Comment on 13 April 2018 on RogerMontgomery.com at ABC Nightlife:
The following is perhaps more a “weekend read”, but I think this really needs to begin to be dealt with…
The more important issue around retailing in Australia, in my opinion, is the impact of the throw-away society on the environment, especially in relation to medium to large-sized (household) goods.
Here’s a question: When you last shopped for a household white good, what was the expected life of the product according to the salesman? And did the short time period shock you?
There is no way in the world that the price of goods sold represent their true cost, including importantly impacts on the environment in their production, use and/or disposal. Star ratings may be an attempt at addressing the middle point, but I don’t believe the other – probably more important issues – have really begun to be addressed.
This is something that I have been reflecting on following a couple of recent events.
Recently I took advantage of an in-home installation offer while purchasing a built in closet from a major global retailer. Near the end of the installation the installer told me there was a minor defect – a small scratch on the door – and that I would be within my rights to reject the product and have a new one delivered. And, as we all know, because these goods are flat-packed and sent from overseas, this would mean taking away the whole closet and bringing back an entire new one. Being fairly pragmatic (after all it was for my sons and they could easily do at least that much damage to it that very afternoon), but more importantly not wishing to add to waste, I declined to do that.
As he completed the job he proceeded to tell me just how many items arrive with defects that are rejected – one example was someone rejecting 3 sofas (including one that was completely busted) before getting “a good one” !
At the price that these goods are sold, and while I accept that some of these “defective” goods end up in scratch and dent sales or are sold/given to friends, at least I sincerely hope so, I think it highly unlikely that the goods are shipped back to be either repaired or at least repackaged and re-exported. One can only assume that much of these new goods end up being dumped.
“When I was a young lad”, if you could not afford a leather lounge you bought a vinyl one. Sure they did not breath – and being a poor student in Townsville I certainly understood what that meant! But at least they lasted for years!
Now it seems that “PU leather” is the cheaper alternative to leather. When we bought our last lounge (from a different retailer than mentioned above), not wishing to pay for our “forever lounge suite” having young children (still with a penchant for Niko pen art), we opted for “PU leather” over the real stuff.
Almost to the day on 2 years, once the “warranty” had expired, we noticed fine cracking all over. And within months this thing flaked down to the underlying fabric mesh over most of it. (We also bought an office chair and an ottoman in “PU leather” around the same time which have done exactly the same thing). It’s gross – the flakes stick to your skin and clothes, and build up like confetti around the offending and offensive piece.
I sent an email to the retailer of the lounge with photographs and asked them to contact me to discuss what could be done. They did so fairly promptly and it was quickly determined that we were outside of their warranty period. I replied that I was aware that ACCC regulations make it clear that warranty periods are largely irrelevant, and after further discussion they offered a 50% store credit. I replied that wasn’t good enough and that I would send them the link to my Youtube video clip of our experience, once I uploaded it, to give them first right of reply. At that point the representative said they would have the manager call me. The representative called back shortly afterwards offering a full store credit which I accepted (even though I would have preferred a refund to purchase elsewhere).
The point of all of this is that the business models of these manufacturers and retailers MUST allow for all of this transit damage and product failure in their pricing. (As well as the annoyance to the customers at the poor quality of the product being sold and the inconvenience.)
And we all know the number of goods that fail on us often due to rather small issues well before the product life of most of the other components have expired. These goods are often unrepairable because parts are unavailable or, in rare cases when they are available, the costs of repair are uneconomic compared to buying an entirely new good. Over recent years people have tended to replace rather than working at, and perhaps accepting a little inconvenience, extracting as much life from them as possible. (As a parent I would proffer as an example backyard trampolines where I have seen on many instances plastic components of the safety net breaking well before the utility of the trampoline has expired, but, unable to buy replacement parts, unwilling to persevere and develop work arounds, and with replacement cost of a cheap trampoline only a couple of hundred dollars, they are thrown out within just 2 or 3 years.)
While handy-minded people sifting through curb-side offerings and recycling programs might reduce this waste somewhat, much of these materials end up in land fill prematurely (or the metals recycled) often when 90% of the parts in the goods have significant useful life left in them (and are worth more than their elemental value which requires more energy to process).
Part of this is undoubtedly due to China encouraging over capacity in all forms of production (to meet their own internal growth targets). But I have little sympathy for retailers for not being able to compete with Chinese businesses selling directly because they have embraced these cheap suppliers for years. All that has changed is that first wholesalers were cut out by businesses going direct (via trade shows and then Alibaba and the like), and now the local retailers are being cut out.
What I believe firmly has to be the future, and this is where I do have something a little constructive to say about Trump, and it would be the saviour of local retailers with the right mindset, is that prices of goods do need to start to reflect their genuine costs to human beings as a whole. Perhaps that can be done by tariffs, but I think it would be preferable if it were explicitly called an anti-waste or environmental tax. (I realise that this is certainly not Trump’s aim – but it is interesting his first target for tariffs were white goods and solar panels – and if a reduction in the sale in the US of low-quality, short-lived products were an unintended consequence of his actions then that would be something!)
There needs to be pricing signals embedded in the costs of all goods that reflect the genuine full cost of goods. I simply can’t see how goods manufactured overseas from resources gathered in various geographies, and shipped to Australia (all along burning fossil fuels) can retail at these prices at a profit (with all of the local costs) after allowing for a replacement rate of say 50%.
