By Michael Baker
LIKE an overcrowded hospital that kicks out a patient before he's completely recovered, Australia's leading policymakers are abandoning small business. The economy, supposedly, is now hopping again. Reserve Bank governor Glenn Stevens is whistling a merry tune and nudging up interest rates, much to the delight of Westpac, Commonwealth Bank and ANZ, which have all taken the opportunity to get their grubby little paws a bit deeper into consumers' pockets.
The policy focus has shifted from the economy to global warming and the camel surplus. And for comic relief we have had Turnbull versus Abbott, helping us get into the holiday mood.
For many small retailers though, the idea that things are mending must seem ridiculous.
At first glance the retail numbers are really not too bad, if unspectacular compared with the go-go years before 2008. For retailers out to capture the consumer's discretionary dollar, sales growth on a year-over-year basis has been bobbing along at just over 5 per cent in recent months.
However, you don't have to scratch too far below the surface to see a big problem, which is that small retailers are taking an awful beating. The chains, according to Australian Bureau of Statistics data, not only secured the lion's share of the spending from the Federal Government stimulus packages, but have gone on to prosper in the months since, while the independents as a group continue to struggle with sales declines.
Excluding eating establishments, the independent retail sector has not managed a sales increase in any month since June and has only managed three months of growth in the past year.
The past four months have been particularly significant because they are largely post-stimulus.
In this time, the chains have had year-on-year growth of 8.2 per cent, with only the department stores significantly underperforming the average. The small retailers have had sales fall by 1.7 per cent, a differential of almost 10 per cent.
This kind of weakness wouldn't be so bad if it were marking strong gains a year ago. Sadly, that is not the case. The 1.7 per cent decline comes on top of a 0.3 per cent decrease in the same months a year ago.
The hardest-hit segments are household goods (down 10.1 per cent), clothing (down 6.3 per cent) and food (up, barely, by 1 per cent).
Independent food service retailers have been the lone standout with sales growth of 15.9 per cent.
They have handily outperformed the food service chains, which consist primarily of fast-food operators.
Why are the independents doing so poorly versus the chains in every category except cafes and restaurants?
The first and most obvious reason is the superior marketing muscle of the large national and regional chains.The second is their ability to undercut the independent players on price. The more price-sensitive consumers are, the more important this factor becomes.
Thus, the huge chasm between chain and independent retailer performance right now is partly just consumers telling us they are still very stretched financially.
Prospects of this changing soon don't appear bright. After falling for a year, household debt service ratios are about to start increasing again because of rising interest rates and weak income growth. Money that could have gone to retailers will be siphoned off by the banks instead.
The job market, at least through October, is still biased towards part-time rather than full-time employment growth.
Fifteen years ago, independents consistently accounted for more than 45 per cent of total retail sales, but now they are hanging on grimly to just 37 per cent and went as low as 35 per cent a year ago. Market forces are pulverising them and this should be a matter of concern to all industry stakeholders as well as the jaded consuming public.
Where are the professional retail training programs in the universities?
Why is retailing just a school vacation job instead of a genuine career?
How can retailing have a better marketing profile so that more talented people are drawn to it?
Huey Long, a governor of Louisiana in the 1920s and US senator in the 1930s, once said that he "would rather have thieves and gangsters in Louisiana than chain stores". Australia's retail oligopolies don't deserve such vitriol. But the governor's words betray how much the preservation of an independent retailer culture means to society.
Some of the independents' problems are just cyclical - they'll come good again as the economy recovers. Some of the problems, however, are self-inflicted and need to be addressed by industry professional organisations, academic and government investigators.
If not, the future of independent retailing will be increasingly grim and our shopping choices increasingly constrained.
Michael Baker is a global retail and property analyst and consultant. He is a former research director of the New York-based International Council of Shopping Centres. He can be contacted at Mbakerconsult@gmail.com