Lean times ahead as part time work trend leads to vicious circle

The fallout from the rise of part time work and an imminent property slowdown pose a serious threat to retailers.

 

The sharp rise in part time work spreading across the nation is much more than a statistic — life is tough for a lot of non-government enterprises and they are making sure that they use their labour in the most efficient way.

This greater efficiency in employment is going to change the way people live and the business strategies required to win in this new environment.

The increased use of technology means that less labour is often needed and that is a trend that will accelerate in the years ahead as a large range of service providers like banks slash the labour content in their operations.

In addition the dismissal rules are so harsh in Australia that enterprises of all types employ people on casual and part time basis until they really feel confident that they have the right person and can use that person’s services full time. Accordingly, we are looking at a long-term trend.

But, on the other side, the lack of job security affects spending.

For those enterprises selling goods and services the consumer fall out from more part time work is just as big a revolution. There is greater competition for the consumer dollar in areas where people are being squeezed on the income front.

Nothing illustrates there repercussions better that the revelation that the volume of supermarket sales is virtually stagnant except in areas where there is population growth (Supermarkets fighting for share in stagnant market, Oct 10).

And so we have the chilling sight of groups like Woolworths, Coles, Metcash and Aldi investing billions in a fight to increase their share of a stagnant market. That’s not good news for shareholders.

To make matters worse, the strategies being adopted in the market battle — fewer goods and less service — is the wrong strategy to tap the wallets of those in the community with more discretionary cash.

David Jones can see a gap created by rivals trying to win on price and is planning an up-market thrust into the food market. And that’s exactly what all enterprises must consider: how can they tap the more affluent market.

But care needs to taken because currently major sections of the more affluent market are spending confidently because their dwelling or dwellings are rising in value.

Morgan Stanley are predicting a much more subdued real estate market in 2017 and they believe it may curb consumer spending (Apartment glut could put a brake on the broader economy, October 21).

Down at the Reserve Bank the traditionalists will be saying that it’s time to reduce interest rates again and the Australian dollar is weakening in anticipation.

But, unfortunately, once interest rates get to this level, there is limited stimulation for groups like supermarkets because the younger generation is spending spare cash on eating out rather than supermarkets and, members of the older generation, who are big users of supermarkets, often have less income when interest rates fall.

And with the federal government borrowing to pay pensions and facing the grim prospect of losing Australia’s triple-A credit rating because of spending, there is not much scope for extra stimulus from Canberra.

And so it becomes a battle for the consumer dollar where there will be winners but also losers. But most of the profit increases will be achieved by lowering costs including the use of better utilised part time labour. It’s a vicious circle.