchases from overseas. (Lew, by the way, says Premier has enjoyed 67 per cent growth in its own online business this year, suggesting that stiff competition from overseas has driven him to technology investments that will ensure his continued profitability.)

Amid this silly season of big retailer-pleading-poverty, the latest ABS retail stats appeared, at least on the surface, to support their gloomy world views. Sales did not grow one iota from September to October and were up just 3.0 per cent year over year. Small retailers enjoyed year-over-year growth of only 1.3 per cent.

In the consumer electronics sector in which Harvey's chain is a leading player, October sales dropped 1.5 per cent.

As usual the pain has been felt more deeply by small retailers. In the year to date their retail sales have grown by 2.4 per cent for independents compared with 4.2 per cent for the chains.

Biggest drag on growth for the independents in October was the household goods sector, which fell 1.4 per cent.

Food improved slightly in October (up 3.2 per cent) after three consecutive months of declines, but the pressure from the major supermarket players is unrelenting.

Clothing also continued a muted recovery of sorts. Sales for small retailers in the clothing segment grew by 5.2 per cent but off a very weak base. For perspective on how shaky the independent clothing retail sector has become, the ABS estimated October sales of $559.0 million, which is lower than the level achieved way back in October 2004 ($588.3 million). Vacancies in independent fashion strongholds like Oxford Street in Sydney's Paddington neighbourhood tell a graphic story of things going wrong.

Yet Gerry Harvey's commentary about adverse retail conditions is only a small piece of the story. The bigger and more important piece is not going to just be blown away by the revving up of one of his airconditioners. It's called “radical sector transformation.”

Australians are still on the move, travelling abroad in record numbers and presumably taking advantage of the huge bargains available to them by shopping overseas. They are also spending up big on restaurant meals, non-retail services and salting money away in their piggy banks. Consumer fundamentals are actually very sound.

The problem for many retailers then is not so much consumers as inertia. First, they did not anticipate how the structural changes emanating from the technology revolution, global recession, international retailer arrivals and price transparency would flow through into consumer behaviour as they have in the past two years.

And when they did realise what was happening they didn't move fast enough. Some are still sitting on their hands, wondering where things are all going. The retail models that made them successful in the past are now threatening to pull them under.

No one is sure where it will all end but one thing is for sure. Investors in companies run by the captains of Australian retail should scream bloody murder whenever they hear a retailer CEOs sitting around blaming the weather, consumer sentiment and offshore internet sites for poor results.

Michael Baker is principal of Baker Consulting and can be reached at michael@mbaker-retail.com and www.mbaker-retail.com.

38 comments so far

"Investors in companies run by the captains of Australian retail should scream bloody murder whenever they hear a retailer CEOs sitting around blaming the weather, consumer sentiment and offshore internet sites for poor results" At last a sensible comment by a journalist.Sol can bang on about the 10%, but how does he explain Jeans (made in Bangladesh) in his stores that cost $130, that only cost $35 in USA/UK. He cannot justify it.People wake up, it is not the !0% that Gerry/Sol want, but the customs hassles it will impose.Your $30 item, will be plus $3, plus a $50-$100 customs fee, plus a long wait at the post office while you fill out 3 pages of forms, (thats after waiting a month for it to pass through customs). The end result is it will be just too hard most people and they will not bother (just as Gerry/Sol planned).Instead why dont the old retailers (Myer/DJ/Colesworths) give us some real value like ALDI/Sostco/Zara have done!The days of the huge markup are over, time to adapt or die.I will not spend in any business belonging to any business connected with these robber barons, until they change their ways.

Commenter

Roy

Date and time

December 05, 2012, 7:29AM

When the likes of Lew in particular, put there money where their mouth is and support Australian suppliers rather than importing their products, then maybe they have a case to argue.However, their perspective is that 'it's my company's right and obligation to source my product at the lowest cost' HOWEVER, the consumer does NOT have that right.....Give me a break!!

Commenter

JIM

Location

Bayside

Date and time

December 05, 2012, 9:22AM

Absolutely! We get ripped off in this country ...... Imagine how your employer feels, they could get one of you for $3 a day in China, instead you charge them hundreds! Are you ripping your employer off? Why don't you be globally competitive in the labour market? Imagine if we could sell our labour on EBAY, what would your "buy it now" price be?

