Erg... this again.
Owning a small t-shirt business on the side has taught me a few things about scales of economy. Basically, as a wholesaler, or
distributor - when you order a thousand of the one product, you can buy it at a certain rate. When you order a million of the same product you get it a hell of a lot cheaper. Thus you can pass on savings and you keep your prices down in order shift more stock, and the cycle continues.
The problem here VS America is simple. There are 21m people in Australia. There are over 310m in America. All sales markets are much bigger, so manufacturers of items are able to reduce their costs because they will be selling so many. Wholesalers then buy more, because they have a bigger maket to sell to, so they enjoy the reduced costs too.
Other MAJOR considerations are:
- Excessively high commercial property rents (not going to start a debate here about property prices, but look at America for a comparison to how much a shop will cost you to buy or lease, and then look at Australia).
- Comparitively high wages for unskilled workers (look at miniumum wage in USA vs here)
Both of the above add to the overheads of the Australian retailers.
Is it sustainable? No.
Interestingly, there was a brilliant piece the other day on the burn out of China. Basically, the USA manufacturers are starting to fire up again because China's wage growth is starting to level out the manufacturing costs and the USA is starting to draw level with the Chinese again on locally produced goods. Very interesting.