ISBN [online].

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ISBN 978-1-921916-85-4 [online]. © Commonwealth of Australia 2013

This work is copyright. Apart from any use as permitted under the Copyright Act 1968, no part may be reproduced by any process without prior written permission from the Commonwealth.

Requests and inquiries concerning reproduction and rights should be addressed to the Department of Industry, Innovation, Science, Research and Tertiary Education, GPO Box 9839, Canberra ACT 2601.

Disclaimer: The material contained in this paper has been developed by the Australian Workforce and Productivity Agency.

The views and recommendations do not necessarily reflect the views of the Australian Government, or indicate its commitment to a particular course of action.

The Australian Government and the Australian Workforce and Productivity Agency do not guarantee or accept any legal liability or responsibility for the accuracy, completeness, or usefulness of any information disclosed.

The Australia Government recommends that users exercise their own skill and care with respect to their use of this paper and that users carefully evaluate the accuracy, completeness and relevance of the material in the paper for their purposes and where necessary obtain any appropriate

professional advice relevant to their particular circumstances. The paper can be accessed at www.awpa.gov.au.

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The issues paper

The Australian Workforce and Productivity Agency (AWPA) and Service Skills Australia are preparing a study of skills and workforce development issues within the retail industry with a view to

identifying and addressing issues for the industry as a whole, for enterprises and for individuals. The key objectives of this study are to:

 examine factors which are impacting on industry workforce needs over the coming 5–10 years, including changing demographics, opportunities arising from the Asian century, economic change, technology, and human capital

 analyse sources of skill supply and demand into the future

 identify specific issues in relation to skill supply and demand and skills formation particularly in relation to the high proportion of unskilled workers, low engagement with VET and higher education, the need for improvement in school-based programs and workforce development practices for example in job design, recruitment and retention.

This paper is designed to elicit industry feedback and suggestions. It is structured as follows: Part one presents a picture of the retail industry from the data.

Part two provides an overview of drivers of change in the retail industry, noting key trends and implications for the workforce.

Part three explores how workforce development challenges for the industry might be addressed. Part four contains information on consultations and how to make a submission to this issues paper.

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Executive summary

The retail industry employs more than 10 per cent of the entire Australian workforce and is the second-largest employing industry in Australia. Sales assistants, who make up close to 40 per cent of the retail workforce, are the largest occupational group in Australia.1 The industry is large, diverse and complex. A number of characteristics set the retail workforce apart from other industries. It has one of the youngest age profiles, with almost three-quarters of workers aged under 45 years and more than a third aged 24 years or younger.2 Fifty-six per cent of the workforce is female and 48 per cent are employed part-time.3_{Forty-one per cent of the retail workforce is employed in large enterprises (those that}

employ 200 workers or more), while 38 per cent are employed in small-sized enterprises (those that employ less than 20 workers). 4 Apart from retail-specific occupations, the industry also employs a number of non-industry specific occupations in areas such as finance and accounting, marketing and public relations, logistics and ICT.

There are immense opportunities for Australian retail in the continuing development of Asia, and the growing appetite for consumer goods and services among Asia’s emerging middle classes. At the same time, globalisation presents the industry with the challenge of international retailers establishing

themselves in Australia and competing in the local marketplace. In order to capitalise on its geographical location, Australian retailers will need to develop knowledge and capability to identify opportunities within the global market; provide appropriate goods and services to international customers; and compete with large international retailers who can benefit from economies of scale.

Retailers operate in a market where confidence, consumption and spending patterns are continuously changing. While Australian consumer confidence improved in 2009 following the global financial crisis, it deteriorated throughout much of early 2011.5 The household savings ratio is now at around 10 per cent, which is about the same as the mid-1980s.6 Meanwhile, the growth in household consumption has slowed from around 2007.7

In volume terms, retail sales have increased substantially over the last two decades as a share of household spending. In nominal terms, however, the movement has been exactly opposite, with retail turnover falling as a share of household consumption. The difference between these two measures reflects the fact that the price of Australian produced services has been rising faster than retailed goods.8

The composition of retail sales is also changing. Fresh food sales have continued to trend up quite strongly, as has spending on eating out and on ‘other retail’ (including for example, stores selling mobile phones). For some years, however, spending in department stores, and spending on clothing, footwear

1

Australian Bureau of Statistics, 2013, Labour Force, Australia, May, cat. no. 6291.0.55.003, ABS, Canberra.

2

3

DEEWR, 2012, Australian Jobs 2012, Australian Government, Canberra.

4

Australian Bureau of Statistics, 2012, Australian Industry, 2010-11, cat. no. 8155.0, ABS, Canberra.

5

Westpac Banking Corporation, Australian economic reports, www.westpac.com.au/about-westpac/media/reports/australian-economic-reports.

6

Reserve Bank of Australia, Chart Pack—Household Sector, www.rba.gov.au/chart-pack/household-sector.html.

7

Stevens G, ‘The cautious consumer,’ Address to The Anika Foundation Luncheon, Sydney, 26 July 2011.

8

Productivity Commission, 2011, Economic structure and performance of the Australian retail industry, Productivity Commission Inquiry Report No. 56, Commonwealth of Australia, Canberra.

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and household goods has been growing only slowly. This is true in volume terms, and even more apparent in dollar terms.

Technology poses significant challenges to the industry. Online retail is growing, with online sales expected to account for 9 per cent of retail sales by 2016, compared to the current 6 per cent. Two-thirds of Australian consumers are now using the internet for shopping.9_{In addition a suite of options is}

emerging for in-store marketing including the use of smart devices and other interactive technologies. There is an emerging need for data analysis skills to understand and respond to the preferences of individual customers, with specialist skills required to access, design and implement new technology solutions.

At the same time, the industry has a relatively uncredentialled workforce. The majority of workers in retail (62 per cent) do not hold post-school qualifications, compared to 37 per cent for all industries.10 While Certificate II and III qualifications in retail operations are the predominant qualifications, 43 per cent of employers used unaccredited training in 2011 and more than half (77 per cent) used informal training.11 Traditionally, the industry has provided employment opportunities for young people and women. It provides opportunities for people who are attracted to the casual and part-time work opportunities on offer while they study, for instance, or undertake caring responsibilities.

Now, however, employers are finding it hard to recruit suitable staff, battling the perception that the industry is low-skilled and lacks good career prospects.12 Staff turnover is higher than average.13 While a career progression framework is outlined in the industry training package and higher education

offerings, it is poorly understood and underutilised. Strategies to improve recruitment and retention could include expanded opportunities for training and development including for casual and part-time staff, job redesign to allow employees to undertake a wider variety of tasks, and structured career paths within organisations.

