Economic structure and performance of the Australian retail industry

Inquiry report

Released 09 / 12 / 2011

This inquiry report examines the Implications of globalisation for the retail industry and the appropriateness of current policy settings in this environment.

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Government response

Key points
Contents

There are almost 140 000 retail businesses in Australia, accounting for 4.1 per cent of GDP and 10.7 per cent of employment.
The retail industry exhibits great diversity by: size of business, region, retail format, competition within sectors and in the nature of goods sold. Both current trading conditions and longer term trends are challenging. Retail sales growth has trended down over the past half decade as consumers save more of their rising incomes and their spending is increasingly directed towards a range of non-retail services.
The retail industry has met many competitive challenges in the past. Online retailing and the entry of new innovative global retailers are just the latest. The intensified competition is good for consumers, but is challenging for the industry which, as a whole, does not compare favourably in terms of productivity with many overseas countries. And the productivity gap appears to have widened over time.
Australia also appears to lag a number of comparable countries in its development of online retailing. The Commission's best estimate is that online retailing represents 6 per cent of total Australian retail sales - made up of 4 per cent domestic online ($8.4 billion) and 2 per cent from overseas ($4.2 billion). In some other countries, online sales figures are higher and set to grow further, as will also happen here.
Retailers operate under several regulatory regimes that restrict their competitiveness and ability to innovate. Major restrictions which need to be addressed are:
- planning and zoning regulations which are complex, excessively prescriptive, and often anticompetitive
- trading hours regulations which restrict the industry's ability to adapt and compete with online competitors and provide the convenience that consumers want.
Workplace relations regulations may not provide sufficient workplace flexibility to facilitate the adoption of best practice productivity measures in the retail industry, and require examination in the reviews scheduled in 2012.
The current level of the low value threshold (LVT) for exemption from GST and duty on imports of $1000 is judged to be a minor part of the competitive disadvantage faced by retailers. But there are strong in principle grounds for the LVT to be lowered significantly, to promote tax neutrality with domestic sales. However, the Government should not proceed to lower the LVT until it is cost effective to do so.
The Government should establish a taskforce charged with investigating new approaches to the processing of low value imported parcels, particularly those in the international mail stream, and recommending a new process which would deliver significant improvements and efficiencies in handling without creating delivery delays or other compliance difficulties for importers and consumers.
Once an improved international parcels process has been designed, the Government should reassess the extent to which the LVT could be lowered while still remaining cost effective - the costs of raising this additional revenue should be at least broadly comparable to the costs of raising other taxes.

Preliminaries
- Cover, Copyright, Letter of transmittal, Terms of reference, Contents, Acknowledgments and Abbreviations
Overview - including key points
Recommendations
Chapter 1 About the inquiry
- 1.1 What the Commission has been asked to do
- 1.2 Scope of the inquiry
- 1.3 The Commission's approach
- 1.4 A guide to the report
Chapter 2 The role and development of Australian retail
- 2.1 What is the role of retail?
- 2.2 How has the retail industry developed in Australia?
Chapter 3 The structure and performance of the retail industry
- 3.1 A snapshot of the retail industry
- 3.2 Market structure in retail
- 3.3 Indicators of retail performance
- 3.4 Conclusion
Chapter 4 Trends and issues related to online retailing
- 4.1 The development of e-commerce and online retailing
- 4.2 Online share of retail sales
- 4.3 Estimates for online retail share of total retail sales in the United Kingdom and the United States
- 4.4 What is driving online sales?
- 4.5 Characteristics of online purchasing
- 4.6 The slow emergence of online grocery shopping
- 4.7 Rapid growth in m-commerce
- 4.8 Why has Australia lagged online sales of other countries?
- 4.9 Constraints to online growth
Chapter 5 Consumer protection
- 5.1 Australia's consumer protection laws and online retailing
- 5.2 Product safety and warranty issues in online retailing
- 5.3 Online transaction security and protection against fraud
- 5.4 Search engines
Chapter 6 Retail price differences
- 6.1 The Commission's retail price comparisons
- 6.2 Factors influencing retail prices
- 6.3 Conclusion
Chapter 7 Appropriateness of current indirect tax arrangements
- 7.1 Low value importation threshold
- 7.2 The Australian threshold
- 7.3 Overseas indirect tax arrangements
- 7.4 Impact of the threshold on revenue
- 7.5 Processing of parcels entering Australia
- 7.6 Economic principles
- 7.7 Impact of the threshold arrangements
- 7.8 Changing the threshold
- 7.9 Options for reforming processes
- 7.10 Overseas online purchases of intangibles
- 7.11 The way forward
Chapter 8 Planning and zoning regulation
- 8.1 How planning and zoning affects retail in Australia
- 8.2 The impact of planning and zoning regulations on retail competition - overseas evidence
- 8.3 Other impacts of planning and zoning regulations on the retail industry - overseas evidence
- 8.4 The Australian experience with planning and zoning restrictions on competition
- 8.5 Planning regulation and compliance costs
Chapter 9 Retail tenancy leases
- 9.1 The market for retail tenancy leases
- 9.2 What are retail tenancy leases and how are they regulated?
- 9.3 Recent regulation review and reform activity
- 9.4 COAG retail tenancy reform activity
- 9.5 The impact of planning and zoning on the market for retail tenancy leases
Chapter 10 Retail trading hours regulation
- 10.1 Why are trading hours regulated?
- 10.2 What are the costs associated with regulation?
- 10.3 Changing social patterns have led to more liberalised trading hours in Australia
- 10.4 Are there benefits to be gained from deregulating shopping hours further in Australia?
- 10.5 Should retail trading hours be fully deregulated?
Chapter 11 Workplace relations regulation
- 11.1 Introduction
- 11.2 Industrial relations laws and institutional arrangements
- 11.3 Setting pay and conditions in retail
- 11.4 Wages and earnings outcomes and trends
- 11.5 Concerns about awards and labour costs
- 11.6 Workplace flexibility
- 11.7 Conclusion
Chapter 12 Employment, skills and training
- 12.1 Employment
- 12.2 Training
- 12.3 Are labour shortages and skill levels affecting the retail industry?
- 12.4 Conclusion
Chapter 13 Other regulatory burdens
- 13.1 Introduction
- 13.2 Concerns raised with this review
- 13.3 Existing processes for the identification and reform of unnecessary regulatory burdens
- 13.4 Conclusion
Appendix A Consultation
References

Please note: The following appendices are only available online and are not in the printed copy.

Economic structure and performance of the Australian retail industry

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