This week, the long-running debate about why Australia has some of the highest retail prices in the world surfaced again. And in a much more prominent and mainstream manner, with The Age, The Sydney Morning Herald and AFR all leading with front-page comparisons of prices for international brands here and around the world.
These were supported by quotes from many of our leading retailers stating that they believed the issue lay with international companies choosing to charge Australia more, because Australians earned more and could afford to pay more.
This debate will continue in buying offices and boardrooms here and around the world, and over time, prices of international brands will continue to fall. While that’s happening, the issue for retailers and manufacturers, large and small, is how to compete, manage costs in the face of falling prices, and retain the confidence of shoppers and consumers.
Parallel importing of international brands, direct sourcing of own brands, and the increasing presence of new brands by both retailer and manufacturers will assist and disrupt that process. While that’s happening, we shoppers will just continue doing what we do best: shop for the best quality at the best price wherever and however we can make that possible.
So here’s a thought, in the face of a $12 billion deficit.
What if over the next five years, no salaries in Australia, for industry or government, moved up at all: zero percent pay packet improvement for nurses, teachers, policemen, call centre agents, CEOs and government ministers. But at the same time, the cost of every single item we buy declined to a level only 10% higher than in the US.
Our cars, trucks, forklifts and motor bikes would be between 20% and 40% cheaper. Our food, clothing, furniture and electronics goods would be 20% to 40% cheaper. Sounds a bit far-fetched? Our pay cheques wouldn’t need to increase for five years and we’d still be able to live?! The cost of living would actually drop?!
Well, as individual shoppers, we are doing that and have been doing that for the past four years. We don’t spend all of our salary. This is shown by our high savings rate. Our food costs have been declining for three years. We buy cheaper Ted Baker wash bags thanks to six ASOS 747 cargo jets a week, directly import cheaper Pirelli tyres, Harley Davidson motor bikes and as many large and small items as we can via the internet or overseas buying trips. And for the big items we happily pay GST, duties, freight and compliance costs.
And new retailers with new brands, from Costco with Kirkland cookies to Zara with fashion-forward clothing, are all selling us more stuff, more cheaply each month. These new international retailers have production and head office costs in euros and US dollars which allow them to have low products costs. But they pay local Australian labour, energy, freight, GST and rental costs in Australian dollars to service us.
Our own major established Australian retailers, distributors and manufacturers are sourcing direct from overseas factories or direct from more efficient local producers. Even small independent corner stores can buy branded biscuits from New Zealand, branded soft drinks from Indonesia and branded beer from Italy. All parallel imported.
Strangely, our real productivity improvements and real increases in quality of life, lie not with government, but within the hands of individual shoppers, retailers and manufacturers driving down prices by our choices.
CROSSMARK CEO Kevin Moore looks at the world of retailing from grocery to pharmacy, bottle shops to car dealers, corner store to department stores. His international career in sales and marketing has seen him responsible for businesses in over 40 countries.