Submission on Small Business Advisory Group
NEW ZEALAND RETAILERS ASSOCIATION
to the
MINISTER FOR SMALL BUSINESS
in respect of
THE FIRST ANNUAL REPORT OF THE SMALL BUSINESS ADVISORY GROUP
September 2004
Introduction
These submissions are presented by the New Zealand Retailers Association on behalf of its members. We welcome the report and support the ongoing work of the Small Business Advisory Group as it works to promote the special interests of this vital sector of the New Zealand economy.
Background
The Association is the largest trade association involved in the retail industry in New Zealand. We represent an industry that has annual sales of $50b, and which employs some 325,000 people (17% of the workforce) in some 49,000 outlets throughout New Zealand.
Our membership includes the major supermarket and general merchandise chains, specialised chains, traditional department stores and thousands of owner operators.
We also service a number of specialised trade groups of plumbing materials suppliers, metal fastener distributors, bicycle dealers, pet shops, jewellers and equestrian suppliers.
General Comment
The Association welcomes the release of this report and generally supports in principle the 19 recommendations made by the Small Business Advisory Group. Rather than completing the template questionnaire appended to the report, we felt it preferable to make written submissions on each of the specific recommendations set out in the report.
This approach was foreshadowed in our meeting with the Minister for Small Business on 26 August and we have forwarded a copy of this submission to the Minister as requested at that time.
Specific Comments
1. Mentoring Services
We are supportive of the proposal for enhanced funding for mentoring services such as that provided by Business in the Community. The value of mentoring for small business operators who are prepared to engage with and learn from an experienced mentor is well accepted.
It is important that funding support is not limited to one agency. It should be available on a contestable basis to a range of organisations that can demonstrate the capability to deliver a high quality service at a realistic price. For example, we see considerable value in providing a specific service targeted at the retail industry utilising the skills and experience of senior retailers trained for the purpose.
Our Association has, for the past year, offered a support service to smaller retailers throughout the country that includes mentoring support. This service, called the Retail Store Advisory Service, is delivered by an experienced staff member with many years experience in the industry as a retail manager and advisor. He advises retailers on store presentation and layout, customer service, merchandising, stock mix / stock turns, financial ratios and on ways to minimise operating costs and maximise returns.
This service has been well received and is utilised by a significant number of Association members and other retailers. Costs are kept to a minimum, but even so we are aware that the small cost of an initial consultation (currently $200-$350 per visit depending on travel costs) is a barrier to many new operators that might otherwise benefit from the service.
Our advisor has undertaken some contracted work for BIZ providers and this has allowed some extension of the service. We consider that far more could be done with well targeted funding.
In a related area, the Association received financial assistance from the Department of Labour's Employment Relations Education (ERE) fund to enable another member of our staff to undertake nation-wide road shows to assist retailers understand their obligations under the Holidays Act 2003 and the Employment Relations Act.
This funding allowed seminars to be run across the country to some 1200 participants. The presentations were well received by participants and the exercise succeeded in it's objective of raising understanding of the risks and responsibilities that retailers have as employers. Many of the participants from smaller businesses indicated a wish to additional assistance from the consultant delivering the programme, provided this was available at an affordable price.
We consider that government investment in programmes such as mentoring programmes and these two services provided by the Association is a positive step to support the development of smaller enterprises. It is cost effective to support existing organisations that have established credibility and the capability to deliver services to the required standard.
We welcome advice on other opportunities for similar assistance from programmes run by the Ministry for Economic Development.
2. Advisory Boards
We consider that the recommendation to provide funding to assist SMEs engage experienced directors to help with the governance of their businesses is a positive extension of the mentoring concept.
Such a programme will allow SME operators to call upon a resource of appropriately experienced directors to foster growth of the business and bring fresh eyes and expertise to assist the owners achieve their full potential.
3. Local Business Awards and Benchmarking Data
The Association runs annual regional 'Top Shop' competitions in the major metropolitan cities and also supports similar competitions run by other organisations in provincial areas. These competitions, which have run for the past 15 years, are designed to raise retail excellence and highlight the value of service standards.
Finalists are assessed by experienced judges and by mystery shoppers to ensure that the expected outcomes are achieved. The annual award ceremonies are widely covered by the news media and the achievements of the category winners assist us to promote retail standards across the industry.
We are supportive of the recommendation to further support local business award programmes, but do stress the value of models that reflect the particular needs of different industry sectors. Standardised templates and evaluation criteria need to reflect the relative importance of the key success factors for each business sector if they are to be a useful measure of different types of business.
The overall objective may be best achieved by MED and other government agencies working with existing industry award programmes to assist the organisers promote recognised success factors, rather than creating something additional. MED may wish to consider sponsoring awards that recognise success for smaller businesses.
In this regard, we note the support of the New Zealand Food Safety Authority in sponsoring the food and beverage categories in this year's 'Top Shop' competitions in several centres. The judging criteria for this award includes assessment of how the entrant works to comply with appropriate food safety standards. The sponsorship forms part of the Authority's promotional programme to raise awareness and promote compliance with regulatory standards across industry generally.