Employment in the top retail occupations is expected to grow modestly both in the short term and in the medium term to 2025.14 Because of its high proportion of young workers, the challenges of an ageing population will be keenly felt as other industries compete for a dwindling pool.15 Job redesign to reduce more physically demanding aspects of sales roles could help the industry to recruit and retain older employees. New technologies could enable a change of this nature, and the demand for more sophisticated interpersonal skills to engage customers may provide a better fit for mature-age workers. There is evidence that this shift is already occurring, with the number of workers aged 45 and over in retail increasing by 16 per cent between 2005 and 2013, compared to 5 per cent for the industry as a whole.16 At the same time, it is important that VET in Schools (VETiS) can attract students and provide

9

Pricewaterhousecoopers and Frost & Sullivan, 2012, Australian online shopping market and digital insights,

www.pwc.com.au/industry/retail-consumer/assets/Digital-Media-Research-Jul12.pdf; Jude G et al., 2012, How you can join the omnichannel shopper in transforming Australian retail, Telstra, Australia.

10

11

NCVER, 2011, Australian vocational education and training statistics: Employers’ use and views of the VET system, NCVER, Adelaide.

12

Australian Centre for Retail Studies, 2011, The war for talent, Monash University, Melbourne.

13

Australian Bureau of Statistics, 2012, Labour mobility, Australia, February,cat. no. 6209.0, ABS, Canberra.

14

Australian Bureau of Statistics, 2013, Labour force Australia, February, cat. no. 6291.0.55.003 (DEEWR trend), ABS, Canberra.

15

16

Australian Bureau of Statistics, 2013, Labour force Australia, detailed quarterly report, comparison of May 2005 and May 2013 quarters, cat. no. 6291.0.55.003.

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them with quality training and viable employment options. Industry concerns about the variable outcomes of VETiS programs may reflect the fact that many do not include work-based application. Small-to-medium enterprises (SMEs) face particular challenges in workforce development owing to the difficulty of releasing staff for off the job or other forms of training, and they are unlikely to have dedicated human resources personnel who can support a broader focus on other workforce

development strategies such as career pathway development, job redesign and talent management to help with staff retention.

Management and leadership is a particular concern for the industry. Managers are typically employed without a formal qualification and promoted internally with minimal development. There is evidence that this has created significant skills deficits among managers, for example in basic financial

management, people management and strategic thinking. While there are some retail-specific management programs, they are generally not well-subscribed. Some look for solutions in stronger professional qualifications while others believe a generalist business degree is more valuable.17 Given the changes in customer expectation, the skill levels of sales staff will become increasingly

important. In addition to the need for higher level technology skills, sales staff also need greater product knowledge, more sophisticated interpersonal skills, and the capacity to provide a unique and compelling experience. Many back office roles are yet to be properly defined. There is also evidence that the sector is reticent in adopting digital technologies.18 A review of the skills needs of current retail occupations in light of new and emerging requirements may be timely.

This retail issues paper is focusing on strategies that may help the retail industry prosper and adapt to the plethora of technological and societal changes it faces. The final report will incorporate suggested policy directions arising from our extensive stakeholder consultations.

17

Service Skills Australia, 2012, Retail futures—Progress report—Stage one, SSA, Sydney.

18

Ernst & Young, 2011, ‘Australia productivity survey—Wastage adds up despite motivated workers,’

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Introduction

The market stall supplying farmers’ surplus produce was probably the first example of retailing as we understand it today. It introduced the concept of displaying goods for purchase and attracted groups of people to browse and buy, which made it into a social as well as a commercial space. As villages and towns grew around the market place, it also became a key enabler of innovation.19 The market fuelled the development of notions of currency, insurance, supply chains and credit, but it also created a space for connection and became a catalyst for wider innovation:

A strong correlation exists between those dense settlements and the dramatic surge in the societal innovation rate… in the dense networks of the first cities, good ideas have a natural propensity to get into circulation… when the first market towns emerged in Italy they didn’t magically create some higher level group consciousness. They simply widened the pool of minds that could come up with and share good ideas.20

The market place, or the retail industry, continues to be central to our sense of community and a significant driver of innovation. While the industry continues to serve the public by providing access to markets for producers, access to goods and services for consumers, and, most importantly, a social experience, it has undergone significant transformation in response to wider changes in technology, society and the economy.

A snapshot of recent developments in the industry demonstrates that retail is constantly innovating. In the past century we’ve seen shops move from corner stores to department stores, to shopping centres and now to the use of online platforms. We’ve seen transactions enabled by cash, then by charge accounts, cheques and credit cards, and now people are using smart devices and cashless systems. Current developments in technology and society mean that retail will continue to evolve even more quickly and more dramatically than in the past.

Not only does retail contribute to the social wellbeing of the community, it is also a driving economic force. Retail is the second highest employing industry within the Australian economy (after Health Care and Social Assistance) employing more than one in ten, or 10.5 per cent, of the entire Australian workforce. 21_{Forty-one per cent of the retail workforce is employed in large enterprises (those that}

employ 200 workers or more), while 38 per cent are employed in small-sized enterprises (those that employ less than 20 workers).22 Thirty-nine per cent of employment in retail trade occurs outside capital cities—slightly higher than the all-industry average of 37 per cent.23_{The retail industry contributed}

around 4.8 per cent ($65.6 b) to the national economy in 2011–12.24

19

Johnson S, 2010, Where good ideas come from: The seven patterns of innovation, Penguin, United Kingdom.

20

Johnson S, 2010, Where good ideas come from: The seven patterns of innovation, Penguin, United Kingdom.

21

22

Australian Bureau of Statistics, 2012, Australian Industry, 2010-11, cat. no. 8155.0, ABS, Canberra.

23

24

‘Industry value added’ is the measure of the contribution by industry to gross domestic product (GDP) at basic prices. Australian Bureau of Statistics, 2012, Australian System of National Accounts, cat. no. 5204.0, ABS, Canberra.

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Included within the retail sector is a wide range of enterprise types, such as supermarkets, department stores, specialty chains, commission-based retail, convenience stores and online. It also includes a range of large employers, retail chains and franchises, but is predominantly made up of SMEs.25

Around half of retail workers are employed part-time (48 per cent) compared with the all-industry average of 37 per cent.26_{Most of this part-time workforce is employed on a casual basis (that is, without}

paid leave entitlements). Retail has more than twice the proportion of casual workers, at 40 per cent, than industry as a whole, with an average of 19 per cent.27

Young people and women are attracted to the casual and part-time work opportunities on offer within retail because they provide a support income while, for instance, studying or caring for children. Employers also value the flexibility of such a workforce to accommodate fluctuations in demand in a retail environment. It is now becoming clear, however, that a largely transient and unskilled workforce creates issues in relation to retention, skill development, and the creation of a viable industry career framework—the industry infrastructure required to be agile and adaptive in the face of change. The industry is large, diverse and complex. It covers 14 sub-sectors: supermarket and grocery stores; pharmaceutical and other store-based retail; clothing, footwear and accessories retail; motor vehicle retail; recreational goods retail; electrical and electronic goods retail; furniture; floor coverings; housewares and textiles retail; fuel retail; motor vehicle parts and tyre retail; non-store retail; and commission-based retail. See Attachment 1 for details.

