Shut Stores, Disti Issues, COVID In Warehouses: Retail Vs. Lockdown
2020 was a terrible year for humanity, but a fantastic year for home entertainment retailers.
JB Hi-Fi posted an underlying net profit after tax of $332.7 million for FY20, an increase of 33.2 per cent on FY19. It’s earnings before interest and taxes was up 26.2 per cent from the previous year, to $380.8m.
The Good Guys’ earnings before interest and taxes leaped even higher, 47.8 per cent year-on-year, to $107.8 million.
Things kept rolling during the second half of 2020, even as restrictions lifted everywhere that wasn’t Melbourne. Online sales for JB Hi-Fi Limited were up 161.7 per cent to $678.8m, representing 13.7 per cent of total sales.
Harvey Norman made a $462m net profit for the second half of 2020, with Gerry Harvey infamously refusing to pay back the JobKeeper money the company took, despite posting a record year.
Now, with both Melbourne and Sydney in lockdown, some estimated 12 million Australians with limited access to the outside world, and the harsher restrictions on Sydney retail coming in over the weekend, the question is – will this happen again?
Many are predicting that no, it won’t.
This time, there are far bigger issues at play.
Warehousing, for one. Distribution for another.
Sydney reported 97 new cases this morning, just 11 days out from the hoped lifting of the lockdown. Three LGAs are in total lockdown, and non-essential retail, which includes all home entertainment retailers, have been ordered to close.
It is looking very unlikely the restrictions will lift anytime soon.
Amazon’s Sydney fulfilment centre is in Moorebank. Last Tuesday, they were forced to close the centre after two workers tested positive for COVID-19. They opened later that week, but Moorebank is in the local government area of Liverpool, which is currently at the centre of an outbreak: 13 new cases over the last 24-hour period were announced this morning.
Moorebank workers cannot leave the region for work. I contacted Amazon to find out whether this will impact Amazon workers coming into Moorebank, and what precautions are taken when shipping parcels from this LGA.
I am yet to hear back, but will update this story with information once I receive it.
Amazon’s Melbourne centre in Dandenong South will also be impacted by the recent lockdowns, especially if the stay-at-home orders increase, as many as expecting they will.
JB Hi-Fi’s Sydney distribution centre is in Marsden Park, which is in the Blacktown Local Council – safe for now.
Currently, Amazon are building a 200,000 square metre storage and distribution centre in Kemps Creek in Western Sydney. Gladys Berejiklian recently called a two-week construction ban, which will impact the centre’s plans to be operational by the end of 2021. Considering this centre is meant to be housing 11 million items by Christmas, this ban, especially if it extends beyond the two weeks, may prove disastrous.
This morning, Berejiklian rejected Sydney operating in a similar matter to how Melbourne did, allowing 25 per cent of workers on site.
Many other distribution centres are in the south-west or the west of Sydney.
In addition, the Transport Workers Union is threatening to take strike action in protest at transport company Toll, who are planning to lower working wages, and reduce benefits like super and overtime rates. This will add further havoc.
Queensland police have also crackdown hard on the freight industry, after a police operation over the weekend found 83 truck drivers with fake or incorrect border passes. 29 of these arrived from hotspots in Sydney.
This will slow national distribution further.
Local distribution issues may, overall, prove to be a much bigger headache than moving shopping habits online.
There is still a reasonable chance that the lack of open brick-and-mortar retail outlet won’t be as dire as predicted.
Australians quickly adopted online shopping during the 2020 wave of the pandemic.
In fact, Salesforce’s Holiday Insights Hub and 2020 Holiday Predictions report showed Australia and New Zealand’s ecommerce growth was actually the highest in the world, at 108 per cent in Q2, 2020, and 107 per cent in Q3 2020.
Australia Post’s eCommerce Industry Report further found that in March 2020, after the first lockdown, 12.3 per cent of Australia’s retail sales were made online, rising to 14 per cent by July. By April 2020, 5.3 million Australians were shopping online, as opposed to just 3.6 million the previous April.
This is all to say, we move pretty quickly into relying on online commerce, even those who had never done so before.
In November 2020, after Melbourne enjoyed its first full month of retail being opened, spending shot up in the state by 22.4 per cent across all retail sectors, compared to the rest of the country, where turnover rose an average of just 2.6 per cent – a modest rise which could be accounted for by early Xmas spending.
It must be noted this followed an unprecedented 112-day lockdown, so any post-lockdown retail spending is likely to be far more modest.
Perhaps the jump in retail fortunes won’t be seen until we leave the lockdown, whenever that is.
In the meantime, things are looking very dire. This lockdown will not be the same as the previous ones. Retail will be hit hard, from all angles.