We also note that ACC is a regular sponsor of business awards as part of its wider objective to promote injury prevention.
The Association recognises the value of benchmark data to allow retailers to measure themselves against similar businesses. There is also a necessity for smaller retailers to gain a greater understanding of how to use business data to achieve better financial performance.
We are currently involved in negotiations with a number of parties that collect data that could be used to establish key benchmarks across the retail industry and are happy to discuss this further with the Advisory Group and officials. We also suggest that this recommendation might usefully be discussed with the Ministry for Economic Development and Statistics New Zealand
4. Checklist for Starting a Business
We are supportive of this recommendation but again stress the need to utilise well-established resources that are accepted and effective rather than starting from scratch.
This Association offers members throughout New Zealand a wide range of advisory services on employment matters, consumer and business law, leasing and property matters, industry and business development seminars and workshops, business planning, and the retail store advisory services outlined earlier in this submission.
A flyer, which outlines the range of these services, is appended for information purposes.
5. Checklist for Hiring an Employee
We similarly support this recommendation with the reservations on utilising existing resources, but also see some danger in trying to develop a 'one size fits all' approach to employment in SMEs across the board. There are different training and licensing requirements for work in some industry sectors and these may limit the value of a generic tool.
For the information of the Advisory Group, I have attached our circular on recruitment that is typical of the resources provided to assist our smaller members. We also have a more comprehensive recruitment pack available to members with information specifically targeted to assist retailers make well informed recruitment decisions. This resource is widely used in the industry.
6. Enhancing Access to Finance
The recommendation to develop tools to make financial resources more easily accessible to smaller business operators in New Zealand is supported.
Financial support at critical stages in the development of a business is essential for growth and effective development.
7. Accelerated Depreciation on Capital Equipment
The Association proposed a similar recommendation in response to the changes proposed by the Department of Inland Revenue to New Zealand tax depreciation rules.
While depreciation rates for capital equipment are not usually a major barrier to growth in the retail sector (the requirement for investment in high cost capital plant in retail is less than in sectors such as manufacturing) we do recognise it as a critical issue for other sectors and support the recommendation.
8. Grants to Implement Sales and Marketing Plans
The comments in the report supporting this recommendation highlight the fact that funding assistance for SMEs in the critical areas of developing sales and marketing plans is limited and fragmented across different programmes. We generally support the recommendation to develop a strategy to ensure SMEs can have access to available assistance in this area, but see the need for more fundamental change.
The primary need appears to be an effective programme to rationalise funding options to ensure that the criteria for funding are clear and consistent and directed to all SME's that need the assistance.
As part of this wider programme, we see the need for support for education initiatives to assist businesses to understand the value of utilising statistical data to understand their market and generally improve business performance. In our experience few SME operators understand the importance or usefulness of the available statistical data and how to use such data to grow their individual businesses.
9. More Enterprise Education
This Association is strongly supportive of enterprise education at all levels, including in schools. We are frustrated at the negative attitude of transition to employment in retail that is apparent in many schools and the generally poor understanding in schools of the importance of business development and growth to the overall health of the community.
The recommendation to promote enterprise education as part of the core curriculum from Year 10 is a positive and worthwhile tool to change these attitudes. We see a need for greater co-operation between schools and business at the local level and suggest that direct involvement of local business in the delivery of enterprise programmes in schools will also be helpful to change attitudes.
The Association is strongly supportive of the Retail Industry Training Organisation (RITO) as the promoter of standards based training for the retail industry. RITO has developed unit standards for retail skills that are used in the workplace and in schools, polytechnics and PTEs to increase the skills and customer standards of retail staff.
Training and certification in retail skills is a significant part of the Gateway programme that currently operates in 124 schools to assist senior school students to participate in learning towards national qualifications in real workplaces. Some 39 schools currently offer retail unit standards as part of this programme.
We are happy to work with the Advisory group and MED to further develop the enterprise training model and to assist to implement this recommendation.
10. Government Procurement Practices
We consider that much of this work is already undertaken by the Industrial Supplies Office in the Ministry of Economic Development and caution against duplication.
The required outcome may be best achieved by reviewing and further developing the work of this organisation.
11. Harmonising Borders with Australia
We are supportive of this recommendation which is in line with the spirit of the CER agreement with Australia. The retail sector already operates in a trans-Tasman market with significant numbers of New Zealand companies now trading on both sides of the Tasman. Examples include Kumfs Shoes and Keith Matheson Menswear.
Positive examples of successful harmonisation include the work of Food Standards Australia and New Zealand and co-operation between Standards New Zealand and its Australian counterpart.
We have recently made submissions to the Australian Productivity Centre on its review of Australasian Competition and Consumer Laws and believe that part of its study may well be usefully extended to consider the effects of particular statutes or regulatory controls on small businesses.