Key retail-specific occupations include: sales assistants; retail managers; brand managers; retail supervisors; buyers; merchandisers and merchandise planners; and shelf fillers.

In this paper we will distinguish between in-store positions (sales assistants, retail managers, retail supervisors, shelf fillers) and back office and support positions (those employees who work in retail but do not normally have customer contact, such as merchandisers, buyers, human resources, marketing and ICT).

There are also a number of non-retail specific occupations employed within the retail trade covering functions such as finance and accounting, marketing and public relations, human resources,

warehousing, logistics and information and communications technology (ICT).

There is an increasing number of positions required to support online platforms and technology

adoption including areas such as data analysis, online design and development, online customer service, as well as supply chain platforms and logistics of home delivery.

This paper sets out to explore the nature of these changes and their practical impact on the retail workforce in the next five to ten years, particularly in the light of anticipated changes resulting from:

 altered demographics (including the ageing workforce)  opportunities arising from the Asian Century

25

Australian Bureau of Statistics, 2011, Counts of Australian Businesses, including Entries and Exits, cat no. 8165.0, ABS, Canberra.

26

27

Australian Bureau of Statistics, 2012, Forms of Employment, Australia, November 2011, cat. no. 6359.0, ABS, Canberra; Productivity Commission, 2011, Economic structure and performance of the Australian retail industry, Inquiry report no. 56, Commonwealth of Australia, Canberra.

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 restructuring of the economy and emerging industries  human capital and opportunities for re-skilling

 technology (both risks and opportunities and what this means for skill formation).

While these factors will impact on the retail industry in a range of significant ways, such as in legislation, industrial relations and planning, the focus of this paper is on the implications for the workforce and their skills and development needs. Through an analysis of data in relation to the supply and demand of skills, coupled with insights into the culture of the retail industry and the drivers of change both

internally and externally, this paper will provide trigger questions for stakeholders about developing the skills and attributes required for a prosperous and sustainable future for the industry. This feedback will provide the basis for the final report.

The term workforce development relates to those policies and practices that support people to participate effectively in the workforce and to develop and apply skills in a workplace context. It

concerns itself with issues such as recruitment and retention, job design and career development as well as skills formation. Workforce development activities within a firm help improve our productivity by enabling innovation through better management practices and organisational change.28

The Asian Century is set to provide extensive new opportunities for Australian retailing. ‘Asia’ is used in this paper, as in the Australia in the Asian Century White Paper, to refer to the group of nations that stretch from India through Southeast Asia to Northeast Asia, including Indonesia, other Association of Southeast Asian Nations (ASEAN) members (South Korea, Thailand, Malaysia, Singapore, Philippines, Vietnam, Burma, Brunei, Cambodia, Laos), China and Japan.29 Similarly, globalisation will continue to present opportunities and challenges from other regions around the world.

This paper has been prepared in collaboration with a retail industry reference group and incorporates feedback from industry practitioners who were engaged in the first stage of Service Skills Australia research, Retail futures.30 The research involved interviews with approximately 40 people from 21 retail enterprises and included CEOs, sales staff, frontline managers, strategic managers and human resource management.

Industry wide analysis

At this level, the definition of retail will be that used in the Australian and New Zealand Standard Industrial Classification (ANZSIC) 2006:

The Retail Trade Division includes units mainly engaged in the purchase and onselling, the commission-based buying, and the commission-based selling of goods, without significant transformation, to the general public. The Retail Trade Division also includes units that purchase and onsell goods to the general public using non-traditional means, including the internet.31 While some industry subdivisions are covered by other Industry Skills Councils under current

governance arrangements and have been traditionally closely associated with other industry sectors

28

Skills Australia, 2010, Australian workforce futures, Commonwealth of Australia, Canberra.

29

Department of the Prime Minister and Cabinet, 2012, Australia in the Asian century issues paper, Commonwealth of Australia, Canberra.

30

See Service Skills Australia, 2012, Retail futures – Progress report – Stage one, SSA, Sydney.

31

Australian Bureau of Statistics, 2006, Australian and New Zealand Standard Industrial Classification (ANZSIC) 2006 (Revision 1.0), cat. no. 1292.0, ABS, Canberra.

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(e.g. Motor Vehicle and Motor Vehicle Parts Retailing), it is not practical to exclude these subdivisions from industry-level data due to the following factors:

1. The industry ‘retail trade’ includes all subdivisions as defined by ANZSIC 2006, including Motor Vehicle and Motor Vehicle Parts Retailing and Fuel Retailing. While data collected by the Australian Bureau of Statistics (ABS) can generally be disaggregated to exclude these

subdivisions, this is not true of all data sources, including historical data series and education and training collections. Disaggregating specific subdivisions from top-level data therefore means it cannot be compared to other data collections.

2. Disaggregating specific subdivisions (in particular, significant subdivisions such as Motor Vehicle and Motor Vehicle Parts Retailing) from top-level data can result in data distortions.

3. Excluding key parts of the retail trade industry based on governance arrangements risks providing an incomplete picture of key trends within the sector.

Due to diversification a number of significant retailers have broadened their product offerings to include Motor Vehicle Parts Retailing and Fuel Retailing, which have traditionally been closely linked to different sectors. See Attachment 2 for a list of types of retail businesses.

Subdivision and specific occupation level analysis

For analysing supply and demand of specific occupations and workforce development needs, AWPA’s medium-term scenario-based modelling is available at the occupation level. This allows us to

concentrate on specific subdivisions and/or key occupations.

Industry occupation vs ANZSIC occupation classification

There are some retail roles as classified by the industry (e.g. buyers), without a specific ANZSIC classification. While some assumptions can be made for some roles, quantitative analysis in this study will be largely based on ANZSIC classifications where reliable data (both historical and forecasts) is available.

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Part One The retail industry: A picture from the data

The retail industry comprises a wide range of occupations. These include occupations specific to retail such as sales assistants, retail supervisors, retail managers and merchandising, as well as supporting interdisciplinary roles in human resources, finance and technology. ABS data covers all occupations employed within retail trade, including sales-specific roles (such as general sales assistants, checkout operators, pharmacy sales assistants, motor vehicle and parts sales assistants) as well as retail managers, shelf fillers, retail supervisors and storepersons, among other occupations.

