A change of heart: Keeping retail alive in heartland New Zealand
Over the past year, a concerning number of provincial towns have reported a proliferation of vacant shops. Elly Strang takes a look at retail in heartland New Zealand and what can be done to stop the haemorrhaging of consumer spending.
As late as 1959, only 54 percent of New Zealand households had access to a fridge. People would shop on a ‘need to buy’ basis, frequenting the local butcher, greengrocer and corner dairy at their town centre. Fast forward 57 years to 2016, and times have changed.
Not only do most households have a fridge, but they also have access to the internet, where everything can be bought online – including meat, surprisingly.
There’s less reason to leave the house, and even less inclination to pop down to the local shops.
This development is just one factor affecting retailers in New Zealand’s small towns.
Death by a thousand cuts
It would be difficult to pinpoint just one reason why some retailers in provincial towns are struggling.
Instead, the current climate has been shaped by various factors, including spending attrition, poor town planning and dwindling rural population numbers.
Chris Wilkinson, managing director of consultancy First Retail, says things changed for provincial towns in the 1990s and early 2000s when ‘big box’ stores moved in.
Over this period, Kmart expanded across New Zealand, The Warehouse began scaling up to larger outlets and in 2004, Mitre 10 opened its first Mega store in Hastings.
As the big box retailers settled into cheaper, larger sites on the fringes of towns, consumers started to bypass the high streets and spend their money at one-stop shops.
Lloyd Budd, director of commercial and retail operations for real estate company Bayleys says town planners succumbed to pressure to let bulk retailers move away from town centres.
“Doing so erodes the vibrancy of cafes, smaller retailers and the business community in these centres to such a degree we are now seeing some places lose their heart completely.”
Raymond Jujnovich, manager of Jujnovich Gifts and Souvenirs in Kaitaia, a town whose population has declined steadily over the years to just under 5000, says big-box stores positioned away from the main street have eroded spending at independent retailers.
“Foot traffic has always been a problem for Kaitaia – when a big Warehouse comes into town and they put a new shop in place, that’s 20 shops in one [for customers]. They get tunnel vision.”
The next blow was the rise of online shopping.
Wilkinson says time-poor consumers are increasingly splitting their purchasing between online sites and bricks and mortar stores.
They do their research beforehand and work out what will save them time before heading out to shop, he says.
“People’s lifestyles are changing. There’s a lot more of what we call ‘purposeful’ shopping, which means the retailers that have strong online presence surface much higher in consumers’ search and prioritisation.
“People are sitting at home or at the office in these provincial areas doing their searching validation online, which helps them decide where to go.”
Figures released by research company Roy Morgan in December show the number of Kiwis shopping online rose to 49 percent - or 1.8 million people - in the year ending June 2015.
This had increased from 39 percent in 2011.
One reason for this is that those in the regions live a long drive away from the town centre, so having something shipped straight to their door is more convenient.
Wilkinson believes convenience is a higher priority than price for many consumers.
“It’s that certainty and assurance which is driving people towards these big boxes and online.”
Recent developments in property and dairying haven’t helped lessen the load for retailers.
Spending in the regions has been dampened by slashed dairy payouts, and the outlook for 2016 isn’t promising. Fonterra’s forecasted payout for milk solids was cut by 25 cents a kilo in March, guaranteeing a lean winter ahead for farmers.
Infometrics senior economist Benje Patterson says although this has been a big dampener to areas reliant on dairying, there are few places in New Zealand that count on dairying and nothing else.
“Most places do still have a few strings to their bow. What we’ve seen is other areas have been picking up and filling that void left by low dairy prices, like extremely high tourist flows.”
Bayleys’ Budd agrees. He says what’s happening in dairy isn’t reflected in the whole sector, with sheep and beef farming, as well as some sectors of the horticulture industry doing okay.
“I’m not saying the provinces are doing well, but there are no train wrecks or mass closures on the main street.”
Still, Patterson says some regions are struggling, particularly if they are off the tourist trail and not getting any economic spin-off from the Auckland boom.
These places include the Buller district on the South Island’s West Coast, which is in real trouble due to mining layoffs, he says.
Two retailers NZRetail Magazine spoke to in Westport, Buller, said many people who have lost their jobs have left the area and that’s impacting on foot traffic.
