If you want a sense of the financial pain being felt by some shopkeepers at the moment, all you need to do is peruse the submissions to the Productivity Commission’s inquiry into Australian retailing. Whether anything should be done about it, and if so what, is another question entirely.
As anybody who’s comparison-shopped knows – and as the draft Commission report also demonstrates – the price differential between shopping online from overseas sources, and shopping in Australia, often far exceeds the 10% GST. As my local bicycle shop proprietor puts it, the retail prices on overseas websites are often lower than the wholesale prices from Australian distributors where he has to purchase items.
While currency movements might explain some of this, it’s very difficult to understand how it can possibly be cheaper to air-freight quite bulky goods from a warehouse half-way round the world, than to bring them via a ship and freight them around Australia. I can’t help concluding that there’s gross inefficiencies and feather-bedding somewhere in the supply chain, even if it’s not the local retailers.
Be that as it may, it does seem likely that an increasing fraction of goods will be supplied through online retailing in the future. So what are we to make of this from a “left of center perspective”? What are the societal costs of a relative decline of traditional retailing – and who will bear them? Only then can we compare these to the very considerable societal benefits of online retailing – a wider range of cheaper goods, often with much more information available to aid in the purchase, available more conveniently – and see if what, if any action is warranted in response.
I do have some sympathy for individual retailers. But it’s in the very nature of commerce that business changes over time; those that adapt, prosper, those that don’t, go out of business. By going into business, that is the risk retailers have consciously chosen to take. The emergence of online retailing is just another change.
The fate of retail workers is one that deserves a bit more consideration; shop assistants are (as I understand it) on low pay, often casually employed, and with relatively little job security. But, then again, a large fraction of retail employees are temporarily employed in the sector – students seeking a few hours here and there, for instance. The question is then whether there will be alternative employment available on similar or better terms for those workers. At least in the short to medium term, that’s surely a question of Australia’s overall economic performance – I expect the Luddites to remain wrong for a while yet. A more subtle version of this question might relate to the nature of the alternative work. But I’m having a hard time imagining that working as a shop assistant is so obviously superior than the plausible alternatives that this justifies any particular government action to encourage traditional retailing.
The most far-reaching effects, however, might be on our urban landscape and lifestyle. If we purchase an increasing fraction of our goods online, the amount of space required for retailing might well decline (at least in relative terms), and the rents paid to retail landlords might decrease. I’m not weeping for Frank Lowy, but the financial effects on local government, for instance, are something that I’m not sure has even been considered yet. Nor have the potential changes to land use been thought through. Are we going to see the Australian equivalent of the Dead mall? And what about the social impacts? Are there things about current “retail culture” that are actually worth conscious effort to retain? I’m unconvinced that there are (to say the least) but it’s surely worth having the discussion.
And surely these are more important questions about the future of retailing than whether Gerry Harvey’s fortune is maintained.