Jobs, choice and a 21st century world view

Initial submission to the Qld Government’s Review of Trading Hours

1.0 About the Submitter

The National Retail Association (NRA) is a not-for-profit industry organisation providing professional services and critical information and advice to the retail, fast food and broader service industry throughout Australia. The Queensland-based NRA is Australia’s largest and most representative retail industry organisation, representing more than 19,000 stores and outlets.

The NRA’s membership is comprised of members from all the sub-categories of retail including fashion, groceries, department stores, home wares, hardware, recreational goods, newsagents, fast food, cafes and personal services like hairdressing and beauty. It also includes both large and small businesses, including the majority of national retail chains, as well as independent retailers and franchisees, and other service sector employers.

The NRA has represented the interests of retailers and the broader service sector for almost 100 years. The NRA’s aim is to help Australian retail businesses grow.

2.0 Overview

Queensland has Australia’s most restrictive retail trading hours regime. The Queensland Parliament passed the Trading (Allowable Hours) Act in 1990. Since that time, the Australian retail landscape has changed dramatically, and consumers now have different expectations of when and how they will be able to shop.

They also have greater choice than ever before, including the ability to shop from the comfort of their own lounge room or kitchen table. And yet, legislation that is now more than a quarter of a century old constrains both the choices of Queensland shoppers, and the ability of local businesses to generate economic activity and jobs.

These 20^th-century restrictions also constrain Queensland’s ability to grow as a global destination for business and tourism.

The NRA believes the time has come to bring Queensland’s trading hours regulations into the 21^st century, and to ensure that it continues to meet the needs of businesses, customers and employees in our fast-changing world. The NRA believes that this must occur in order to ensure that:

business owners are not unreasonably restrained from being able to trade;
customers are not unreasonably restrained in being able to shop as they want to;
the needs of south east Queensland’s growing population continue to be met; and
Retailers in the region are able to rise to the challenges of digital disruption and globalisation.

This proposal outlines how removing trading hours restrictions would deliver a $440 million boost to the state, and add the equivalent of 3109 full time jobs. It also provides evidence of demand from the Queensland public for greater flexibility in when and where they are able to shop. And most of all, it will argue that the time has come to ensure that Queensland’s business environment is suited to the 21st century.

3.0 The Ergas Report

In 2014, the NRA engaged economic consultants Green Square Associates, under the guidance of highly respected economist Henry Ergas, to undertake a study of the impacts of trading hour’s restrictions in Queensland, and the potential benefits of liberalising the existing regime. The resulting report has come to be known as the Ergas Report. A copy of this document is attached to this submission.

The Ergas report found that removing the existing trading hour’s restrictions would boost Gross State Product by $253 million, as a result of additional economic activity, greater competition and consumers being able to access lower prices. The report also found there would be a further $187 million in benefits to consumers from convenience and time saving – making a total benefit of $440 million (in 2014 figures) from removing the current restrictions.

The Ergas Report did not consider the added benefits of reduced business red tape in complying with the existing trading hours laws, as these were considered difficult to quantify. However, based on our experience in advising members and operating in the trading hours regulatory space, the NRA believes removing the regulation would bring very significant benefits to businesses – reducing compliance costs and lowering the risk of operating illegally due to confusion over the laws.

The Ergas report (p3) recommended complete removal of trading hours restrictions, saying this would be the least-cost option, and would provide the greatest net benefits to the Queensland community. However it also found that the economic gains from extending trading hours are not evenly weighted across the 24 hours of a day, but rather most heavily favour the next few additional opening hours adjacent to existing trading hours.

For instance, based on current shopping patterns, it is likely that three-quarters of the economic and welfare gains are achievable by extending trading hours by just two hours per day. However, by extending trading hours, shopping patterns will adjust so that further benefits would be achievable by further deregulation.

If the review is not disposed to complete removal of the existing trading hour’s restrictions, a large proportion of the economic gain could be achieved by extending normal trading times by one hour at the start and end of each day. That is, while the Ergas report recommends complete removal of trading hour’s restrictions, most of the gain could be achieved with a state-wide trading hours of 7am to 10pm.