Specific functions within retail such as merchandising, buying, retail planning, online retail positions and retail loss prevention are also captured under the ABS Australian and New Zealand Standard

Classification of Occupations (ANZSCO), but this level of detail (i.e. at the six digit ANZSCO level) is generally not available from data sources such as labour force surveys or education collections and has not been included in the analysis below.

1.1

Retail workforce overview

As noted previously, the retail industry is the second highest employing industry in Australia and employs more than 1.2 million people or 10.5 per cent of the entire Australian workforce.

As the table below demonstrates, the largest occupational group in the retail industry is Sales Assistants (General) comprising nearly one-third of employment across the whole sector. However there are a number of other sales assistant classifications (such as Pharmacy Sales Assistants, ICT Sales Assistants and Other Sales Assistants and Salespersons) which in effect means that sales assistant roles make up closer to 40 per cent of the retail workforce. In addition, it is worth noting that sales assistants are the largest occupational group in Australia, with an additional 130,000 workers employed in other industry sectors, such as Accommodation and Food Services, Manufacturing and Wholesale Trade.32

Table 1 Top ten retail occupations

Occupation People

employed

Industry employment ‘000 % of total

6211 Sales Assistants (General) 370.3 30.5

1421 Retail Managers 163.2 13.4

6311 Checkout Operators and Office Cashiers 118.9 9.8

8912 Shelf Fillers 59.8 4.9

6214 Pharmacy Sales Assistants 32.0 2.6

6215 Retail Supervisors 31.2 2.6

6213 Motor Vehicle and Vehicle Parts Salespersons 23.3 1.9

7411 Storepersons 22.6 1.9

3512 Butchers and Smallgoods Makers 19.1 1.6

2515 Pharmacists 18.7 1.5

Total retail trade 1213.5 70.8

Source: ABS (2013) Labour Force Australia, detailed quarterly report, 2012 average of four quarters (cat. no. 6291.0.55.003).

32

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The next largest occupation is retail managers at 13 per cent, followed by checkout operators and office cashiers at 10 per cent.

Workforce profile

The retail workforce has a number of characteristics which set it apart from other industries. It has one of the youngest age profiles, second only to Accommodation and Food Services, with almost three-quarters of workers aged under 45 years and more than a third (34 per cent) aged 24 years or

younger.33 Over half the workforce is female (56 per cent) and 48 per cent of the workforce is employed part-time.34

The retail industry is also characterised by a lack of formal qualification holding. The majority of workers in retail trade (62 per cent) do not hold post-school qualifications compared to 37 per cent for all industries.35 This indicates that retail trade is an industry which provides entry-level opportunities within the labour market, enabling people to gain a foothold in the world of work while pursuing study or other responsibilities.

Figure 1 Comparison of retail industry qualifications

Note: Excludes ‘Level of education not stated’ from total.

Source: DEEWR (2012) Australian Jobs 2012 (ABS 2011 Census Data).

Retail serves as an effective entry point into the labour market, particularly for people seeking flexible hours and conditions, but it also provides longer term career opportunities. Data from the Household, Income and Labour Dynamics in Australia Survey (HILDA) indicates that 21 per cent of respondents working in the retail industry were still attending school, with an additional 16 per cent studying full-time at a tertiary institution.36

Job roles within retail are highly stratified by gender and whether employees are employed on a part-time or full-part-time basis. Analysis of 2009 Australia at Work data reveals that while women dominate

33

Australian Bureau of Statistics, 2013, Labour Force, Australia, May, cat. no. 6291.0.55.003, ABS, Canberra.

34

35

36

Centre for Research on Education Systems, 2012, Destinations survey for the service industries: HILDA survey, prepared for Service Skills Australia, University of Melbourne.

38.7 3.2 20.3 10.5 27.2 61.8 4.1 14.7 7.4 12.1 0 10 20 30 40 50 60 70 No post-school qualifications Certificate (other) Certificate III/IV Advanced diploma/Diploma Bachelor degree or higher

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employment in the retail sector, the employment tends to be part-time and lower skilled, while men tend to be employed in more physical jobs or more senior, permanent full-time positions. Skilled positions in retail are more likely to be occupied by full-time workers, with part-time workers occupying less skilled roles.37

Specialised occupations

The Specialised Occupations List (SpOL) is a tool developed by the former Skills Australia to assist in workforce development planning. ‘Specialised occupations’ are defined as those ‘where specialised skills, learned in formal education and training, are needed at entry level and where the impact of market failure is potentially significant for the economy and/or the community.’ 38 It is not necessarily meant to indicate occupations of greater value.

The only occupation on the SpOL among key occupations in the retail sector is pharmacists. While there are large numbers of people working in associated or supporting occupations on the SpOL within the retail sector, for example in accounting or auditing, these roles are not defined as ‘retail’ occupations per se, as they provide services across a range of industries. As discussed later in this paper, there may be a need to better understand these roles within the retail context.

1.2

Industry skills demand

Demand to 2017

The Department of Education, Employment and Workplace Relations (DEEWR) forecasts an increase in retail employment of 4.1 per cent in the five years to 2016-17, an average of 0.8 per cent per annum, as shown in Table 2 below. This represents a projected increase of 50,400 workers.39

Table 2 Average annual industry employment growth, 2012–13 to 2016–17 (% per annum) Industry

Average annual growth rate

(2012–13 to 2016–17) (%)

Motor Vehicle and Motor Vehicle Parts Retailing 0.5

Fuel Retailing 1.1

Food Retailing 1.5

Other Store-Based Retailing 1.5

Non-Store Retailing and Retail Commission-Based

Buying and/or Selling -0.2

Retail 1.7

All industries 1.4

Source: ABS (2013) Labour Force Australia, February, cat. no. 6291.0.55.003 (DEEWR trend).

Over the five years to 2016-17, strong employment growth is expected in a number of retail industry subsectors (at the ANZSIC three digit level). These include:

 Non-Store Retailing (33 per cent)40

37

Chang J and Travaglione A, 2012, ‘Gender and employment-structure patterns in Australia’s retail workforce: An intra-industry analysis,’ Australian Bulletin of Labour, Vol. 38, No. 4, pp. 315-344.

38

AWPA, 2013, ‘Specialised occupations list,’ www.awpa.gov.au/our-work/labour-market-information/specialised-occupations-list/Pages/default.aspx.

