Tuesday, 19 June 2012

So, how much are we really paying?

Where does it stop? On the back of Fair Work Australia's (FWA) announcement of the 2.9% hourly rate increase to come into effect as of July 1, 2012, the infamous Carbon Tax will also be introduced, and retailers are bracing for it. It’s hard to pin point an exact number that will be drawn from businesses back pockets; but it’s plain to see that retail will notice a difference.

Looking at the bigger picture, there’s two ways that retailers will be affected:

  1. Directly – through an increase in running costs (electricity and staff labour costs)
  2. Indirectly – through supplier increases

As a global industry, it’s almost impossible for a retailer to run a one-stop shop; where they create and sell all goods in the same place without any third party suppliers or distribution chains. That’s why the industry, along with the likes of hospitality, can expect to feel the main brunt of these newly imposed costs.

I’m all for employees getting fair wage increases, the issue is the timing and forethought of our politicians in imposing these increases at the same time. This all comes on the back of continued price increases in the cost of operating businesses, something that could have been marginally offset have the federal government honored their commitment to lower company tax to 29%, but alas another broken promise, and who pays, the business owner, the employee and the Australian public.

There are reports of shopping centre giant, Westfield putting a clause into rental agreements in order to onset the cost extra cost to retailers, while being disputed by Julia Gillard, it is  not being denied by Australia’s leading shopping mall business.

Passing the cost to consumers is not an option for retailers as they are still fiercely discounting, reducing costs and managing their margins to ensure that they can keep the doors open and turn a profit – so even a small increase in product cost won’t get a second thought.

In the meantime, new fit outs can prepare by buying energy efficient appliances and fittings while existing locations can introduce procedures that ensure power and waste cutting measurements are put in place.

I’m not saying that the Carbon Tax is a bad idea. Given future planning and the importance of sustainability, it’s inevitable that such a cost will need to implemented globally. But as a significant portion of retailers struggle to keep their doors open, it’s just another slap in the face.

Let’s hope that the consumer is not taken advantage of with the implementation of the carbon tax, last week we were hearing of electricity cost increases of up to 20% due in part to the carbon tax and in part to the rising costs of generating power. Unfortunately we can’t go without electricity and they can charge whatever they like, unlike retailers already feeling the pinch of tight consumer sentiment. There’s no question that all the talk of a carbon tax and the likely impact could well stifle consumer confidence further and this will no doubt have a flow on affect in Retail – Where does it stop?

A few months in to the new tax we’ll have a better idea of the impact on bottom line. Watch this space.

- John Caldwell

Sunday, 17 June 2012

The War for Talent – Its not Blah Blah, it’s real!

If you’ve read any of my previous articles then you’ve heard me talk about “The War for Talent”. And as we know wars are not won in the short term, Wars are strategized, planned and staged over long periods of time. The ‘Art of War’ by Sun Tzu has been applied to many fields well outside of the military. Much of the text is about how to fight wars without actually having to do battle: it gives tips on how to outsmart one's opponent so that physical battle is not necessary. As such, it has found application as a training guide for many competitive endeavours that do not involve actual combat.

Part of winning the battle is doing your research and reacting to these findings, Seek is the dominant on-line job board and regularly undertakes extensive research to understand the market so that they can implement their own strategies against their competitors and from this have identified what the future holds and it aint pretty!

Seek have identified that by 2016/2020 the labour demand is expected to outweigh supply; particularly for Retail Managers. The graphs below show the AU labour market figures, along with the jobs that are expected to have excess and surplus candidates.

Although it may seem a long way off, the best businesses are planning today for what will happen tomorrow and in the years to come, smart retailers are developing strategies for attracting and retaining the best talent and it is this long term approach that will help our economy and business in the short term as it will stimulate the growth and consumer and business confidence we need to drive our economy forward.

- John Caldwell

*Graphs from

Thursday, 7 June 2012

D- Day for Business: July 1st

From a retailers perspective, the increase in minimum wage is not going to help anyone. Some retailers are struggling to remain afloat, so adding the extra burden of a wage increase, on the same day the country will be hit with carbon tax, is just another nail in the coffin for a lot a small businesses. And for those that receive the increase, will it even be substantial enough to cover the increased costs associated with the carbon tax or the impact that the scaremongering around this tax and subsequent impact on consumer confidence will have?

Fair Work Australia announced that minimum wage will increase to on 1st July to $15.51 (or $17.16 for apprentices).  What might seem a small amount to the feuding unions is a large expense to employers: those that are dealing with a large number of junior staff and those that are struggling to make ends meet as it is . This will lead to hours being cut, and new job opportunities hitting a brick wall.
The Australian Chamber of Commerce has said the rise should be limited to $9.40 a week to “reflect inflationary pressures” and that the decision for “increases ranges from $17.10 per week to $30.00, depending on the prevailing award, is a significant and costly impost.”

A recent survey run by Retailworld indicated that less than 45% of retailers are already considering a wage budget increase over the next 12 months.

So, what does that mean for retail?
  • Hiring freezes
  • New job opportunities put on hold
  • Current employees could lose hours (particularly those on casual contracts)
  • Product prices will rise to maintain margins that are already at a minimum
  • Ultimately small to medium businesses will find trading conditions even tougher and many may continue with their struggle to survive
July 1st - A ‘Double Whammy’ for business. It’s not going to be pretty.