Another recent issue that’s surfaced is the seismic strengthening requirements for older buildings.
Following Christchurch’s devastating earthquakes in 2010 and 2011, the Government amended its policy for earthquake-prone buildings in 2013 and again in 2015.
The amendments ruled that strengthening or demolishing of earthquake-prone buildings needed to be carried out within 15 years in high-risk areas.
Towns such as Gisborne, Blenheim, Napier and Hastings are among the areas considered to be high-risk zones for earthquakes.
But earthquake strengthening is expensive, and Wilkinson says rather than fork out large sums to bring fragile buildings up to scratch, some businesses have simply abandoned them, affecting the look and feel of town centres.
In other towns, building owners have stopped investing, causing dilapidation.
This, combined with flattening or declining populations, is creating a challenging environment for provincial retailers to operate in.
Scratching the surface
Some experts believe a common mistake being made in provincial towns is focusing too much on appearance.
The look and feel of a town is undoubtedly an important factor when it comes to spending - a desolate, abandoned-looking main street can send travellers and potential investors scarpering, while locals travel out of town to spend their dollars.
But Karen Remetis, principal of Waikato-based strategic planning company Town Centre Development Group, says it’s important not to get caught up in the superficial.
Though people might not consciously realise it, the town centre is a reflection of the economic health of the wider area, she says.
What happens often is the focus for improving a small town is the urban design, when really, this won’t have much of an effect on the foot traffic.
“When a town is struggling and people put in new footpaths and beautify it, it’s going to make it look good but not going to fundamentally change how the town is going to thrive,” Remetis says.
“Sure, those things are important, but for me they’re not the most important. The most important to me is how are we going to get this economy to work?”
Another commonly-used strategy for tackling high streets suffering from too many unattractive vacant shop fronts is to hold art exhibitions within the empty stores.
First Retail’s Wilkinson is critical of such strategies, calling it “embalming”. “It’s embalming a body rather than resuscitating the patient.”
Remetis says when it comes to a town branding itself, it should be around what’s local, what’s real and what’s important.
She says often, what the town chooses to focus on marketing-wise doesn’t have any substance underneath.
“It’s no use having a big carrot or a big banana, there’s got to be something that is relevant. Even if it’s the sheer beauty of the town, an original town, that’s what visitors and tourists want.”
The retailer: Tracy Hawker, who owns women’s fashion boutique Fifty Five and gift store Country Lane Originals says her businesses are doing well, but she knows of retailers hurting at the moment. “We have a number of empty stores in the CBD but we also have a rejuvenation programme being implemented where empty space is provided to artists to ensure the main retail area remains vibrant.”
The expert: First Retail’s Wilkinson says Whanganui feels like it’s “under siege”. “We’ve had lots of retailers contact us from Whanganui wanting help.” He says the MainStreet Wanganui has had some success, but it may need extra resources from the council as retail is changing so rapidly and it hasn’t been able to cope as well.
The council: Chris Heywood from MainStreet Wanganui says there are empty shops in the CBD, but not a reduction in retail trade. He says town centre vacancies have increased mainly due to changing in retail spending patterns and the way people do their shopping. He says there’s a revitalisation project underway to help improve the CBD, as well as another initiative to have pop-up art shops in empty stores until landlords find a permanent tenant.
The retailer: A store owner who wished to remain anonymous says town stakeholders were trying to make the town centre more attractive by adding stone walls and gardens into areas. They wanted to see their city being promoted more to residents of large cities like Wellington as a great place to move to or visit.
The expert: One of the challenges is many towns like Levin have economic development advisers that don’t necessarily understand retail, Wilkinson says. “Levin’s an area that has so much potential, but there’s a bypass coming that will take traffic away from the town centre in the next five to six years, so Levin needs to be really strategic and leverage some of its gems, like its manufacturing gems, like Swazi or RJ’s licorice.” He says Levin also needs to find some personality and the “essence” of its town.
The economist: Infometrics’ Patterson says Levin’s economy has been growing at a moderate rate, about in line with the broader New Zealand economy.
