Businesses cannot keep absorbing rising costs, and the November rate rise is likely to be the final straw.
Retailers are dealing with price rises in every aspect of their business, whether it be fresh produce, raw materials, transport costs, wages or rents.
Another rate rise just puts added pressure on all those things, while also further reducing the amount of money customers have to spend.
It’s likely to be the final straw for many, and we’re going to see retailers forced to increase their prices in order to survive, from the price of a cup of coffee and food items, right through to general goods and services.
While our business has managed to keep the price of our core product – coffee – stable for more than 18 months, we’re now also looking at a slight increase as we simply can no longer absorb the rising costs.
We’re looking at what we can do to keep any rise as minimal as possible, but I truly feel for smaller operators who are likely going to have to pass on much bigger rises.
They don’t have any choice.
Government handouts aren’t the answer, but there are steps that can be taken to help reduce the cost of doing business more broadly;
- Fuel excise: The previous Federal Coalition Government halved the fuel excise for six months as a way of providing cost of living relief and the current Government should consider doing the same. The biggest impost to doing business right now is the cost of fuel, and the cost of transporting goods. Higher fuel costs are passed on to every product being ordered right now, whether it’s fresh produce, coffee cups or straws. It all adds up quickly.
- Payroll tax: While the amount paid can vary across states and territories, reducing the payroll tax burden would greatly assist businesses bottom line, and free up disposable income for other business-related costs.
- Supply chain efficiency: Improvements to supply chain efficiency would assist businesses and potentially reduce costs. The reliance on one freight-rail line to transport goods from the eastern states can be challenging, as a single disruptive event can blow out delivery times significantly.
The Council of Small Business Organisations Australia’s July report highlighted that small businesses are currently navigating a perfect storm of economic challenges, including slowing sales growth and rising operational costs.
There’s no doubt current economic conditions are challenging for retailers, and conditions will worsen before they get better.
Unfortunately, it’s going to be a tough Christmas for a lot of people. I fear that for some businesses, even upping their prices won’t be enough to save them, it’s simply become unviable to continue operating.
Warren Reynolds is major shareholder and executive chairman of Muzz Buzz, a West Australian owned and operated business, specialising in Great Coffee on the Go.