4.0 Consumer Preferences

The National Retail Association conducted a survey of shoppers in relation to the South East Queensland trading hour’s application, which found strong support for more liberal trading hours. This application sought standard trading hours of 7am to 9pm Monday to Saturday for the south-east corner of the state. This exercise revealed that 65 per cent of those people surveyed were in favour of the proposed trading hours on weekdays, and 61 per cent supported the proposed Saturday hours. In comparison, just 16 per cent and 23 per cent respectively were opposed. The results of this survey are summarised below.

Time Support Neutral Oppose

7am – 9pm weekdays 65% 19% 16%

7am – 9pm Saturday 61% 16% 23%

The most common reasons cited for supporting longer trading hours included greater convenience, freeing up time for other activities on the weekend, benefits for shift workers, ease of access and freedom of choice.

The majority of customers indicated that the change in trading hours would not change which supermarket retailer they shop at, but would provide them with greater flexibility about when they shop. A copy of this research is attached to this submission.

The NRA believes that the existing trading hours restrict a fundamental right of Queensland consumers in the modern era – that is, the ability within reason to shop when and where they wish to. For some shoppers this amounts to little more than an inconvenience – either through being forced to wait for their preferred store to open or to buy a specific product that is only carried by a specific retailer. For others, however, lack of competition and inability to access non-exempt stores can be a significant economic burden. Take, for example, a shift worker who finishes working in a mine at 9pm, and is limited to performing grocery shopping at convenience or independent stores rather than major supermarkets. Or a nurse who finishes night duty at 7am, but must wait for one hour before being able to shop at a supermarket. For these workers and many others, being denied access to non-exempt stores represents at best a limit to their freedom to choose where they shop, and potentially imposes an economic penalty on them.

Restricted trading hours also impose the same limitations on tourists and business visitors to the Sunshine State. The Ergas Report found that Queenslanders travelling overseas were likely to encounter much more liberal trading hours than exist at home, while around 90 per cent of the people who come to Queensland from elsewhere are accustomed to more liberal trading hours.

These limitations restrict the ability of major stores to meet the needs of tourists and visitors. In the NRA’s experience, this leads to a situation where travellers bypass regional towns because major stores aren’t open, causing harm to the entire local economy. The restrictions also damage Queensland’s ability to present itself as a modern, vibrant and worldly destination for interstate and overseas visitors.

The NRA argues that both visitors and locals have a reasonable expectation that the shops should be open when they want to access them.

5.0 Simpler rules for everyone

The Goss Government, in handing power to the Commission to vary its proscribed trading hours, clearly understood that the retail landscape would continue to evolve, that consumer expectations would change, and that retailers would need to move with the times. That’s why the Government of the day developed a mechanism for considering and implementing proposed changes.

However, a large number of geographically specific changes to the Trading Hours Order over the past 25 years has now created a trading hour’s order that runs to some 32 pages, and which contains 32 clauses and around 50 different trading hours’ zones around the state.

In the NRA’s experience this results in confusion for both shoppers and business owners, as well as for interstate and international visitors. It has also resulted in a number of curious anomalies in the allowable hours for different stores and areas. For example:

in some areas of inner Brisbane, non-exempt stores may open from 7am to 7pm on a Saturday, other (nearby) areas of the city heart may only trade from 8am to 5.30pm;
while major stores may trade on Easter Sunday in regional areas of Queensland such as Bundaberg and Toowoomba, they are required to remain closed in most parts of the South East;
while supermarkets in the City Heart of Brisbane may trade until 7pm on a Saturday night, department stores must close their doors at 5.30pm; and
although supermarkets in the Gold Coast Coastal Tourist Area may trade until 10pm on a weeknight to service the needs of the tourist industry, department stores must shut at 9pm, with the exception of department stores in the Australia Fair Shopping Centre at Southport, which may also trade until 10pm.

In many cases, the right to trade is defined by the proportion of floor space given over to particular types of stock, the maximum number of employees on the floor, and even whether a store is located within or just outside the boundary of the area. In the latter case, a non- exempt store only one block from a competitor may be forced to close while the competitor is free to trade.

The complete removal of the regulations recommended in the Ergas report would, naturally, also remove the confusion and contradiction that has become the norm in Queensland’s trading hour’s laws. However, the fall back position suggested by the NRA of 7am to 10pm state-wide would do away with almost all of the regulation currently embedded in the trading hours order. The notable exception to this would be the various allowances made for non-exempt stores in some areas to trade on extended hours leading up to Christmas.

