There are many factors in play when looking at the online and in store price comparison of a similar product; some of these influences receive more media coverage than others – the hotly debated GST debate raises its head every so often; but little airtime is given to factors around retail wages and store opening hours – two major pain points for traditional retailers that make buying online more attractive.
Before delving further it must be said that the author believes in retail – that being a combination of an online and a traditional presence – a true amalgamation of the approaches will be of most benefit to the consumer and the most likely to succeed. The in store experience still offers a range of services and experiences that online will never replicate – although some entrepreneurs will try. And largely the online model presents an efficient process that a high street retail presence can only dream about – supply chain, stock on hand, multitasking employees, open 24/7, real time integrations and lower wages for staff.
Yes wages play a huge role in a reason why online prices can be lower than those in store. Many CEOs have bemoaned the fact that the minimum wage for retail is higher than the national minimum; and when loading for weekends and evenings are taken into a account the difference becomes even more significant. And the key differentiation can be in the classification of the employee; an employee on the shop floor at a department store serving customers, assisting with check out, restocking shelves and of course smiling and being polite will earn more than an employee in a cold warehouse shoving clothes in an Australia Post satchel multiple times each hour – perhaps not smiling or being polite – with both technically being in retail; their skill set and hence classification is vastly different. An online retailer will be able to classify their staff as non-retail and take advantage of lower hourly rates.
The online operation has most of the roles or processes such as presentation, customer service, restocking product and aiding checkout either automated, have one person who can assist with multiple customer queries at once or have paid a one off cost for development – hence the need for a highly paid retail wage can be avoided. What the online business can then use is a lower 9-5 minimum wage for pick and pack staff.
Lets look at the figures – minimum hourly retail wage is $19.07 with National minimum hourly wage being $16.37; both these rates apply from July 1 2013. Whilst the difference is plain to see, additional wages pain for retailers arrives when loading for weekends, evenings and casual employees are in play – features that an online retailer will likely be able to avoid. So the actual difference may be far greater than the nearly $3 an hour difference. And I am sorry to say that I have more bad news for retailers; the issue is compounded when looking at the number of staff needed for a shop floor when compared to a warehouse pick pack facility, a retail outlet with minimal staff risks losing out on the ability to serve customers and complete transactions. The comparative productive efficiencies of each of each of these different employees is also huge – floor staff picking and packing are completing work for sales already processed, retail staff are aiming to start that sales process.
The retail shop floor may be the single biggest hindrance for a retailer increasing profit and the key reason why prices online should always be cheaper. The skill sets required to complete the same retail processes are very different, as are the costs – until either retail wages are lowered, loading conditions altered or warehouse staff pay rates increased – online should always be cheaper.