If the genuine full cost of goods became embedded in the pricing then I strongly believe the concept of food miles would quickly expand to all goods (once again) and be a major competitive factor.
If I were the entrepreneurial type I would be going flat tack on this right now, opening for example small furniture shops where the furniture is made very locally and customers know that whenever the piece should break – be it accidentally during setup or in 10 years – it can be repaired promptly and at reasonable cost. Sadly this type of service tends to be marketed as a premium-type of service and thus is expensive. But the premium level can be built in based on the desirability of the materials used (eg. type of timber and fabrics), not the longevity of its components and construction, to allow for different pricing points.
Further complicating customers assessment of quality is an understanding that the marketing budget spent on the product or branding (of producer or retailer) is often more correlated to the retail price rather than its actual quality.
Moreover, it has long been postulated that even some high quality goods are intentionally and programmatically made to function less well or even become defunct after a specified period. This is often referred to as “planned obsolescence” and may be used to drive more frequent turnover of a product and therefore increase sales. Evidence of such behaviour should be treated very dimly indeed by national and perhaps international authorities.
I do not pretend to have all of the answers – of course I am abundantly aware that I have few of the answers. But the problem is plain for all to see.
Moreover I wish to be clear that I am in no way suggesting that all imported products are poor in quality, and all locally produced products (currently or in the future) are necessarily of higher quality. The progress towards producing higher quality products, with greater reliability and better technology, as national economies develop and manufacturing capabilities improve is well understood.
Essentially there needs to be disincentives for retailers to sell, or for customers to purchase, products which are likely to have short working lives compared to the resources that went into making them or to the true full cost of their disposal.
In many instances this may well lead to a renaissance in local manufacturing and this would mean that the customer is dealing once again with retailers who will genuinely stand behind their product because it actually is their product! (As used to be the case before transport allowed increasingly wider distributions of goods.) And regardless of your budget you can access this level of service because pricing signals have been altered such that retailers of lesser quality goods do not have a price advantage and the competition would require them to also stand behind their products irrespective of their origin.
Undoubtedly this would lead to increased inflation during a prolonged adjustment phase. But I just can’t see how the world can afford this level of waste and its consequent damage to the environment. (I always think of the movie “Wall-E” when I reflect on this, with piles of rubbish taller than sky-scrapers.)
If this type of restructuring were undertaken genuinely and comprehensively, then absolutely I would support taxing of (some, or even all) goods purchased directly from overseas suppliers by end customers if it were necessary to prevent circumvention of these anti-waste measures.
I think most Australians have to know in their heart of hearts that we have been underpaying for a whole range of goods. We all manage to avoid confronting this reality, except on the rare occasion when we are reminded by, for example, a building collapse in a developing country where, it emerges, was housed a business (often employing very young people) exporting cheap goods to Australian companies or companies retailing to Australians. Even those of us that feel guilty about it are relatively powerless to do anything about it or even to become better informed.
Clearly international and/or supra-national authority involvement is what is needed to genuinely address these issues.
Moreover, while I have a lot of time for the benefits of unions – and I consider it a sad state of affairs that our Reserve Bank Governor has become the loudest voice arguing for salary increases due to increasing impotence of labor unions – I do have concerns about them talking about disparities in safety standards between our wealthy nation and developing countries. Given their membership is Australian workers, I do not think they are calling for improved working conditions for the benefit of people in the developing countries. And it would be unrealistic for people to work in pristinely safe factories and walk out the gate dodging potholes and innumerable hazards to return to their shanties. (I think most people will be familiar with the footage of children scrambling over moving piles of rubbish and dodging bulldozers in a race to get hold of resources that may be of some value and benefit to improving the lot of themselves and/or their family.)
If we want the world to become a fairer and more equal place then we need people in poor countries to have a chance to benefit from accessing wealth from rich countries by as many mechanisms as possibly. Moreover, again the link between population growth and economic development of a regions is very well understood.
This is my major concern about the policy adjustments I propose above. However, I find it difficult to believe that it would be impossible to make these adjustments within the broader context of genuinely working towards a better world for all human beings.
When it comes down to it, I am a globalist and I am always sceptical about campaigns to protect local environments and peoples (above others). Two precepts explain my views best, the “butterfly effect” (if a butterfly flaps it’s wings in the Amazon …. ) and the following quote from Franklin D Roosevelt’s Fourth Inaugural Address on 20 January 1945:
“We have learned that we cannot live alone, at peace; that our own well-being is dependent on the well-being of nations far away. We have learned that we must live as men, and not as ostriches nor as dogs in the manger. We have learned to be citizens of the world, members of the human community”
(Why I similarly have deep scepticism towards those who wish to argue for enforcing a population limit for Australia.)
But there is no doubt that we need to urgently work towards making human progress on this globe sustainable, and when done in the context of caring equally for all human beings irrespective of where we live or were born, then that will really be something of which we all can be proud.
In fact, I believe a “Roosevelt clause” should be inserted into the oath of all those in Public Office from and for all nations that acknowledges that to do their best for their constituents they must always, and above all else, act as “citizens of the world; members of the human community”.
© Copyright Brett Edgerton 2019