Some selfish Aussies are unhappy with $620 million worth of unwanted Christmas presents, according to research for some free publicity for an online selling platform. Comment below if you wish as we take a brief look at it?
Yet another Adelaide small business retailer, Judells, is closing citing a variety of reasons. It is a sign of the times so let us look at both sides of the coin.
I read public comments on Facebook as well as the news article where a Judells spokesperson outlined some of the reasons for closing. Let us first look at the latter and other reasons why other Adelaide small businesses have closed in the last two or three years. Rent, power bills, competitors, penalty rates and consumer confidence are among these reasons.
Adelaide small business woes
Distraint for rent is one of the reasons as rents have become excessive. Some companies will put a sign on their front door saying that they have closed due to the end of their lease. Sometimes this might be true and they are moving. However, it is usually because the rent went up too high and this combined with cheaper local competitors has driven them out of the area or out of business altogether. Other times the landlord has opted to not renew the lease so that they can jack the rent up and find a higher paying, different type of business as the tenant. This may not be the case with Judells but countless empty CBD shops and offices are currently a sign of landlord greed. Companies have voted with their money and moved to the city fringe for cheaper rent. Excessive rents only force up the price of the product or service and consumers will not pay that higher price.
Judells mentioned that power bills in one eastern suburbs shopping centre was one factor in the decision to close the store there. Unfortunately we have the third highest electricity bills in the world in this state, depending on whose statistics you chose to believe. It has been a big reason why many small businesses have closed in recent years. The carbon tax crippled small restaurants and the owners said that they had to close or go bankrupt. The price of electricity since then has continued to be a great fraud in this state and there is no sign of that changing in any hurry. Cheap power helps businesses a lot better than crippling power bills but how can we change the situation? Excessive power costs only force up the price of the product or service and consumers will not pay that higher price.
Some fashion stores are the big guys from overseas. Very few local family businesses can compete in fashion retailing or in anything else that has much bigger competitors in the market. We have seen that with small hardware stores as another example recently where Masters was blamed. Big companies can screw their costs right down from manufacturing to transport to retailing and most, but not all, of the wages for all of those. Small businesses do not stand a chance where their costs and subsequently their prices are higher. Higher costs means overpriced rubbish and consumers will not pay that higher price.
Penalty rates are often blamed for business closures. It costs more to pay staff on weekends than it does during ordinary hours during the week. Many small business owners have publicly said that they have to do the weekend work themselves and have less staff working there then. Higher wages pushes up the price of products and services and consumers will not pay the higher price.
Add it all up and you can see some of the reasons why prices are so inflated in this state and across Australia. It wreaks havoc on consumer confidence when there is so much uncertainty over job security and the the high cost of living (food, fuel, taxes, rents and mortgages and the price of consumer goods). People have said to Judells that they just cannot afford to shop there. Plenty of small businesses are all experiencing the same phenomenon at the moment.
The consumer’s woes
Now let us look at the other side of the coin from the consumer’s perspective. Sometimes you see social media comments blaming the businesses and other times you see people blaming the consumer for wanting everything for free. Other comments take the side of consumers. Yes there are non-essential businesses offering products or services that are parasitic in nature. More of these businesses need to close because some market consolidation must occur in uncertain times. But some businesses are well managed but still under outside influences that they can do little about no matter how hard they try to factor those into their planning. The rest offer overpriced products and services anyway and consumers instead seek cheaper alternatives. Very few handcrafted products are made here with the price to match the quality and craftsmanship. Consumers can only afford to buy when they have consistent work to save up money.
This problem of saving up money is the real problem in this state. Householders are slugged with high water and electricity bills and high council rates and state taxes and levies. Fuel prices have been high for years until recent times. Bracket creep in federal tax is a disincentive for some people to take an extra shift or two at work if they can get it because they end up with less net pay. Food prices are high, the cost of dining out is high, clothes are expensive, mechanical repairs on the car are costly, and on and on it goes.