39

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 Specialised Food Retailing (18 per cent)

 Clothing, Footwear and Personal Accessory Retailing (15 per cent)  Hardware, Building and Garden Supplies Retailing (7 per cent)  Supermarket and Grocery Stores (8 per cent).41

Demand to 2025

In the longer term, a range of factors such as changing technologies, globalisation, new patterns of work and the opportunities of the Asian century are making it harder to predict and plan for the future. To deal with this uncertainty, AWPA developed four plausible scenarios of the future to inform its 2013 national workforce development strategy, Future focus.42 These four scenarios provide policymakers with the means to make decisions about the future while helping to manage uncertainty and ensure that Australia has the adaptive capacity to cope with change.

Figure 2 The four scenarios

40

Non-store retailing refers to units mainly engaged in retailing goods without the use of a shopfront or physical store presence, including milk vendors, sole e-commerce retailers and direct shopping units.

41

Australian Bureau of Statistics, 2013, Labour Force Australia, February, cat. no. 6291.0.55.003 (DEEWR trend), ABS, Canberra

42

AWPA, 2012, Future focus: Australia’s skills and workforce development needs – Discussion paper, Commonwealth of Australia, Canberra.

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In Future focus, the medium term outlook (to 2025) shows varying growth rates depending on which future scenario eventuates.43 Under all four scenarios, there will be some employment growth per annum to 2025 for all retail subsectors with the exception of fuel retailing and in other store-based retailing in the lowest growth scenario, Ring of Fire. Employment in non-store retailing and retail

commission-based buying and/or selling is expected to experience the strongest growth. However this is from a relatively small base, with 21,400 workers currently employed in this subsector.44

Table 3 Average annual industry employment growth in four scenarios, 2011–25 (% per annum)

Industry Long Boom Smart Recovery Terms of Trade Shock Ring of Fire

Motor Vehicle and Motor Vehicle Parts Retailing 1.0 0.6 0.6 0.0

Fuel Retailing -3.3 -3.6 -3.7 -4.2

Food Retailing 1.2 0.8 0.7 0.2

Other Store-Based Retailing 0.9 0.6 0.5 -0.1

Non-Store Retailing and Retail

Commission-Based Buying and/or Selling 15.7 15.3 15.2 14.6

Retail 1.4 1.0 0.9 0.4

All industries 2.0 1.5 1.6 0.7

Source: Deloitte Access Economics (2012) Economic modelling of skills demand and supply, Scenario output—detailed employment results.

This data suggests that overall there will be small growth in retail employment whichever scenario eventuates, with fluctuations within particular sub-sectors.

1.3

Occupational demand

As mentioned previously, Sales Assistants and Sales Managers make up the bulk of employment within the retail sector, and there have been slight variations in demand over the previous decade. Table 4 shows growth across key occupations (corresponding to the top ten job roles, as outlined in Table 1). While it is important to note that these figures refer to the expected number of people in these occupations across allindustries, not just in the retail sector, we can anticipate that employment will continue to grow modestly for each of these occupations. However this data does not necessarily capture shifts in employment between online retail roles, back office occupations and other emerging retail areas.

43

A description of the scenarios and the Deloitte Access Economics modelling of employment in each, with state and territory breakdowns is available from AWPA at www.awpa.gov.au/our-work/national-workforce-development-strategy/2013-workforce-development-strategy/Pages/Scenario-Development.aspx.

44

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Table 4 Average annual occupational employment growth, 2012–13 to 2016–17 (% per annum) Occupation Average annual growth rate (2012–13 to 2016–17) (%)

6211 Sales Assistants (General) 0.5

1421 Retail Managers 0.8

6311 Checkout Operators and Office Cashiers 0.5

8912 Shelf Fillers 0.7

6214 Pharmacy Sales Assistants 0.9

6215 Retail Supervisors 0.7

6213 Motor Vehicle and Vehicle Parts Salespersons 0.5

7411 Storepersons 1.5

3512 Butchers and Smallgoods Makers 2.4

2515 Pharmacists 2.4

All occupations 1.4

Source: ABS (2013) Labour Force Australia, February, cat. no. 6291.0.55.003 (DEEWR trend).

A comparison of occupation growth over the medium term (to 2025) across each of the AWPA scenarios shows similar patterns of modest growth for roles such as Sales Assistants (General) and Storepersons. However employment opportunities for Shelf Fillers and Checkout Operators and Office Cashiers are expected to decline under the majority of the four future scenarios.

Table 5 Average annual occupation growth in four scenarios, 2011–25 (% per annum)

Occupation Long Boom Smart Recovery Terms of Trade Shock Ring of Fire

6211 Sales Assistants (General) 1.1 0.7 0.7 0.2

1421 Retail Managers 1.6 1.2 1.2 0.6

6311 Checkout Operators and Office Cashiers 0.1 -0.2 -0.2 -0.7

8912 Shelf Fillers -0.6 -1.0 -1.1 -1.6

6214 Pharmacy Sales Assistants 0.2 -0.2 -0.3 -0.8

6215 Retail Supervisors 2.5 2.2 2.2 1.7

6213 Motor Vehicle and Vehicle Parts Salespersons 0.8 0.4 0.3 -0.3

7411 Storepersons 1.6 1.2 1.1 0.5

3512 Butchers and Smallgoods Makers 1.2 0.9 0.9 0.5

2515 Pharmacists 0.3 -0.2 0.0 -0.8

All occupations 2.0 1.5 1.6 0.7

Source: Deloitte Access Economics (2012) Economic modelling of skills demand and supply, Scenario output—detailed employment results.

Demand for back office and online support occupations

It is projected, on the basis of this and other data, that overall growth in employment in retail will be moderate in the short-to-medium term. However a different mix of occupations may be needed to support a diverse range of retail business models in the future, particularly given the changes in technology and customer preferences that are redefining the industry. For example, DEEWR forecasts significant growth in employment within non-store retailing over the next five years (an increase of 33

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per cent to 2017) while employment within department stores is expected to decline by 10 per cent over the same period.45

While quantitative data sources are limited in the extent to which they can tell us which individual occupations will be most in demand, there are growing indications in the qualitative research that there will be a greater need for technology and ‘back office’ occupations to support online design, display, purchasing, customer service, warehousing and delivery as well as marketing, branding and consumer analysis. Surveyed respondents in Retail futures confirm that there has been a shift away from in-store retail employment in favour of back of house roles: 46

We need a lot of buyers, IT staff and store designers … the back of house workforce is on the increase. The in-store workforce is declining; there is less need for cashiers and other in-store personnel.

The Productivity Commission also suggests that:

Growth of online retailing will result in a redistribution of employment through the economy. The combination of growth in the number of domestic pure play retailers, growth in sales activity of existing pure plays, and growth in activity of the online divisions of Australian multi-channel retailers will contribute to the redistribution of jobs away from bricks and mortar operations to online retailing and services such as website development and maintenance. Employment is also expected to shift to industries linked to retail such as transport delivery services and warehousing as a result of growth in online shopping.47

Past job opportunities offered by online-only retail sites such as Amazon, Groupon, and Ozsale include:  Online category Manager

 Mobile Commerce Designer

 Consumer Relationship Manager Analyst  Delivery personnel.