Recommendations 12, 13, 14, 15, 16 and 17 - Developing a Positive Regulatory Environment
We strongly support the Committee's comments about the lack of understanding of the interests of business and SMEs amongst legislators and regulators. There are exceptions to this general statement, but overall there is a need for greater sensitivity to the practical difficulties enterprises face in understanding and applying the complex web of legislation and regulation that affects their operations.
In our experience, individual government agencies generally have little understanding or interest in how their particular requirements impact on those required by other agencies or of the way proposed changes affect the confidence and economic situation of the businesses affected.
It is high time that New Zealand's regulatory processes were subject to the broad-base oversight and review envisaged by the report. We see a particular need to initiate a 'whole of government' approach to review, update and consolidate regulations and statutes with a view to reducing complexity and compliance costs. This will not be achieved by exercises within individual departments and agencies.
For example, we have identified more than 40 statutes and regulations that directly impinge upon the retail sector. Differences in drafting style, language and terminology cause considerable difficulty to smaller retailers who do their best to understand and comply with the law. We have promoted the need for a broad-based review of this body of law to identify the opportunities to consolidate blocks of this legislation and to recast it using plain and consistent language, but face the problems of competing departmental interests and patch protection.
If any worthwhile change is to be achieved, regulatory reform needs separate resourcing and support at the highest level of Government. Staff responsible for undertaking the supporting work need broad based commercial experience and an ability to understand the implications of the changes that are proposed. There is scope to consider using individuals seconded from the private sector as part of such an exercise.
We do have reservations about the comment that there is no case to treat smaller enterprises differently under the law. While there is a strong case to ensure that as a general principle the rules are set with SME's as the template, in area like employment regulation there is a case to distinguish between businesses that are large enough to support the specialist resources required for full compliance with technical regulations (e.g. health and safety and ERMA standards). Smaller enterprises seldom have the resources to comply fully with those standards, but they are still bound by the "all practicable steps test".
With those general comments in mind, our suggestions in relation to each of the recommendations are:
12. The proposal to appoint a small business advocate in government agencies may be a positive step provided the appointees do have the necessary grasp of the wider interests of SME's and are given the scope to work co-operatively across different agencies.
13. We doubt that the proposal to require senior managers in Government Departments to scrutinise proposed regulations will have the required impact unless there is effective liaison across different agencies. Senior managers within Departments will have inevitably been part of the decision making process and are unlikely to have the objectivity required to make the decisions required.
14. We are generally supportive of the recommendation to calculate and publish the cumulative costs of compliance with regulations on a regular basis. Such reports would be useful in evaluating their ongoing respective usefulness and applicability to the New Zealand small business environment.
15. There is merit in the proposal that business legislation and regulations should come into effect on two common dates each year. This change would enhance compliance, particularly if a compendium of the main changes that impinged on small business could be developed and made available by the Ministry for Economic Development prior to the nominated date.
16. Minimum consultation and implementation periods for regulations may assist to ensure that there is better scrutiny of the proposals before enactment, but will not make a major difference unless the regulators are open to the comments and proposals made.
Where regulators have a closed mind to the interests of business, or are implementing government policy that is in itself antagonistic to business, the three-month period will only delay the evil day.
We have a particular concern at the widespread practice of releasing proposed legislation and discussion documents for consultation over the Christmas period. This is the busiest time for the retail industry and there is little chance of effective engagement during the holiday season.
For sector organisations like ours, one positive effect of the proposed three-month leadtime would be that we had a better opportunity to obtain meaningful comments from smaller retailers who are often not able to respond to requests at short notice.
17. The proposal to have Government Agencies run regular information nights to inform small businesses of regulatory requirements and changes has merit. Ideally, they should be operated to ensure that the topics presented are directed to the interests of industry sectors. Otherwise they risk being so generic that they will be of limited value. This Association is well placed to work with the agencies in implementing such discussions for retailers using our regional resources located in Auckland, Wellington and Christchurch.
18. Simplifying FBT on Business Vehicles
We support this recommendation. It is in line with submissions we made earlier in the year to the Inland Revenue Department on their review of FBT rules on motor vehicles.
19. Qualifying periods for personal grievances during probation periods
This is a very positive recommendation and aligns with proposals made by this Association in submissions to government since 2000. It is eminently sensible and practical to recognise the need for a period to allow both employees and employers to ensure that a new employee fits the culture and needs of the organisation.
There is a need for a reasonable process to ensure that individuals are not treated unfairly, but this can be done without resorting to the blunt instruments currently in New Zealand law. As noted in the report, there are precedents in other countries similar to New Zealand to ensure that reasonable protection is given to the interests of both parties.
Conclusion
In summary, we commend the Advisory Committee for an excellent and well written report. The succinct commentary and positive recommendations provide a strong base for future action and we look forward to confirmation that Government will implement those recommendations.
Some proposals will need further consideration and development. We welcome the opportunity of meeting with the Advisory Group to explore some of those areas further and also to discussing our submission with Officials.
John Albertson
Chief Executive
New Zealand Retailers Association
September 2004
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