Department store chain Myer reported worse-than-expected results today, and Myer CEO Bernie Brookes was quick to cite two familiar reasons: employment costs are too high and Myer is disadvantaged because online retailers from overseas aren’t required to pay GST. It’s a highly selective argument, and very poor basis for claiming that we need to change the rules for online shopping.
Picture: Getty Images
First things first: Myer made a profit of $127 million for the full year. That might not thrill the company or its shareholders, but it isn’t going broke. Making less money than you want is a pathetic excuse to argue that people should be paid less.
Yet this was the comment Bernie Brookes made about the results:
All Australian retailers are being impacted by rising employment costs, escalating occupancy and utility costs, and a GST loophole providing an unfair advantage to foreign retailers.
Let’s examine how true that is in the case of Myer. Earlier this year, we noted that many of the claims Brookes made about what staff were paid didn’t survive close scrutiny. I’m not going to revisit that part of the argument here, though it does remind us that Brookes’ comments on wages deserve careful checking. Instead, I want to look at something much simpler: the claimed ‘rising cost of employment’ and how Myer compares to its peers.
In FY2013, Myer spent $461,582,000 on “employee benefits” (that is, paying its staff). In FY2012, it spent $442,668,000. That’s a percentage rise of around 4.2 per cent year on year. Its claimed staff total (12,500) is the same as in 2012, so we can’t attribute any of the change to a shift in employee numbers.
How atypical is a 3.1 per cent rise? In the same time frame, the wage price index (WPI), which measures changes to hourly wages, went up by 3.0 per cent. So Myer’s staff bill has gone up more than for Australian industry overall.
Interestingly, it has also gone up faster than the retail sector overall, where the WPI rise in the year to June was a lower-than-average 2.7 per cent. End result? Myer can legitimately claim that its wages bill is rising faster than normal (a result I’ll confess surprised me given its elastic approach in some statements about labour costs in the past), but it can’t really make the same claim for the retail sector as a whole.
On the question of GST, it’s a simpler story and one which favours the Myer argument a lot less. We’ve often made the point in the past that goods from overseas are already so much cheaper, even when postage is included, that adding another 10 per cent to the cost wouldn’t make them less appealing. They would still come out ahead.
A quick visit to the Myer site confirms that remains the case much of the time. One current special offer is for a Minx Go Bluetooth speaker for $249. I can easily locate one on eBay for under $200, postage included. Add 10 per cent and I’m still ahead. Myer will sell me Operation for $44.95 plus postage. I can have it from eBay for $30, postage included.
What’s truly annoying about all this is that Brookes’ comments will be endlessly repeated in business media and TV news and held up as “evidence” that we need reforms in both these areas. The numbers don’t show anything of the sort. They may well show Myer faces challenges as a business, but they don’t make any kind of strong case for changing Australian legislation for retailers overall. We’ve heard this argument before (hello, Gerry Harvey); I’m sure we’ll hear it again.
And why does this matter to Lifehacker readers? Because if the cost of goods from overseas is going to be forced up in order to make Australian businesses more competitive, we need to know that enacting those rules would actually make a difference. In the case of Myer, which is arguing that it would, it wouldn’t necessarily.
Similarly, if retail workers are going to have their pay lowered, that should not be based on a claim about rising costs based on a single retailer. The reality is more complex.
[Results via SMH]
Comments
13 responses to “Why The Myer Push To Ditch The GST Is Rubbish”
Employment costs are too high?
So I guess he’s taking a pay cut?
Halving his salary could no doubt bump profit by a few million!
Bernie isn’t paid as well as other retail CEOs. Bernie is one of the few to raise through the ranks. He started at Myer as a Christmas casual.
Much like Gerry Harvey, They like to blame everyone else but themselves for their own shortcomings. The truth in the matter is that all these retailers are sticking to what they currently do thinking it works, even though customers are fleeing in packs to online stores. If these companies want to increase retail spends that need to make it more attractive to buy things instore in Australia rather than online. But seeing as lots of these companies are ignorant. they wont do anything and blame us for their shortcomings.
R.I.P Australian Retail Sector
Look at what a lot of stores in the US are doing now. Charging a $50 information fee, if you don’t buy the item. They had too many customers coming into the store to find out information about a product, then buying it online. Now they get charged.
France is looking at adding a 10% online tax (not just overseas stores, but French online stores), to protect B&M stores. B&M US stores are calling for something similar over there. They argue that online businesses costs are much lower, and companies like Amazon are killing them.
Because charging a fee for looking at something in the store will totally encourage customers to come back .__.
The federal GST should be scrapped. Let states introduce their own taxes on goods and/or services if they like. Similar to the US model. Shelf & advertising prices should exclude the tax in the price (as they are in the US), so as to not confuse people buying an item from NSW when they’re in QLD.
