20/07/2015 - 13:04

WA retail trapped in global net

20/07/2015 - 13:04

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Retail, not mining, has borne the brunt of the slowdown in Western Australia during the past 12 months, with a study of the state’s economy by the investment bank Goldman Sachs revealing a startling decline in retail jobs of more than 20 per cent.

WA retail trapped in global net

Retail, not mining, has borne the brunt of the slowdown in Western Australia during the past 12 months, with a study of the state’s economy by the investment bank Goldman Sachs revealing a startling decline in retail jobs of more than 20 per cent.

Mining’s job decline has been around 7 per cent.

Whether the data from Goldman Sachs is absolutely correct or not, the disparity is so great (given the publicity associated with the resources sector downturn) that it is enough to trigger questions as to what other factors are at work in WA.

Other states in the survey have not experienced anything like the WA retail jobs slide.

Queensland’s big mining sector has been hit just as hard as that of WA, yet that state only posted a retail jobs decline of around 9 per cent while the mining decline has been around 6 per cent – roughly the same as WA.

In South Australia, traditionally a poor performer, there has been no change in retail job creation. There has been a fall of about 2 per cent in Victoria, while in NSW there has been a rise of around 18 per cent.

What Goldman Sachs set out to investigate was Australian household demand on a region-by -region basis, noting that the decade-long boom in WA and Queensland had ended and moved into reverse. No prize for working that out.

But the retail jobs downturn is significantly worse than might reasonably have been expected, and could be pointing to another factor at work at the same time as the mining decline – the rise of internet shopping.

Every household approaches internet retail in a different way, but it does seem to be having an increasingly perverse effect on local retailers, who appear to be suffering from their loss of what once protected them from competition – WA’s isolation.

Until the advent of the internet, many businesses in WA, especially retail, were not exposed to the same level of competition as those in the more populous states. Other states also benefited from being closer to the source of original supply of manufactured goods, and retailers there had the benefit of higher sales volumes, which help keep prices down.

Today, WA is plugged into the national supply chain, with local shoppers able to hunt for bargains on the internet in a way that has never before been possible.

Much of what’s happening is anecdotal, but most people in WA have hunted for an item of clothing or household appliances in local shops, and then found that the same article is available at a lower price from an internet-based vendor, even after transport and delivery costs.

Some of what’s happening is a function of internet retailing as it is known worldwide. The collapse of music and bookshops is a global phenomenon.

The rise of internet-based news services (such as the one you’re reading now) is another, with people in WA able to access national and international news immediately, rather than having to wait for the afternoon delivery of Sydney and Melbourne newspapers as once used to be the case.

What could have caused the remarkable collapse in WA retail jobs detected by Goldman Sachs is the combination of WA shoppers embracing internet retail in a wholehearted way (because it does bring greater advantages than elsewhere in Australia) with the effects of that trend being magnified by the resources slump.

Another factor at work in the retail jobs collapse is a significant slowdown in WA’s rate of population growth, which was running at a breakneck annual rate 3.6 per cent in 2012 but has now subsided to a growth rate of 1.6 per cent, with overseas and interstate migration falling off a cliff.

Much of what’s happened in WA over the past 12 months has been well reported and is well understood, because we have been through these boom/bust cycles repeatedly, with a sharp recovery always following a severe slowdown.

For retail, however, this time it might be different; and while it’s never wise to say that (because economic events invariably turn out to be a re-run of what’s happened in previous cycles), it does seem that WA shoppers are developing a greater-than-national taste for online retail thanks to critical factors such as price, convenience and greater choice.

The critical factor for WA consumers is that, after almost two centuries of isolation from the rest of the world, the internet has brought globally competitive goods and services into every household – and that’s showing in retail job numbers.

 

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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