As online retail is heavily reliant on the development and maintenance of user-friendly e-commerce sites, there will also be ongoing demand for IT specialists in roles such as:

 Data Analyst

 User Experience Designer  User Experience Researcher  Software Development Engineer.

While positions such as Data Analyst and Software Development Engineer have been defined and understood in the context of other industries, there may need to be a better understanding of their role within the retail context, including the extent to which IT services are ‘bought in’ to the sector and/or the extent to which these roles are maintained in-house, particularly in the case of large organisations.

45

DEEWR, 2012, Industry projections to 2016-17,

www.deewr.gov.au/LMIP/default.aspx?LMIP/Publications/IndustryEmploymentProjections, Australian Government.

46

Service Skills Australia, 2012, Retail futures – Progress report – Stage one, SSA, Sydney.

47

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There is little data about the demand for back-of-house, retail-specific skill requirements although Retail futures indicates that there is a demand for positions such as visual merchandisers (both in-store and online) retail buyers, retail planners, brand managers and fit-out designers.48 A number of respondents suggest that many higher-level positions in these areas are sourced from other countries, particularly the United Kingdom.49

Back office positions also include a variety of professionally qualified individuals, such as human resource professionals, accountants and logistics professionals, who are likely to have undertaken qualifications within their area of specialisation and then transfer these skills into a retail context. Many of these occupations provide services to a range of other industry sectors, which creates competition with other industries that are perceived to offer better working conditions, remuneration and opportunities as discussed in the next section.

It is critical that more research is done to more fully understand the contributions and functions of the various non-store retail positions and the skills that these roles require. This will support workforce development strategies to ensure an appropriate supply of trained staff to meet demand for online and back office support staff.

 As an employer or industry representative, do you see that there is a growing need for back office and online support occupations? Which ones in particular?

 To what extent are these occupations filled in-house or engaged through a consultant on a contract basis? If you use a consultant, why is this?

 To what extent is there a need for retail-specific knowledge and skill for these roles?

1.4

Skills supply

There are a number of sources of labour for the retail sector including graduates from VET and higher education options as well as school-based programs. However there are no prerequisite qualifications for a significant proportion of positions in the retail sector. This is reflected in the current workforce profile. For example, in 2011, 71 per cent of sales workers, which accounts for the majority (631,800 workers) of employment in the industry, do not hold a post-school qualification.50 As mentioned previously, the lack of a qualification requirement can be appealing to people seeking casual and part-time work or entry into the workforce, and many employees in retail are attending school or university. Typically people are recruited into retail on a part-time or casual basis and receive informal essential skills training. Some are employed through a traineeship or through a Training Package qualification other than a traineeship, or alternatively on a full time basis supported by internal or unaccredited training programs. Managers most often are developed and promoted through internal programs, which were characterised by Retail futures interviewees as largely focused on enterprise processes. However

48

49

50

Australian Bureau of Statistics, 2012, Survey of education and work, cat. no. 6227.0, ABS, Canberra; Deloitte Access Economics, 2012, unpublished data.

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some managers complete a Certificate IV qualification, or achieve a degree or Masters of Business Administration, some with a retail specialisation.51

VET in Schools (VETiS)

VETiS programs are nationally recognised VET qualifications delivered to secondary school students by registered training organisations (RTOs), which can be the student’s school but also include school-based apprenticeships or traineeships. AWPA and its predecessor Skills Australia have drawn attention in Skills for prosperity and Future focus to the multiple purposes of VETiS programs but noted the variable outcomes when these programs are not followed up by further study or relevant work.52 Although VETiS could be considered a platform for recruiting young people into a retail career, Service Skills Australia reports that there is concern within the industry about the poor quality of some VETiS programs.53

 As an employer, have you engaged with the VETiS system? If so, what has been your experience of VETiS programs?

VET courses

While traineeships in Retail Operations (Certificate II and III) are the predominant qualifications for the retail trade, the industry makes significant use of unaccredited and informal training, as noted in the Productivity Commission report:

Employers in retail were less likely to use the VET system and more likely to use informal training—38 per cent of retail employers used the VET system and 77 per cent used informal training in 2011. By comparison 54 per cent of employers in all industries used the VET system and 76 per cent used informal training.54

The commencement data in Figure 2 below is more encouraging and shows steady enrolment increases (albeit from a relatively low base considering the number of people employed as sales assistants) in a number of Retail Services Training Package qualifications. Commencements in Certificate II in Retail Services have increased steadily at an average annual rate of 5 per cent since 2004. Similarly,

commencements in Certificate III in Retail Operations increased at an average annual rate of 14 per cent since 2004.

The Retail Services Training Package also offers a Certificate III in Retail Supervision, Certificate IV in Retail Management and a Diploma of Retail Management. While the take-up of these courses is lower than the lower level retail qualifications as indicated by the enrolment data in Figure 2, growth in enrolments in Certificate IV in Retail Management has expanded at an average annual rate of 29 per cent since 2004.

51

52

Skills Australia, 2011, Skills for prosperity: A roadmap for vocational education and training, Commonwealth of Australia, Canberra; AWPA, 2013, Future focus: 2013 national workforce development strategy, Commonwealth of Australia, Canberra.

53

Service Skills Australia, 2013, Retail, wholesale and floristry environmental scan, SSA, Sydney.

54

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Figure 2 Vocational Course Enrolments by Retail Qualification (2002–2011)

Source: NCVER, 2012, Students and Courses

There is also concern about the completion rates in retail (see Figure 3 below). NCVER data shows completion rates of around 45 per cent of sales workers in 2007 compared with a non-trade

occupations average of 50.3 per cent.55 The Productivity Commission points out that the high levels of non-completion in retail may be partially due to the fact that a retail qualification is not a prerequisite for employment.56 In its submission to the Productivity Commission inquiry (Economic Structure and Performance of the Australian Retail Industry), Service Skills Australia provided a number of other personal reasons but the majority of reasons (45 per cent of respondents)for non-completion remain related to changes in work circumstances such as resignation from a job, finding a job elsewhere, or the termination of employment.57

55

NCVER, 2012, NCVER report 2: Overview of apprenticeship and traineeship institutional structure, Report for the Apprenticeships for the 21st century expert panel, NCVER, Adelaide.

56

57

Service Skills Australia, 2011, Submission to the Productivity Commission Inquiry, Economic structure and performance of the Australian retail industry.

