The value of employees and the relevance of reward is topical this week, due to the public release of incomes for Chief Executives of companies and those working in the public sector. We all want to earn more for what we do. We can either dictate our own income by working for ourselves and therefore take the risk of investment versus return, or alternatively work for somebody else and be dictated by the salary we can negotiate. We believe that either path will produce rewards that we should be satisfied with. However, who is to say that the reward justifies the effort? The answer is pretty simple, it’s the “market” that dictates. However, its all a bit bizarre when we see people in energy companies receiving salaries well in excess of $1.0 million per annum together with other benefits. Energy is something that we all use and need; it’s a commodity that we cannot do without. So why reward so highly?
If we extend the discussion, what about the rewards for the local body/ government sector? How can the CEO of a regional town be paid close to $400,000 per annum? What do these people actually do to justify the level of salary paid? Well it really is out of our hands as individuals, but it seems difficult for us to compare these levels of salaries with our own, when we have to take risks and benefit or suffer as a result. So who drives the “market”? Demand effectively, and those who are prepared to work in the public sector. The problem we have is the level of effort versus the significant rewards! It just doesn’t seem to make sense. Are we wrong?
Then we have people who have been made bankrupt and are out in the workforce again making major decisions that affect the future of others. How does all that work? If they were so good how come they were made bankrupt? So plenty of questions and not it seems many answers. Energy companies should not be permitted to increase consumer charges and at the same time increase salary levels to the extent they have. We saw in Christchurch the reaction from consumers to what they believed was excessive rewards in a difficult economy. We agree that the “market dictates”, but when the market reacts negatively, it is time to take notice.
Meantime back to our core business. The recent focus on “online” shopping has generated debate, with retailers arguing that GST should still be charged when New Zealanders shop on overseas websites, to give a level playing field. So how big is this online business? We have annual retail sales in New Zealand of $53 billion. Online sales to overseas websites currently account for several hundred million dollars, so there is a long way to go before it becomes a serious threat to the retail industry, but if GST was applied to this sales volume, then Government would have a potential tax take of in the tens of millions, a sum not to be sneezed at. However online shopping is growing and more people are using the online format, and as we have illustrated previously certain retail sectors are at a greater risk than others. However, it will take time, if at all, to seriously affect bricks and mortar, and as a result property as such.
The IRD will however be looking at this tax take opportunity, but it would be quite a leap to introduce GST on overseas purchases just yet, given the government’s costs in collecting the revenue, and the level of tax that is currently coming off such items as petrol. Conversely, credit card companies will want online shopping to grow, given the benefit they get from the growth in sales.
Life is a matter of getting the “balance” right. Consumers feel challenged by today’s economic environment, and a friendly purchase online can make one feel they have “got a bargain”, and an expectation of the item arriving in the mail. Like excessive incomes for energy company Chief Executives and those working in the local body or public sector, a balance must be maintained in all. However, we believe that online shopping will have some interesting days ahead that will challenge its continuation in the current format. The market will dictate its future, probably with some help from the IRD.
SHAREWATCH – KATHMANDU
Kathmandu’s Australian operation posted higher sales than New Zealand (AUD $67.3 million), but made a smaller contribution to profits – despite having higher gross margins.
As for the six UK stores, Kathmandu hasn’t been too successful – the stores have never turned a profit and sales actually dropped by 13.6% compared with the previous year. All in all, it was a fairly disappointing six months for Kathmandu and the markets have reacted accordingly.
IN THE PRESS
LOCAL AND INTERNATIONAL MEDIA HIGHLIGHTS 19 – 26TH MARCH 2012
NZ mobile phone shopping, the next big thing?
Credit card giant, MasterCard is betting their buck New Zealanders are at a “tipping point” with online shopping mobile payments. MasterCard’s Findings indicate near half of New Zealanders surveyed use online mobile shopping out of convenience, and what’s a more convenient mobile device than a smart phone?
(Source: NZ Herald)
A revolutionary scanner, barcode free
Japanese company, Toshiba Tec, has released a scanner that recognises objects based on shape. The scanner could reduce waiting times created by damaged barcodes and manually entered fruit descriptions.
(Source: Inside Retailing)
Big red jumps gun on new iPad
The Warehouse has speed ahead of Apple, announcing it will have 100 parallel imported new iPads available for purchase on its website – two days in advance of the official New Zealand release on Friday. The Warehouse has been placing greater prominence on growing its online sales.
(Source: NZ Herald)
Sockless shoe gives Nike new edge
The world’s largest sporting-goods maker has just revealed Flyknit, a 158g woven sockless running shoe. Executives say the new synthetic yarn weaving process could slim costs enough to shift production outside Asia and someday allow customers to personalise shoes to their precise foot specifications.(Source: NZ Herald)