Then comes the double whammy of job uncertainty. When retail and hospitality workers especially are “lucky” if they get 2 shifts a week at work then how can they afford everything? Get a second job? That is not easy when there are thousands of other underemployed plus the unemployed all competing for limited vacant jobs. A lot of the other work in this state has been temporary and short term contract work for decades. The gig economy is too small in Adelaide. People can spend weeks or months being unemployed in between construction, major event gigs, and others. It is like temping but without the continuity of going from one temping assignment to another. All of this and companies laying off workers every week just about leads to consumer uncertainty. Consumers are forced to be selective in what they buy and from where they buy it.
Attacking weekend penalty rates is bad news for the local economy and for those small businesses desperate to see it brought in across the board. This adds to consumer uncertainty as well. There is ZERO evidence that any group of small businesses will employ new staff or give current staff any additional work if weekend penalty rates are slashed. What we do know is that the workers who work mostly on weekends will have less income to spend in the local economy. That has a multiplier effect, especially if every industry slashes penalty rates. When even less people can afford to buy the overpriced garbage in shops then it comes back to bite the greedy retailers who wanted penalty rates to be slashed. Their businesses will lose money hand over fist and close, as will others who see profits decline. Does not make much sense in deliberately wrecking the local economy then, does it?
Perhaps it is not hard to understand why consumers want everything for free everywhere like they always seem to at local markets for example? If they have no job security and the cost of living is continuing to spiral out of control – with real wage growth being less than 1 percent last year – then have a think about it? Consumers have seen their quality of living eroded as poverty increases. They are just not buying what they once could afford to buy and are instead focusing on necessities. That means that they are leaving a long list of other things to buy if and when they can (car repairs, new clothes, replacing broken household items, and so on before the extravagant things like dining out). So why do you think that more and more small businesses are hitting the wall?
Look at the local newspaper on any given day. They want you to not only pay for poor quality “journalism” but then they want you to get out there and waste money on the following:
Their ads disguised as news, reviews and so on encourage you to forget your job uncertainty and just get out there and waste what little money you have. Then when people are broke the media laughs at the poor and criticises them. It just does not wash with many people who are smart enough to ignore it. They have to focus on what they need first. Then they look at what they should buy next (car repairs left too long, for example). Then if they can afford it they can look at travelling the world, getting a designer vagina or plastic surgery to look like Kim Kardashian, and all that nonsense later. Choices must be made and consumers are being very selective at the moment out of financial necessity. Plenty, in fact, said online that they could not afford to run around to all the overpriced major events recently. Some said that they are still paying off Christmas shopping and paying for the children’s return to school.
All this impacts small businesses in a negative way across the wider community. Australians have already put $51 billion worth of purchases and bills on credit in recent times but they cannot keep doing that forever. Gratification delay is today’s norm as our standard of living further erodes and businesses need to get used to it and plan accordingly. Not everyone can afford to shop at Judells and other overpriced retailers at Burnside Village. The real rich buy overseas. The lonely plastic surgery set, who are pretenders, shop at Burnside Village to be fussed over by blissfully unaware shop staff. They then have to gingerly tip-toe around all the bogans and ferals that have infested the eastern suburbs and shop at Coles but nowhere else in Burnside Village because they cannot afford to. Pretenders with credit cards are limited in numbers but everyone else has to spend wisely most of the time.
So Adelaide small business is doing it tough because so to are consumers. It is a vicious circle and something has to give. You cannot keep flogging a dead horse and expect it to do anything. The excessive cost of business combined with the excessive cost of living for consumers with job uncertainty is sending businesses to the wall. Bringing in immigrants to take more jobs is not the answer, like the property developers would have you believe that it actually is. Building more apartments for absentee foreign investors to leave vacant will not make local businesses rich. Bringing in tourists will not solve the problem on its own, either, because we need industry diversification and less red tape hindering those wanting to start a business.
If people are delaying marriage and children then why would they buy the overpriced rubbish that many businesses are selling if they cannot afford to? Former Judells customers said on Facebook recently that they found the prices too high, the “fashion” outdated, and the customer service bad going back many years, with some saying they never shopped there again. Naturally the company was blind to that and made no mention of it to the media. The closure of Judells was inevitable for these and other reasons outlined above. Other businesses have seen the same thing happen. We seem to be stuck with no light at the end of the tunnel? This is why net interstate migration is on the rise. No surprises there really when it seems to be the only way out at the moment?