0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Cert I Retail services Cert II Retail services

Cert III Retail Operations Cert III Retail Supervision

Cert IV Retail Management Diploma of Retail Management

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Figure 3 Vocational Course Completions by Retail Qualification (2002–2010)

Source: NCVER, 2012, Students and Courses

AWPA’s projections to 2025 show that the proportion of sales workers holding a Certificate III or IV qualification will increase from the current level of 10 per cent to 21–31 per cent across the three higher growth scenarios. This trend is also expected to be observed among clerical and administrative workers in the retail sector with the proportion of workers holding a Certificate III or IV increasing from 17 per cent in 2011 to 28–33 per cent in 2025 in the three higher growth scenarios.58

 When advertising for a position, do you find that applicants have VET retail qualifications? Does this affect your hiring decision? Why or why not?

 Do you prefer to use informal (in-house) unaccredited training or accredited training for developing your existing staff?

Higher education

The majority (70 per cent) of workers employed in professional occupations in retail (approximately 51,200 workers or approximately 4 per cent of the retail workforce in 2011) hold a bachelor degree or higher qualification. AWPA’s scenario-based modelling to 2025 show this level of educational

attainment is expected to continue under the three highest growth scenarios, increasing to 75 per cent in the highest growth scenario. Currently, 20 per cent of managers working in retail hold a bachelor degree or higher qualification. This is projected to increase significantly to 29–31 per cent across the three higher growth scenarios.59

There are also a number of retail-specific higher education offerings, for example:

58

59

0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 2002 2003 2004 2005 2006 2007 2008 2009 2010

Cert I Retail services Cert II Retail services

Cert III Retail Operations Cert III Retail Supervision

Cert IV Retail Management Diploma of Retail Management

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 University of Wollongong–Master of Retail Management  Deakin University–Graduate Certificate of Retail Management

 University of Western Sydney ( in collaboration with Service Skills Australia)–Bachelor of Business and Commerce (Retail Management)

 Swinburne University–Associate Degree of Business Administration–(Retail Management)  Victoria University–Bachelor of Business in Retail Commerce.

However, like the VET retail management courses, there is reportedly a low take-up of these programs.60

It is reported that back office occupations are often recruited with specialist, non-retail degrees, such as fashion or accountancy. A small number of these positions are filled internally with some in-house development and/or the completion of a specialist qualification.61

Migration

Interviewees in Retail futures suggested that higher level retail positions such as retail buying, merchandising, planning, marketing and digital skills are sought internationally, particularly from the United Kingdom, because there are insufficient skills in those areas locally.62

The next section of the report considers factors such as demographic changes, globalisation and industry structure and their impact on the retail industry.

 Do you see a need for retail-specific higher education qualifications? Is there a need to distinguish retail management qualifications from generalist management degrees?

 How do you think retail fares in attracting talented human resources, marketing, IT and accounting individuals? Please provide details.

 There have been reports that higher level retail positions such as retail buying, merchandising, planning, marketing and digital skills are sought internationally, particularly from the United Kingdom, because there are shortages in Australia. Has this been your experience and why do you think this is the case?

60

Service Skills Australia and Deakin University report that it has been difficult to recruit students for retail specific management programs.

61

62

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Part Two Issues driving change in the retail industry

In the past five years there has been a broad acceptance within the community that retail is changing, and this has largely been attributed to the emergence of mainstream online shopping. However, the reality is that the drivers of change in retail are much more profound and pervasive. There have been significant shifts in response to a range of factors, which include changing demographics, changed economic circumstances and consumer preferences, globalisation, new forms of competition, a new awareness of the need for sustainable practice as well as new and emerging technologies.

In order to respond to these changes, the industry recognises the need to review what skills are needed, how they can be best used in job roles, how they can be developed and how to attract and retain a skilled workforce through effective workforce development practices.

2.1

Demographic changes

The retail industry has traditionally employed a larger proportion of young people, women, casual and part-time staff than other industries. From the employer perspective this has provided the necessary flexibility to meet changing seasonal demands as well as the ability to customise shifts easily to meet day-to-day needs of the business. From the employee perspective, retail has provided part-time and casual work to allow for commitment to other activities such as study, home duties and caring. It has also provided a useful transition from study to work providing the opportunity for the practical development of employability skills.

However projections of the emerging profile of the Australian workforce overall suggest a number of issues that will impact on employment and recruitment practices within retail.63 It is anticipated that there will be a dramatic increase in the number of older Australians, with the number of people aged 65–84 set to double and the number over 85 set to quadruple by 2050. This will result in a decreasing pool of younger workers. There are currently five working age people for every person over 65, and this is set to almost halve by 2050, to 2.7. The median age of Australia’s population (36.8 years at June 2010) is projected to increase to 38.7–40.7 years in 2026 and to 41.9–45.2 years in 2056.64

Increased living costs and longer life spans are projected to delay retirements and there will be an increase in the number of mature aged workers.

In the future, retailers will be competing with other industries for a cohort of younger workers whose share of the workforce will be gradually declining. This may force employers to seek older employees to fulfill their labour needs.65

As discussed later in this paper, face-to-face sales positions are projected to continue to make up the bulk of employment opportunities in retail. These positions are often physically demanding, requiring long periods of standing, lifting and packing. They are also often part-time or casual with limited career pathways. Many older workers are therefore likely to be more attracted to positions in other industries

63

Department of the Treasury, 2010, Australia to 2050: Future challenges– the 2010 intergenerational report, Commonwealth of Australia, Canberra.

64

Australian Bureau of Statistics, 2010, Population by Age and Sex, Australian States and Territories, June, cat. no. 3201.0, ABS, Canberra.

65

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that can offer greater flexibility, more internal development opportunities, and some security of employment. The retail industry may need to consider job redesign in order to attract and retain older workers. The advent of new technology across the enterprise may well be an enabler of such change, and the demand for more sophisticated interpersonal skills to engage customers may provide a better fit for mature-age workers. According to Service Skills Australia, the sector already appears to be responding, with the proportion of workers aged 45 and over in retail increasing by approximately 15.9 per cent between 2005–2011.66

Nevertheless there is a need for strategies to further support enterprises to bring about the change in working conditions necessary to attract and retain a more mature workforce as well as to compete for the diminishing pool of young workers.

 Have you recruited more, or any, mature age workers in the last five years?  What have been the barriers, if any, to employing mature age workers?

 What can the retail industry do to attract and retain more mature-aged workers?

2.2

Opportunities arising from the global market place

New opportunities for Australian retailers will arise through greater engagement with the global market place. Specifically, there will be new prospects for:

 procurement and warehousing of goods offshore

 servicing the product and services needs of the global consumer  expansion into international markets

 expansion of international business to Australia

 the introduction of new business practices from global businesses and migrants settling here. While there is virtually no region that does not offer such opportunities, the emergence of Asian countries has particular relevance for Australia.

