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

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