27/08/2020 - 10:46

Pain tolerance tested as business battles on

27/08/2020 - 10:46

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Many small businesses are optimistic after the challenges of recent months, citing the state’s border bubble as a contributing factor.

Pain tolerance tested as business battles on
Kevin Sanderson says consumers are keen to support local businesses. Photo: Gabriel Oliveira

Retail sales in Western Australia in June were higher than any month on record, outside of the Christmas period.

Nearly $3.2 billion ($3.3bn seasonally adjusted) went through tills across the state, according to Australian Bureau of Statistics data.

The numbers also indicate some positive news for employment in the retail sector.

(click here to view a PDF version of the full special report)

ABS payroll data showed retail jobs down only 0.9 per cent since March 14, compared to a fall of 6.6 per cent as at early May.

All of that suggests retail, a good bellwether for economic activity, is recovering.

However, WA isn’t out of trouble yet.

There’s the risk of a second wave of COVID-19 and a real potential for business failures as programs such as JobKeeper and insolvency protections are wound back.

Those who spoke to Business News were mostly optimistic.

Fremantle Corner Store owner Kevin Sanderson said consumers were keen to spend in the local economy, and the state’s strong border approach was contributing to their confidence.

“We’ve been very busy this first part of the new financial year, although we’re still down,” he said.

“It’s not like people can go on holidays overseas.”

Corner Store is one of many WA small businesses to have adapted its strategy as the shutdown hit.

Mr Sanderson said the retailer was not told to close, but did so for a period out of consideration for staff and customers.

Online sales, and making appointments for customers to come in store, became key.

“We shifted … we had an online presence anyway, a robust platform that kicked into gear when this all hit,” he said.

Mr Sanderson said Corner Store had broadened its offering since reopening, with a studio space for yoga and photography.

“That’s going very well, people are wanting to get back out,” he said.

Adapting strategies was a common theme among those small business owners who spoke to Business News.

Genotyping Australia rapidly expanded into processing COVID-19 tests, with staff numbers up from three to 13 in a month.

“We’re a genetic testing company, we were mainly specialising in agricultural and aquatic testing,” chief executive Mark Castalanelli said.

“We have lots of equipment that can process large numbers of samples every day.”

Pathology lab equipment was similar, he said.

Part of Genotyping’s bigger offering included two fly-in, fly-out staff members for a remote lab on Barrow Island for Chevron’s Gorgon project, to test the island’s workforce.

Dr Castalanelli said the market for COVID-19 testing might not last, but the company’s core business was also growing.

Accelerated 

Bunbury retailer The Green Depot, which sells indoor plants and floristry services, boosted its existing online growth plans amid the pandemic shutdown.

Co-owner Bronwyn Snelling credited that move with helping keep sales flowing.

“COVID-19 pushed us to act quicker on those plans,” Ms Snelling said.

“[Otherwise] maybe it would’ve been a slower transition over three to six months.”

Located in the Bunbury CBD, the business kept its doors open as much as possible during the restrictions, despite being ineligible for JobKeeper support or a rent relaxation.

“Having a small CBD in Bunbury, everyone was aware of everything everyone else was doing … we tried to band together,” Ms Snelling said.

“When there was a full lockdown, it was like a ghost town.”

Ms Snelling warned a second COVID-19 wave would push many businesses over the edge.

She supported continued border restrictions.

“Avoiding a second wave is going to be key for a lot of businesses in our town, particularly as a regional centre,” Ms Snelling said.

“If there’s going to be a second wave, there’s going to be a lot of people who won’t make it through.”

Similar to other business owners, she said the border controls gave consumers confidence to spend.

Gerry Matera owns three businesses in different sectors, with each presenting a different perspective on the pandemic’s impact.

The biggest hit had been to Gather Foods, Mr Matera said, which operated a Bayswater facility and a Beaufort Street delicatessen employing 12 people.

“The food business was probably the scariest because everything went into shutdown,” Mr Matera told Business News.

“Honestly, it gave me a few sleepless nights.

“We went online and started doing home delivery.”

The deli also broadened its offering from bespoke foods and ramped up its marketing.

Meanwhile, Mr Matera’s security business, Eon Protection, has won contracts for COVID-19 related work.

“We were looking after homeless people across Perth, housed down in Coogee at a shelter,” he said.

Another tender is in the pipeline for hotel security.

Mr Matera’s third business, Marawar, had taken on more construction and maintenance work, with the government’s infrastructure stimulus package offering opportunities.

He was also supportive of a strong border, for now.

“It does secure our economy and give people a sense of normalcy,” Mr Matera said.

Gerry Matera says his food retailing business has been hit harder than his construction and security businesses. Photo: Gabriel Oliveira

Adapting

Small Business Development Corporation commissioner David Eaton told Business News the pandemic and shutdown had put the focus on flexibility and the capacity to adapt to different business models.

“COVID has brought into focus the need to revise and adapt,” Mr Eaton said.

He said there had been increased focus on businesses’ financial situation, contracts, mental health, and digital literacy.

Mental health was important all the time, but particularly so for small business owners now, during a period of great stress, Mr Eaton said.

The increased use of technology was a major consideration, he said.

That varied from electronic bookings to new digital sales channels supplementing bricks-and-mortar stores.

The economic impact of the pandemic had been deeper than the GFC, Mr Eaton said, because of behavioural change in addition to the financial impact.

Small Business Lounge founder Brooke Arnott said many operations had boosted their online presence, using e-commerce platforms supported by marketing, particularly on social media.

Ms Arnott said her team had done a lot of work in cash flow forecasting, and testing clients for JobKeeper eligibility after recent rule changes.

There would be a bit of pressure as that program was gradually reduced, she said, although local businesses were generally faring better than in many other places.

“In WA, we’ve been very lucky,” Ms Arnott said.

“The small business community here in Perth, aside from hospitality, tourism, beauty… has been flowing along well.”

Edith Cowan University Business and Innovation Centre manager Desiree Walsh said while WA was experiencing a healthy recovery, it had been an incredibly stressful and uncertain time for many small businesses.

And while some had a view that businesses were impersonal, recent months had shown how heartbreaking it could be.

That included social impacts, such as marriage stress or owners needing to sell their homes, and long periods with insecure accommodation. 

“It has been a terrible time for everyone,” Ms Walsh said.

“It’s quite a different sort of economic disruption. It’s affecting everybody.”

Businesses with leases were under particular pressure, she said.

The silver lining was that many businesses had been flexible and pivoted their offering.

Those who had long acknowledged a need to improve social media presence had taken action to do it, Ms Walsh said, and businesses would be more willing to take advantage of advisory services.

Ahead

Just 21 WA businesses entered administration in June, according to Australian Securities and Investments Commission statistics.

That compared to 84 in June 2019.

It suggests the federal government’s changes to insolvent trading laws have offered breathing space for businesses.

However, it could also mean a big wave of insolvencies hit when the laws are tightened at the end of September.

This will coincide with a tapering of the JobKeeper wage subsidy payments, which will reduce to $1,200 per fortnight in the December quarter, or $750 per fortnight for staff working fewer than 20 hours.

Ms Walsh said care would be needed to get these policies right.

The government had interfered in the ability of many businesses to trade, and there was an argument for compensation, she said.

It would also be important that struggling small business owners weren’t left in a worse position than those receiving other forms of support, Ms Walsh said.

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