The Australia in the Asian Century White Paper makes the point that Australia is well positioned geographically, economically and politically to benefit from the vastly increased prosperity of Asian countries, including China, India and South East Asian countries. Asia will become the largest producer of goods and services and the largest consumers of them.

Asia has transformed the way the world produces goods and services and it will continue to the production engine of the world and the home to the world’s biggest middle class.67

According to Ken Henry,

In 15 years time, Asia will have 3.2 billion middle class consumers … Those business that are likely … to be successful in the Asian century are those that … are already repositioning their

66

Service Skills Australia, 2013, Retail, wholesale and floristry environmental scan, SSA, Sydney.

67

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businesses in order to market product, whether it’s goods or services, to those 3.2 billion middle class consumers in the Asian region.68

From the retail industry perspective, the opportunity is there to capitalise on this growing middle class, and in particular the appetite for luxury brands, unique products and quality.

Consumers across Asia are becoming more sophisticated and more discerning. As incomes of the middle class increase, consumption choices will become more diversified—including a desire for higher quality, and potentially tailored, goods and services.69

Arguably, Australia’s position in Asia is a drawcard, not only for international businesses but also for tourists, who will be looking to holiday here and spend money on goods and services.

Africa is also an emerging consumer and manufacturing force and ‘the continent will gradually emerge as a serious player on the global economic scene’.70 Retailers are also increasingly procuring goods from a range of countries including Turkey, Bangladesh, as well as markets in Asia, South America, Europe and USA.

The opportunities are immense, but there are also risks and challenges for Australian retailers. Australian consumers are seeking reassurance about practices in all parts of the supply chain. This is particularly relevant for the procurement of goods and services from manufacturers. The public

backlash to the recent tragedy in Savar, Bangladesh—when a garment factory building collapsed with a reported death toll of more than 1,120 and many more injuries—highlighted the need for retailers and brands to take more responsibility in this regard.

International retailers attracted to Australia’s geographic position and relative economic strength continue to establish outlets within Australia. According to Colliers International, there is likely to be an even greater influx of international retailers over the next five years, mainly from the fashion and general apparel sectors. They report, for example, that Zara is planning to expand its current 6 stores to 20, Top Shop from 2 to 15 and Gap from 3 to 15. They identify a number of new entrants to the

Australian market includingUniqlo from Japan, Point Zero from Canada and H&M from Sweden. In total they identify plans for approximately 200 new international retail outlets in Australia in the next five years.71

The impacts of globalisation will bring further challenges. Other countries have different legislative regimes in areas of trade practices, employment law, consumer rights and so on which Australian retailers seeking to expand need to fully understand.

Similarly, cultural differences between countries will demand different types of customer service, language proficiency and particular preferences for goods and services all of which will impact on the merchandise and marketing strategies and particularly on the skills of the workforce.

68

Henry K, 2013, ‘The view on: Australia’s economic future’, The Conversation, 18 June, www.theconversation.com/the-view-on-australias-economic-future-with-dr-ken-henry-15303.

69

70

Juma C, 2013, ‘Africa’s economic growth prospects,’ Harvard Kennedy School – Technology and Policy Innovation at Work,

www.technologyandpolicy.org/2013/02/15/africas-economic-growth-prospects/#.Ua_l-KW9ilI.

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Australian retailers will need access to knowledge and capability to negotiate the complexity of

international relations, to identify opportunities within the global market, to provide appropriate goods and service to an international customer, and to compete with large international retailers who have economies of scale.

 In what ways, as you are aware, has the Australian retail industry been affected by globalisation?  What skills and knowledge do you feel Australian retailers are lacking to take full advantage of these

changes? Are there any other barriers?

2.3.

Restructuring of the economy and emerging industries

Retail spending overall grew quite strongly in dollar terms through to the 2008 global financial crisis. While it has since recovered, the rate of growth of nominal retail turnover (at just over 3 per cent in 2012) remains somewhat below the rate of the first half of the last decade.

In volume terms, retail sales have increased substantially over the last two decades as a share of household spending. In nominal terms however, the movement has been exactly opposite, with retail turnover falling as a share of household consumption.72 The difference between these two measures reflects the fact that the price of Australian produced services has been rising faster than retailed goods. The prices of retail goods have risen less quickly than services because the opportunities for productivity gains through technology have generally proved greater in the goods sector than in services. In addition, tariff cuts, a stronger Australian currency, the shift of manufacturing to China and other low cost

producers, and vigorous global competition, have all led to the price of many retail goods increasing markedly less than the price level as a whole.73

Nevertheless, both the volume and the value measures of the increase in retail sales are important. The volume of sales is related to industry size and the number of employees. The relatively slower growth in the nominal value of sales may largely reflect lower wholesale costs, for the reasons given above, but to the extent that it reflects changing retail margins, the nominal sales value will have a more direct influence on profits and the ability of retail businesses to sustain debt.

There are also a number of other spending pattern changes to consider in order to understand the impact of the slowdown in consumption on retail. The cost of living and households that are ‘doing it tough’ has been a constant feature in public debate in recent years. NATSEM analyses household income and expenditure patterns and has developed indexes for common households types to account for varying income levels, family type, age and other defining characteristics. NATSEM found

discretionary purchases as a proportion of household income increased between 1984 and 2011 for households in all income quintiles. This is also true for the period from 2003 to 2011.74

However analysing household spending on basic necessities, relative necessities and discretionary goods does not provide a full picture of what is happening in the retail sector. The retail sector, amongst others, sells products across all three categories. Some products may even move between categories

72

Australian Bureau of Statistics, 2013, Retail Trade, Australia, May, cat. no. 8501.0, ABS Canberra.

73

74

Phillips B, et al., 2012, Prices these days! The cost of living in Australia, AMP.NATSEM Income and Wealth Report, Issue 31, Canberra.

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over time. For example, computers and mobile phones were considered discretionary in the 1980s but are now classified as relative necessities.75 A further complexity is that the composition of consumption is changing over time across all three spending categories.

Deloitte Access Economics found that over the last six years the composition of consumption in general has also changed. Australians are spending less on, furniture, appliances, fixed line telecommunications, home computers, books and magazines, tobacco and toiletries and cosmetics. Over the same period, spending has increased on rent and mortgage interest payments, health insurance and medicines, private school fees, child care, pay TV fees, internet charges, overseas holidays and other services.76

The composition of retail sales is also changing. Fresh food sales have continued to trend up quite strongly, as has spending on eating out and on ‘other retail’ (including for example, stores selling mobile phones). For some years, however, spending in department stores, and spending on clothing, footwear and household goods has been growing only slowly. This