Retail giants say labour costs, restrictive trading hour laws hurting market

Three of Australia’s retail giants have taken aim at Australia’s labour laws, with Woolworths, Myer and Westfield arguing that big wage bills are preventing them from meeting consumer preferences for longer shopping hours.

Shopping centre giant Westfield says Australia’s relatively higher labour costs are leaving the sector vulnerable to further loss of market share to online retailers.

In its submission to the Productivity Commission’s inquiry into the retail sector, Westfield says both trading hours and labour laws need revision to “ensure that the Australian retail sector is prepared for the changes in shopping behaviour that are upon it.

“Labour laws prevent many retailers from profitably trading late nights, or on Sunday and public holidays,” Westfield says.

The shopping centre company says retailers wishing to trade beyond 6pm in Australia find the hourly rate paid to retail staff is nearly three times higher than in the United States.

“This is problematic as a proportion of retail sales lost to online retailers would be because of the lack of late night trading options.

“It is likely that late night trade would draw back a proportion of the sales lost to online retailers (say 50% of the 6% currently going online), and so could grow retailers’ sales by 3%.

“However, it is unlikely that this would be economically feasible because of higher labour costs. Labour laws also preclude retailers from hiring staff to work later shifts specifically in the evenings.”

Noting that retail profits have increased by just 1% since 2007, Westfield adds that labour costs in Australia “represent a greater proportion of total sales than that reflected by other international retailers”.

Westfield isn’t the only one drawing attention to labour costs. In another submission, department store giant Myer nominated the labour market structure as a barrier to a “competitive” retail sector.

Myer warns increases in penalty rates for late night and weekend work, to be phased in over the next three years, could have “unintentional consequences”, and argues that retail sales are not growing in line with increases in penalty rates.

Myer says it expects the increases to cost it between $10 and $15 million per year over the next three years, in addition to any “proposed wage adjustment, thereby having the potential to ‘double’ labour costs within the organisation.

“This has the potential to cause a structural review of the composition of the Myer sales workforce and further impacts on the permanent versus casual mix and long term careers in the industry for those seeking the certainty of a permanent role. There are clearly potential unintentional consequences of such changes for careers in the retail sector.”

While Myer currently pays no penalties for periods after 6pm on Monday to Friday and Saturdays from 6am to 6pm, from July it will pay a 5% penalty rate for those periods.

Rather than paying 50% penalty rates for Sundays, this will be increased to 60% in July. Casual loading rates will also be increased slightly under new settings.

“Retail sales across the industry are not growing in line with the increases in penalty rates that have been implemented through the application of the recent General Retail Award,” Myer says.

Meanwhile, supermarket giant Woolworths – which has an workforce of more than 170,000 – has told the Commission that Australian retailers are “constrained by the assumption that shopping still occurs Monday to Friday between 9am and 5pm, which is reflected in the General Retail Industry Award.”

“This indirectly impacts customers because, whilst retailers can negotiate flexibility to open stores outside this period, there is a considerable cost in doing so as retailers must negotiate higher average wage rates,” it says in its submission.

“Woolworths believes, therefore, that it would be appropriate to undertake a review of the penalty rate arrangements contained in that Award to ensure that retailers are able to have the flexibility to employ and use their staff in a way, and at times, that best serve the needs of customers.”