Over the past few years Australia has seen a massive increase in online shopping in comparison to retail spending, with online sales now accounting for 6.8% of total sales in Australia and growing at a rate five times faster than traditional shopping. The results of this can be seen in the record-high retail closures – Dick Smith, Masters, Pumpkin Patch and others going under in 2016 alone. This has been attributed to the fact that with increasing property prices it has become too expensive for a physical store that is paying for employees and rent to compete with the relatively cheap cost of establishing a website and storing goods in a warehouse that only needs to be scanned and shipped before they are on their way to their destination. For example, JB Hi-Fi’s current cheapest 4K TV is a 40’’ Hisense model that costs $698 and has poor reviews – to contrast, Kogan’s (a brand that began and is currently maintained as mostly online-only) cheapest model is a 43’’ Kogan Brand model that costs $429 and has average reviews. JB Hi Fi could never close the $300 price gap due to the fact that wages are expensive (JB Hi Fi pays an average wage of $20 an hour to their part-time workers) and rent is of course also expensive to hold the huge floor space that JB Hi-Fi is known for. Whether JB Hi-Fi will go the same way as other electronics retailers is yet to be seen (they did post a $150 million dollar profit in 2016 so they’re probably going to be ok), but having products that cost around double the price of your competitors while also paying costs that the competition isn’t has not traditionally been a very successful business model. There is no reason for any retail business in 2017 to bother with a physical storefront as the cost for a new business outweighs the benefit.
Of course if the trend of employees being obsolete continues (it takes far fewer people to manage a warehouse than a store), what does this mean for employment as a whole? Retail is the second highest industry in terms of employment in Australia behind healthcare, and if online retailers continue to grow at the rate they are currently growing at retail would become a mostly obsolete industry within around fifteen to twenty years. It is estimated that within twenty years it will be technically possible to automate between 1/3 to ¼ of all jobs in the Western world. This would leave millions of people unemployed, and retail is not the only industry that is seeing electronics take the role of people. Manufacturing companies in Australia are being beaten by both cheaper wages in third-world countries and the rise of automatic production. Electronic checkouts are gaining ground in industries ranging from supermarkets to fast-food restaurants to theaters as whilst they have a high cost currently they are still cheaper than paying multiple people $16 an hour. The question is, what does this mean for the people made redundant by rapidly-developing technology? Whilst high-end jobs that require a human touch will still exist, as well as tradespeople and other jobs that require reasonable assessment of situations, the fact is that an entire economy cannot exist around these sorts of jobs.
One solution could be a universal income – unconditional welfare for the unemployed that a person could actually live on rather than just scrape by on. This is currently being trialled by Finland, and was suggested by Democrat Senator Bernie Sanders over the course of the 2016 election. The idea of a universal income is inherently controversial because it is essentially free money to poor people. For Australia to pay the rate being trialled by Finland, the welfare bill would increase to 20% of the government’s spending, and as there are no results for to suggest that it has a positive effect on the lives of those who accept it there is no incentive for an Australian politician to waste time trying to implement it because it would not pass and Australia does not yet have the unemployment that other developed countries are experiencing. However if current trends continue this will not be the case for much longer.