The retailer: Westport has been hit hard by mine closures, but the local council has been very supportive, says Westport retailer and founder of Shop West Coast, Rachelle Hicks. In particular, the council is pushing the Government to fund a 56km road linking Westport with Nelson via the northern part of the West Coast and the Kahurangi National Park. “This is so important for us in Westport as at the moment we only capture approximately 11 percent of the tourism market on the entire West Coast.” Hicks says the new road would create many opportunities for Westport and the small towns north of it. “I want this positive energy that we have to continue and I want it to be a catalyst to improve business here.”
The expert: The redundancies in Westport are a setback for the town, Wilkinson says, but it has a vision and the retailers there are passionate to make it work, so there are definitely solutions. Its biggest challenges are its remoteness and small population base, he says. “What we would look to achieve in Westport is probably New Zealand’s most customer centric retail community.”
The economist: A sharp downtown in mining in the area has meant the Buller district is facing a recession, Patterson says. However, he says businesses further down the West Coast that have been exposed to tourism have seen an uplift in activity.
The retailer: Raymond Jujnovich, manager of Jujnovich Gifts and Souvenirs in Kaitaia says the boom in Auckland is largely not impacting on rural New Zealand and the town is suffering because of it. Foot traffic is low, there’s no longer a Vodafone or Spark shop in the town, and the local bus company sold out, so tourists that used to come to the town to catch a bus to Cape Reinga now catch one from the Bay of Islands.
The expert: Wilkinson says smaller places like Kaitaia have had some real challenges, as it’s hard to get the critical mass of people needed to keep the town afloat.
The economist: Patterson says although individual retailers in Kaitaia may be struggling, across the Far North district as a whole, general economic activity has picked up reasonably strongly. Numbers from Marketview show in the year to December 2015, retail spending was up 3.4 percent from a year earlier.
The retailer: Tim Thomas of Thomas’s Department Store says while the number of vacant shops has increased, Paymark statistics for spending in Marlborough are very encouraging. “The last six months’ trading has been very positive; we’ve really seen an improvement. We’re seeing a lot more tourists coming into the region, domestic and international, off the back of the wine industry getting back on its feet and doing really well.” He says the last five years have been tough and there have been casualties, especially with independent stores, but the future is looking promising.
The expert: “You’ve got some very proactive retailers who want things to happen but there’s a lethargy amongst a number of them,” Wilkinson says. The BID structure the town’s employing may not be able to move as quickly to the changing pace of retail, he says.
The property expert: Bayleys’ Budd says Blenheim is suffering from poor town planning, as a bulk retail park has been built by the airport and on the outskirts of town. As a result, the city centre’s business has been impacted.
The economist: Patterson says the Marlborough district has had some good growth as of late, and people there are very optimistic about their wine sector at the moment. “It’s also benefited form the uplift in international visitors to New Zealand and we’ve seen that come through in the regional tourism indicators.”
Stopping the erosion
The experts say there is no one-size-fits-all solution, as every town has different strengths and weaknesses to the next.
Instead, they say it’s vital that regional towns and cities have an action plan that’s put together by an outside facilitator who has no qualms about calling it like they see it.
“It’s like saying you’ve got to go to the dentist – basically, it’s got to be done,” Remetis says.
Wilkinson says a retail-specific strategy should be tailored specifically to the town, so all of the factors at play are captured within it.
“Where councils go wrong is when they try pick off one thing, like parking. That’s the only one part of the equation.”
He says the key opportunities and risks need to be addressed, then a plan needs to be made about how to develop resilience and achieve growth.
Towns getting the retail mix right is also important, says Tim Thomas, owner of Blenheim-based Thomas’s Department Store.
“We’re seeing new stores that open generally are chain stores. It’s important to get the mix of independents as well as chains. As soon as you get more chain stores, the variety for shoppers starts to wane.”
Wilkinson says some councils might say there’s nothing they can do about the retail mix, but the reality is they can have an input.
“You can’t dictate the mix, but you can be a key influencer in how a town evolves - but it relies on you understanding what consumers want.”
Bayleys’ Budd says in terms of the mix, bulk retail shouldn’t be allowed to be positioned on the outskirts of towns, as this drives foot traffic out of the centre.
“Instead, position these big-box retailers on corners behind the heart of a centre so they can support and feed the heart.
“Some of the best examples of towns doing this well are Cambridge and Kerikeri.”
If a business is really struggling to cope with these changes, Remetis says they should accept they need an exit strategy.
