Australia’s shop keepers are about to record one of their worst years ever. That’s the dismal message from the Australian Bureau of Statistics in this month’s report on retail trade.
To a significant extent, however, the retailers have themselves to blame.
What the data shows
Total retail turnover was $26.7 billion for the month of May. That’s an increase of just $648 million — or 2.49% — over May last year. With population having increased 1.59% over that period and inflation at 1.9%, sales volumes are clearly in trouble.
Monthly numbers bounce around, of course, but we now have figures for the first 11 months of the financial year 2017-18. Total turnover for that period was $289 billion, an increase of just 2.52% over the equivalent period in 2016-17. Even if June turns out to have been an exceptional month of bumper winter sales, the increase in retail turnover for the full financial year will not exceed 2.7%.
That is the lowest increase since records of retail turnover began in 1982. In fact, only once before has the percentage increase over a financial year been below 3%. Unsurprisingly, this was in 2011 when the world was in the worst economic crisis in eighty years.
This year-on-year outcome might not be so bad if performance last year had been strong. It wasn’t. The increase in 2016-17 was only 3.11% above 2015-16. The medium term average annual increase — for the 20 financial years prior to this one — was 5.03%.
Department stores in the dumps
Of the five retail sectors the ABS tracks, the worst hit has been department stores, with a rise so far this financial year of just 0.07% over the same period last year. That is a disastrous real decline.
Not surprisingly Myer Holdings shares have halved in value over the last 12 months and other retailers are also losing value.
Also faring poorly are the household goods sector and the clothing and footwear sector, up only 1.86% and 1.85% respectively. Sectors performing a bit better are food up 3.09% and restaurants and takeaway services up 2.89%. People still have to eat.
The rest of the world
It is quite extraordinary that retailers in Australia are faring so badly while the whole world is in a robust upswing in trade, corporate profits, executive salaries and jobs.
Of the 34 developed countries in the OECD whose retail trade history is recorded, only two have copped a serious decline in retail trade over the last four years — Australia and Ireland. Of these, Australia’s collapse has been worse.
This strongly suggests that the causes are local, and not attributable to global influences such the rise of online sales.
How has this come about?
In fact, this is precisely what has been predicted by critics of the Coalition’s policies which shift wealth and income from low and middle income earners to the large corporations and high-income individuals.
As Crikey has regularly reported, wages have been depressed over the last four years, the tax burden has shifted from corporations and high-income professionals to wage and salary earners, and underemployment remains entrenched.
When household incomes decline, retailers suffer. People simply do not have money to spend. This then flows through to wholesale, transport, primary production, manufacturing and imports. These are all key areas for jobs and growth — which everyone agrees are the priorities — but which in Australia are now seriously lagging behind the rest of the world.
Role of the retail lobby
Bizarrely, the Australian Retailers Association routinely opposes even the minimal cost-of-living increases in wages, has actually backed the government’s moves to cut penalty rates for employees and openly barracks for the Coalition’s economic policies that have caused the economic decline over the last four years.
No wonder their customers cannot afford to shop as they used to.
I suspect that there is yet another reason for the decline in retail trade – the fall in passing foot traffic in bricks and mortar shopping centres. Most of the big stores are in shopping malls and I rarely go to these any more. The parking is so onerous that it has to be something quite urgent or important to tempt me to go there. The Myer store in the mall nearest to my home is one of those slated to close this year. And small wonder as the store is empty on the few occasions I go there.
In contrast, several companies I like to deal with have excellent websites and send me details of their new stock, sales and other items I might be interested in. All use Aus Post to deliver and deliveries are prompt and efficient with very good return policies and practices if items do not suit.
I am almost 77 and my demographic is usually described as conservative in its practices, including shopping. From talking with friends I have concluded that the retailers have misjudged us.
How much rent are those denizens of the shopping centres paying : compared to “wages” (that they want to screw down)?
Aren’t tax cuts supposed to take the load/emphasis of the need of employers to share more of that cake, to pay workers more?
Tax cuts that cut government revenue, and cut services to those “stagnant” employees?
In this Brave New World :- “Ford forbid we meddle with employer benefits”?
If 99% of the population (i.e. not the 1% who seem to be doing very well financially in Australia) have not had a decent wage increase and are living from pay cheque to pay cheque and worried about the next electricity bill, how are they going to have enough money to go shopping?
I would have thought this was fairly obvious to corporations who employ many people on low or basic wages. If you want customers, you need people who are paid properly and have a bit of spare cash. Now that we have cut penalty rates it will be interesting to see if retailers complain even more that trade is down.
Haw, haw, haw, well, well, what a hoot, the chickens are coming home to roost. LNP with full support from BCA looked in the other direction on low wages growth, LNP and BCA supporting cuts to penalty rates, wages theft, etc.
BCA is reaping the reward of LNP/IPA and the Murdochracy policies. No growth in Aussie retailing. Well, we hard working low paid Aussie battlers don’t fucking care anymore.
We like it!
Exactly. Retailers benefit most from more people having disposable income, not a few at the top getting more tax breaks or other kickbacks from the LNP. Gerry and his ilk can reap what they sowed as far as I’m concerned, and extending the GST to Amazon and sub $1k trades wont save their arses while they hang on to the attitudes they have currently.
Lazy bastards have forgotten what “retail” actually means and what they need to do to keep it.
There are too many small businesses all offering the same products and services and doing it in a very second rate way. Howard beatified the small business sector and now every tradie does in fact “aspire” to being a high flying developer or to own a fleet of white bongo vans plying some or other trade……there are more hairdressers on the average town main street than hair to be cut and despite our expanding girth even we cant support the amount of dodgy cafe’s, greasy spoons and franchised fat and sugar pedlars.
There is no God given right for a business to exist.