6.0 Supporting small business

The importance to small businesses of reducing restrictions on trading hours for large businesses is a theme explored in the Ergas Report. It found there is an important relationship between large and small retailers, “especially in relation to the suburban shopping mall where most store-based retail shopping takes place”.

Large grocery stores act as ‘anchor tenants’ in suburban shopping malls because they generate positive externalities (or benefits) for other stores. Shopping centre owners “internalise” and organise these externalities, reflecting them in the rents they charge to tenants. Thus, speciality stores are commonly found in the same shopping centre as major supermarket chains. Far from being potentially ‘smashed’ by the large retailers gorging on extended trading hours, the speciality store benefits from the increased foot traffic caused by the presence of the anchor tenant. Thus, speciality retail stores are likely to locate close to major supermarkets. Ergas P23

In the NRA’s trading hours application for South East Queensland in 2015, the CEO of the Shopping Centre Council, Angus Nardi, gave evidence that, in his experience, “smaller stores located in shopping centres very often would prefer to trade longer hours but due to the drop in foot traffic when the major stores have to close, choose not to continue trading”.

In his evidence to the Commission, Mr Nardi indicated that there were 277 shopping centres within the South-East Queensland trading hour boundaries, with 405 anchor tenants (major stores) and some 10,903 specialty stores, many of them small businesses and “mum and dad” retail operations.

These small businesses are not generally in direct in competition with the anchor tenants in their centres. On the contrary, they rely heavily on major stores to attract shoppers to the centre. If the non-exempt stores are closed, traffic volumes fall. At the same time, smaller tenants are forced to absorb 100 per cent of the operating costs of the shopping centre, should they choose to remain open. The net result is that these small businesses cannot profitably trade, even if they want to. As a result, there is a significant small business community suffering financial harm as a result of laws supposedly in place to protect them.

In these instances, large supermarkets and merchandise retailers act as anchor tenants, and are essential in producing foot traffic for smaller businesses within the centre or mall. This effect of gathering together into a single location, known as agglomeration, is significant, and provides benefits for both small, and large retailers. Rather than being in competition with each other, within shopping centres and malls, small and large retailers have a symbiotic relationship: large anchor tenants bring in foot traffic, while small retail stores, and food court vendors, create diversity, and enhance the shopping experience. Therefore, restrictions on the hour’s large retailers can operate, effectively restricts the hours that smaller co-located retail stores can operate, as they are governed by rules agreed to by all tenants and set in place by the landlord under contract.

The QIRC heard evidence in the South East Queensland matter from a Master Grocers Association witness, Mr Robert Sayle, who testified that he had made a strategic business decision to relocate his fruit and vegetable store to be closer to a Woolworths store. While remaining in the same shopping centre, Mr Sayle’s business moved from up to 300 metres away from Woolworths to “about 20 metres away”.

And it’s given us the opportunity to trade to the maximum, utilising our competitor’s traffic flow. And – and it’s shown us, really, what the trading is capable and what the – what the dollar turnover per hour. Like, we’re completely computerised, so we can see exactly what money we take, when, where and how. And in the old shop, 250 metres away from Woolworths, we used to close store at 6 o’clock. We ceased trading basically at 5.30, half an hour, 40 minutes to clean up, etcetera. We’d open when the shopping centre opened at 8.15 and would be there from 6 o’clock, preparing the shop. The same thing happens with the new shop, we’re there early. The first hour in the old shop away from Woolworths, we would take $50. What we found is in the new location, we do get a lot more flow off from Woolworths…

QIRC TH 23/2014 T 10-35 41

MGA witness Leonard Catalano expressed a similar view of the benefits for his fruit and vegetable store (at Garden City, Mt Gravatt) to be co-located with a major supermarket.

Well, I always have operated around supermarkets because supermarkets have a draw to bring customers to the centre. And in doing so, we get the spill off from that. People to buy their groceries and then they can their – they can buy their fruit and veggies at – at the supermarkets if they choose. But we’re there to offer – to offer a different quality. So in – in doing that, we can – we can source more clientele. So we basically need to be with them – well, the whole step of the way to – to get the maximum out of our business.

