The last two years have been some of the toughest for retail businesses and their employees. Just as pandemic recovery was within grasp, retail business owners are now facing a slew of new challenges including supply chain difficulties, inflation and staff shortages.
Last month, business owners experienced another blow when the National Treasurer Jim Chalmers delivered the daunting news that inflation will continue to outpace wages at least until 2024. Currently sitting at 6.1 per cent, inflation is expected to rise up to 8 per cent, while quarterly wages have only grown by 0.7 per cent for the past three quarters.
Across the country, Australians have tightened their purse strings, placing pressure on retail businesses and their employees who have to contend with decreased profits and wages. Here are some of the key challenges facing retail businesses, as well as some ways in which the government can step in to help these businesses weather the post-pandemic storm.
Pressure retailers face with rising inflation
After two years of being in lockdown, Australian shoppers were eager to hit the stores in the first half of the year, making their mark by breaking records for monthly national spending. The Australian Bureau of Statistics reported that total retail turnover hit $34.2 billion in June, which many thought to be a positive indication of the future. However, rising interest rates along with inflation have caused Australians to re-think their spending, as they cope with increased prices of petrol, groceries and other daily necessities.
With several holidays coming up, business owners might have been looking forward to higher profits. However, The Australian Retailers Association, revealed that just 36 per cent of Australians intend on purchasing a Fathers Day gift (down 4 per cent from last year) and of those intending to purchase a gift, 42 per cent said the current cost of living challenges will impact how much they’ll spend. The continuous rise in the cost of living will likely continue to impact the level of growth retail businesses can experience, and business leaders should brace themselves to see retail growth slow, as compared to previous years.
Cost of living outpaces wages
With the oncoming impact on retailers’ bottom lines, business owners may choose to staff fewer workers this holiday season in order to cope with decreased profits. This creates a ripple effect on retail workers, who may find themselves with fewer shifts and even less wages, compounding the effects of the increased cost of living. Many of these shift workers also typically work paycheck to paycheck and may find themselves at an ever higher risk of financial hardship and job insecurity due to the casual or insecure nature of their work.
This begs the question, should retailers be looking to offer higher wages by increasing their profit margins? This is only a temporary solution to address a long-term problem. In order to ensure businesses will make it through this challenging period, more must be done by the government.
Support for retailers
These struggling businesses deserve more support, as they struggle to keep their heads above water in such uncertain times. It is an unpredictable environment, where these retailers are constantly searching for answers and are receiving little to nothing back. The Labor Party insisted that wage growth and rising living costs were top of mind during this year’s election. However, it is evident that not enough has been done by the newly elected government to support retail business owners and shift workers.
The government should alleviate any further pressure being placed on these small retailers in ways such as providing tax breaks for small and growing businesses to give them the financial stability needed to become profitable again while also being able to attract and retain talent with suitable wages. This will enable business owners to invest in their people and effectively support themselves with the rising cost of living. Along with this, should be an increase in the annual migration cap, to get more people into the workforce and contribute to the economy. Longer-term fixes should look at investing in building talent and training, to encourage more people to consider the retail industry as a career.
Shift-workers are the backbone of the economy and are essential to ensuring our society runs smoothly and efficiently. Retailers provide huge contributions, bringing innovation and jobs to our country, so it’s critical that we lighten the burden for these business owners.
Ashik Ahmed is CEO and co-founder of Deputy.