Subject: Productivity Commission – Final report released today (9/12/11)

Subject: Productivity Commission – Final report released today (9/12/11)

From: Julian Josem
Sent: Friday, 9 December 2011 3:32 PM
To: Friends of Julian Josem
Subject: Productivity Commission – Final report released today (9/12/11)

For your interest, I have summarised some key points regarding the Productivity Commission’s report into the retail industry that was kicked off primarily due to the debate on the level of GST paid by customers when buying online from overseas businesses.

If you want the details, I have put all the important links onto my web site for your easy access: CLICK HERE FOR LINKS TO PC FINAL REPORT

Regards,
JULIAN

Final report key points
• Across 140,000 retailers in Australia, retail spending has fallen from 35% in 1980’s to 30% in 2011
o Services has increased
o Goods are cheaper
o $A appreciation
o More savings by consumers
• The rate of entry of new retailers (13.4%) and exiting rate (15.8%) is in line with other Australian industries
• Impact of online is dependent on the sector
o Highest impacts are: Books, CDs/DVDs, apparel, bike parts, cameras and accessories
• Australia’s largest retailers enjoy higher relative profitability compared to the largest firms within other Australian industries
• Labour growth in retail has been similar to that within other Australian industries, but Australian productivity within retail is lower than most comparable OECD countries
o Labour productivity here is measured by output per hours worked lower is than most OECD countries
o Multi-factorial productivity growth is declining – takes into account capital spending
(JJ thinks this is the most serious take-away from a business operations perspective. A key contributor is the difficulty for Australian retailers to productively adopt technolog. This is most prevalent in the small and medium retailer sectors.)
• The Productivity Commission (PC) estimates overall domestic online retail spend is 4% of total retail spend, and a further 2% goes overseas – ($12.6bn on online trade)
o Government response is that the ABS will continue to develop its capabilities to measure online trade
• PC says that surveyed consumers say price, range, and convenience are the reasons for shopping online
o (JJ: Theory of retail services: Information provision, Customer Service, Waiting time, Spatial convenience, Bulk break, Product variations)
• PC says restrictive zoning results in making online retailing more attractive and should be altered
o Removal of business viability as grounds for objection
o Government establishes the Retail Council to recommend more on this
• Distribution contracts for the Australian region are a problem where brand owners are giving rise to parallel importing
o PC recommends government be vigilant against improper practices by international brand owners
• Adversarial landlord-tenant relationships work to prop up tenancy costs
o PC recommends landlord code of conduct to be negotiated with retailers
o Government has established Retail Council to advise on this, but recognises state governments are mainly responsible
• Similarly, restrictive trading hours serve to make online retail more attractive to consumers
o PC doesn’t agree with the adverse social implications of relaxing labour hours, and proposes that fully unrestricted trading times be permitted in all states
• PC recommends establishment of a task force of experts to design new parcel handling
o Government has agreed and established this to report by July 2012
• PC does not agree that the current $1,000 low value threshold for GST is a major problem to retailers, and also highlights that lowering the threshold today would cost the government more than it would gain but agrees in principle that it should be lowered
o Government has initiated a Retail Council to advise Government on issues of concern to the industry

It’s a 580 page document, but the above is my very, very brief summary of the overview.

Best wishes for Christmas trading and the New Year, and if I can be of any assistance to make your systems more productive, please don’t hesitate to contact me at your convenience.

Sincerely,

Julian Josem
Managing Director & Principal Consultant
www.josem.com.au



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