Retail needs lower costs not more hours

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by Chris Becker

It’s hard not to be skeptical about the findings from any inquiry into competition in Australia’s business sector. One always suspects either a dogmatic economic answer (i.e free markets always good, government interference always bad) or a reinforcement of a status quo of a monopoly or oligopoly – the latter supported in kind and method by the Abbott government as “how it is” or “how it should be”.

Sometimes you get both and it seems that way with today’s release of the study into the retail sector, from Fairfax:

Bans on retail trading hours should be scrapped, according to the federal government’s wide ranging competition inquiry.

The review’s chairman Professor Ian Harper said trading restrictions should be “strictly limited” to Christmas Day, Good Friday and Anzac Day morning.

“Full deregulation of retail trading hours in overdue and the remaining restrictions should be removed as soon as possible,” Professor Harper said in the review’s draft report.

He said rapid growth in online shopping was “undermining the original intent of the restrictions” and “disadvantaging ‘bricks and mortar’ retailers”.

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At first glance this makes sense – you or I can shop online at any time, which puts the “bricks/mortar” retailers at a disadvantage. But how much and at what labour cost or social cost to fill this “demand”?

For the big players in the market, margins can be stretched as sales increase when employing additional staff to cover the non-traditional shopping periods, but the small and medium players already under stress from low consumer demand and high land costs (particularly to monopolistic shopping centres), how are they going to afford to put on extra staff and/or pay higher rent?

Lets be honest – the high cost of retailing in Australia is not going to be solved by having longer shopping hours. The problems have always been in the extremely high labour costs for what is relatively low skilled work coupled with extremely high land costs because of lack of supply.

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What’s the bet that the former will be solved by stripping penalty hours while the latter is ignored completely?

More from the review:

Professor Harper said…”Consumers have continued to demand greater diversity in how and when they shop, as is evident in the rapid take-up of online shopping.

“This provides strong grounds for abandoning remaining limits on retail trading hours”.

The findings also lend theory to the idea that this is a great smokescreen for the big players in this industry as the airwaves fill with passioned frenzy on whether or not the “always right consumer” should be able to buy nappies at 2am or a case of Red Bull on Sunday night.

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All the while denying the real debate about the underlying issues of high labour costs and high land prices – which are the one and the same.