QIRC TH 23/2014 T 11-7 26

Like many MGA witnesses in the SEQ matter, Mr Sayle expressed concern in his evidence that he was not able to compete with major supermarket chains, and that his business would not be viable should this application be granted. However, his calculated decision to be closer to his rival – indeed, right outside its door – and his evidence that that co-location made it more profitable for him to trade longer indicate that such competition is not only possible, but it is beneficial for small businesses such as his.

7.0 What is an independent retailer?

As well as distinguishing between large and small businesses, the Trading (Allowable Hours) Act recognises “independent” grocery stores as a distinct class of retailer, afforded specific protection from competition at particular times of day. The NRA supports protections for genuine independent grocery retailers. However, we are firmly of the view that this provision is being abused by some very large corporations in order to take advantage of the protections that were intended for “mum and dad” retail businesses.

A business is currently considered to be an “independent retail shop” in the Act if it meets all the following criteria:

The business is run by an individual, partnership or a proprietary company (does not include a public company or related corporation).
There are no more than 20 people, including the owner, engaged in the shop at any one time.
There are no more than 60 people engaged by the owner in all shops throughout Queensland at any one time.
The business is not conducted within a non-exempt shop or part thereof.

However, in our experience there are a number of large corporations which have established corporate structures specifically designed to circumvent the provisions of the Act that would otherwise see them classified as non-exempt businesses. These include the use of subsidiary and related entities, and the use of labour-hire firms to avoid the direct employment of more than 60 people. For example, in the South East Queensland Trading Hours application, the QIRC heard evidence from a witness who described himself as “the Managing Director of the group of companies which, in total, own and operate seven IGA supermarkets throughout Queensland”. This witness indicated that his business employed approximately 600 people across its seven sites. And yet the group of businesses traded its various locations as independent grocery stores. This was clearly not the intention of the legislation when it was established to protect small business operators.

The NRA suggests the review panel examines the definition of a small business recently introduced in the New South Wales jurisdiction. In that state, a small shop is identified as follows:

If the number of people that own the shop does not exceed 2, or one corporation, and the owner or owners of the shop take the profits from the business.
The total number of employees engaged by a small shop must not exceed a total of 4 regular employees, whether working at the same time or different times.
The number of persons engaged in a small shop does not include:
The occupier or occupiers. If the occupier is a corporation, then 2 natural persons who are shareholders of the corporation; or
Any person engaged in an emergency during the absence from the shop for part of a day of a person who is engaged in the shop on that day; or
Any person engaged outside the normal working hours of any person engaged on a full-time basis.
If the owner of a shop is a corporation, or a Director of a corporation and is engaged in another business, then it fails to comply with the definition of a small shop.

The NRA believes these definitions could form the basis for a revision of the Queensland “independent” retail store classification. Alternatively, the review panel should consider lowering the employee threshold to ten, including owners, and implement provisions to ensure that the limit applies also to associated entities.

8.0 Reform of s26

The NRA urges the review panel also to consider the mechanism by which the Trading Hours Order is modified from time to time. In our view, the subsections of s.26 of the Act do not adequately reflect the reality of modern retail businesses. For example, s.26 gives weight to the interests of tourism in two of the subsections, but fails to give any consideration to the needs of shift workers in other industries.

There is no justification, in our view, for local government to have effectively a power of veto over businesses that are otherwise governed by state and federal laws.

Section 26 of the Act gives no consideration to the needs of shopping centre owners and investors, specifically the need to achieve a fair return on capital. Considering that more and more shopping centres are owned by Australian superannuation funds, this is an increasingly important consideration for all Queenslanders.

And – unsurprisingly, given the age of the Act – there is no consideration of the impact of e-commerce and internet shopping, and the flexibility needed by modern retail businesses in order to survive in a globalised and increasingly competitive world.

The NRA supports the ongoing involvement of the QIRC in reviewing and modifying trading hours where appropriate. We believe that the number of applications would fall significantly if there was a state-wide liberalisation of trading hours. However, there would no doubt continue to be a need for one-off applications, and special circumstances for individual localities or industries.

For all of these reasons, the NRA believes that the review committee should also examine the criteria the QIRC is required to consider when it makes a decision on whether or not to change the trading hours.

9.0 Contact information

National Retail Association
Chief Executive Officer Trevor Evans
1800 RETAIL (1800 738 245)
info@nra.net.au