That’s an awful idea.
What possible benefit could there be?
If I had $5 in my pocket, and needed to buy something from the shop, if the price tag says “$4.50” but excludes sales tax, I would have to work out how much sales tax is applicable on that item, and may find that I don’t have enough money to buy it, because the state has decided to raise sales tax on some items to 12.5%, instead of an easy to calculate 10%. Which, under the system you propose, is allowed.
At the moment, RRP usually includes GST, so the price you see on the shelf is what you pay at the register. It’s so simple.
Each state having a different sales tax may have been acceptable in the days before the internet, but now it would be confusing with online purchases. Is the sales tax calculated on where the business is operated, or where the customer is. Does this give a business an unfair advantage by setting up their supply chain in the state with the lowest sales tax?
The US model is a clusterf*ck of complexity, it results from the concept of States’ Rights, rather than being a better system (which it is not). That’s why products are advertised without sales tax, because it is too complex to factor it in across the entire country.
We should be thankful that we have one GST that is 10% across all items in all states. It would make sense for America too, but they have a high level of political inertia, so it’s unlikely that it will happen.
It would create competition between the states, in a bid to lure businesses to base their business in that state. It would also reduce complaints by states saying they’re not getting their fair share of tax. If they set the rate, and the base, they won’t have that argument.
If most people in 1 state want a 6% tax, but people in another state want a 10% tax, why should people in one state be forced to accept the tax rate that others want? Let each state decide for themselves. Most US states, don’t have a tax on services (such as plumbing, electrical, etc.), which should never apply.
It’s not hard to add tax to the price you pay in your head. Same as the ridiculous law change here that forced retailers to add unit prices to their tickets (when some businesses already did it).
at first i thought you were being satirical – now i am just glad your not calling the shots. The cost in overheads to administer a tax system that varies state to state on such a small populous in australia would be much larger than the current national GST system now.
whilst i agree it is not hard to estimate an end cost of say 6% tax to a price why should a consumer be forced to do that – information is a good thing. i am sure most people most of the time can work these things out on the fly if they had to but what about the times when your feeling sick, stressed and rushed where things like mental arithmetic become much harder or after a hard days work and your trying to work out the tax on items whilst also supervising a bunch of young energetic kids.
There are so many B&M stores, they just keep expanding, new shopping centers everywhere. There are dozens of poorly stocked, sad looking MYER stores all over Australia. Why bother with your local MYER when the online experience is so much more exciting, greater choice, your size in stock. And for all these empty MYER stores, the car parks are FULL. There are plenty of B&M stores which sell the exact same items at significant discount to the MYER prices. Online shopping doesn’t even enter the equation.
I run an online store. I pay GST. I compete with people who don’t pay GST.
Myer and Gerry Harvey keep banging on about this but they forget one important point:
People will happily pay 10% extra to get their stuff quickly, deal with an Australian and have the security of a returns policy. That’s how I’m in business.
People, however, will not pay 100% extra for that “service”.
I recently went into a local jeweler to try on a watch I wanted. I knew what I wanted and had got an idea of what I could buy it online for. A watch they had for $220. They offered me a 5% discount if I purchased it there. Good on them.
The watch was on sale by an Australian eBay merchant for $120. An eBay merchant that gave me an invoice showing that they’d paid GST (and as an eBay merchant they also paid postage and 10% eBay fees). I felt like saying “How about you price-match and give 50% off” but didn’t bother because I would’ve got the standard “we don’t price-match online” response.
If it were $150 in store, I would’ve got it there and then. By my maths, they would’ve made 30% gross margin. Instead they got none.
I’m sorry Myer, but the days of getting 100% markup on your warez is over. It’s not GST that’s making you uncompetitive, it’s you.
This. Exactly this. Keep up, retail Australia!
I feel that Myer cannot quite deal with the fact that it is now possible to buy high end fashion/accessories/etc from the internet and that they no longer hold the monopoly/a vast portion of that market. Living as I do in Tasmania, Myer has previously been the only store here where it was possible to get designer threads, now however with the internet it is possible to access an entirely new market. It isn’t so much about GST, or even price, at least for me, as it is about what I can get elsewhere.
Myer needs to realise the internet is competition and step up its practices. Staff aren’t as attentive or helpful as would be expected in a higher end store, and the stores themselves are taking on a more warehouse-y feel. They aren’t going to win if they don’t work for it.
I worked for Myer as a Christmas casual a few years ago (under 21), and I was getting paid a lot less for my age then most of my friends at McDonald’s and similar. I was getting paid less an hour than the job that I had 2 years prior, and staff were not trained and treated like rubbish by the company. There are lots of stores out there paying their staff alot more and provide proper training that are making money, so it’s all their fault. If they really want their staff to provide good customer service then they should pay them more than $10 an hour.