In a global economy, what goes around very definitely comes around. Right now we can earn our strong Aussie dollar in Australia and spend overseas with a few mouse clicks, but imagine a day when we have parity in price and costs ...

Commenter

Pete

Location

Melbourne

Date and time

December 05, 2012, 9:54AM

The common thread amongst the other whingers here is that 'billionaires' are whingers, profit margins are too high, or similar variations on a very narrow theme.

Before ranting, with complete disregard for some important facts, you might like to consider the following (using a US/Australia comparison as an example):

There's 15 times (approx) more people in the USUS workers get 10 days annual leave - after they've been employed for 10 yearsThere's no annual leave loading, nor weekend penalty ratesThe average US wage is significantly lowerEtc, etc.

All this means the cost of doing business (per item sold) in the US is significantly lower and the volume of units sold is significantly higher.

Now, I'm not here to defend Solomon Lew (nor Gerry Harvey, nor any other 'billionaire') but, you guys need to take into account the fact that billionaires create businesses that provide jobs under Australian awards and cost structures.

By all means, buy your goods overseas (as I do, sometimes when it's convenient),. But realise that, when you do, you're taking business away from local companies and, in turn, local jobs.

It's simple economics that even the most basically educated can understand but maybe not admit. Perhaps it's an inconvenient truth for those who want to push the workers versus the billionaires argument?

The truth is, you can't have high wages & other costs, low volumes and still expect local prices to compare to cheaper cost markets, then blame the 'whingeing billionaires'.

Some profess to be experts in POS and retail distribution business systems. If you're so good at retail business, open your own chain of stores.

Time for a reality check and get on board, rather than name calling, blaming others and ignoring the facts of doing business in Australia.

Commenter

GeoffWhere

Location

Sydney

Date and time

December 05, 2012, 1:52PM

Geoff, Please explain the price difference of A Harley Davidson Wide Glide (go to HD website and change the country from USA to AU)

Nearly $10,000 markup!No right hand drive conversion to be done, just put it in a crate, how can they justify this?An extra $10,000 because the AU dock worker, warehouse person, truck driver, sales person get a higher wage, sorry but I think that $500 to $1000 would probably be adequate or excessive.The same goes for cars sold through out the world, Toyota Corolla, VW Gold we pay way more. If importers were not so greedy then maybe the AU worker would not need to earn twice as much to live.

Commenter

Roy

Date and time

December 09, 2012, 11:42AM

Just repeating comments that have been said for some time. As a consumer (and taxpayer and public utility user), I am happy for 10% to be added to online sales. I will still shop offshore online thanks to better prices, better ranges and better service. Until Aussie retailers can increase their service and range, for which I will be happy to pay more for, they will get less and less consumer cash

Commenter

Franky

Location

Sydney

Date and time

December 05, 2012, 7:29AM

I'm in this basket too.... it's just that every time a retailer opens their mouth about anything, and the SMH run a comments section, a million people pile on and start cursing them for any and everything.

We should be paying GST on these purchases - it's not going to stop people buying O/S via the internet as the difference is often way more than 10%, but the tax take would be useful to address either brand of politics's future plans, and if nothing else will employ more public servants to collect the revenue.

Commenter

David

Location

Sydney

Date and time

December 05, 2012, 8:09AM

"David"Please read my comment above, its not about the GST, they want to effectively make it too difficult to buy from overseas (customs duty, forms, fees, delays etc).I will happily pay 10%, but I am not happy at the cunning way that they are planning to do it.This is all about protecting their over the top markups, next they will be trying to out law their more efficient competitors like Zara/ALDI/Costco.

Commenter

Roy

Date and time

December 05, 2012, 9:12AM

Agree fully with your GST position. We should definitely pay the 10%. What's fair is fair. We can put up all the excuses we want, but at the end of the day, retailers here need to stand on equal footing where possible with online retailers.

Yes, they can do other things to being their costs down, including reducing their margin, granted. But when the GST issue was brought up at least more than a year ago, most jumped on and bagged our retailers for daring to suggest it, including our deputy treasurer.And now we're seeing the results.