“With the changes of where New Zealand is going, some businesses do need to say, ‘We have done well for 20 years but we accept the town and the economy is changing now and we need to look at doing something else.’”
Adapting to change
Wider town solutions aside, there are several ways provincial retailers can encourage more foot traffic to their stores.
Thomas says his store has survived 103 years in retail because it has adapted to change.
“Sometimes what can happen with retail stores in the regions is they don’t change their product offerings and they don’t look at adding new things to the business, which is something we’ve always done.”
In November, it opened a in-store café to make itself more of a destination for shoppers.
“What it’s done is helped to draw people into the store and is another means to engaging with customers,” Thomas says. “You might come into a clothing store once a season to buy a shirt, but you’ll come in every day to buy a coffee.”
Another way to draw customers back into the store is through a customer loyalty programme.
Chanelle Purser, owner of Gore-based clothing store CarvinStreetwear, says when she noticed customers weren’t shopping locally as often, she created a programme that offered customers great perks for spending their dollars with her store.
The programme also created a channel for her to connect with customers on, where she could ask “Is this what you’re after?”
It worked, and Purser stays customer-focused and constantly asks for feedback on stock.
It also helps to pay attention to the economic climate of the town, she says, which is something customers may not be so open about.
When things became tougher locally because of the dairy payouts, Purser began looking for clothing labels at different price points and found a mid-range that would suit people’s pockets better.
Another way to engage customers is when retailers run an event or campaign that emphasises why their stores are unique and worth shopping at.
Melissa Williams, founder of Kilt clothing, says her label started a month-long event called New Zealand Made March to encourage people to shop locally.
The month encourages people to shop with both Kilt and with other New Zealand made brands.
“We have seen people really get on board with it and get excited about it. If you’ve got the option of China made and New Zealand made and they’re a similar price, most people would pick locally made. It’s keeping people in jobs, and there are a lot of feel good factors about it,” Williams says.
United we stand, divided we fall
While there’s no silver bullet for the problems facing provincial retailers, a common thread connecting the successful shops is putting an emphasis on community.
Small towns will never pull the same crowds as the likes of Wellington, Auckland and Christchurch, but this can be seen as a strength, not a weakness.
The smaller customer base means provincial retailers can get to know the intimate communities they operate within and provide better personalisation than their urban city counterparts.
Owner of Hastings-based the Little Red Bookshop, Siobhan Mccormack, says the less frantic pace of the regions allows retailers to familiarise themselves with their customers more.
“Here in the provinces we have a slower pace and more time, it allows us to interact with our customers, to chat, to get to know them. Locals and visitors alike appreciate that, and they will return, and they do recommend us to others.”
Carvin Streetwear’s Purser says getting out and being a part of the community is the best advertising you can do for your store.
“I think being visibly part of the community helps, especially in rural communities, as people really care like seeing that you’re helping their causes, sponsoring things or donating your time.”
This sense of community can be taken to the next level through creating an organisation for retailers in the town to promote themselves to locals.
One example of this is Shop West Coast, an initiative on the South Island’s upper West Coast, set up to promote businesses in the area and shopping locally.
Shop West Coast sells loyalty rewards cards to shoppers, who get discounts with member retailers.
Westport retailer Rachelle Hicks, who founded Shop West Coast, says customers love the idea, with over 1000 cards sold so far.
Fostering a sense of community is key to retail surviving in the provinces, she says.
“People who live in small towns enjoy a feeling of belonging. The love the fact that they know shop staff by name and we know and remember them.”
Rather than competing against one another, she says collaboration between retailers is essential for success.
“When small businesses stand together, talk to each other and work alongside each other it makes them stronger and gives them a more effective presence.”
The benefits of building a retail community include not only creating strength in numbers, but raising group morale.
First Retail’s Wilkinson says it’s important provincial retailers find and share camaraderie with other business owners.
“At the moment, many store owners feel like the sky’s falling in or it’s groundhog day. But when you’ve got businesses working together or participating in mentorship programmes, where experienced retailers or property owners provide free advice and support, town centres truly come together.”
Perhaps most importantly of all, the social impact of struggling retailers in provincial towns is bigger than the retail industry itself.
No town centre means communities can break down and lose their “heart”, with people no longer having a central hub to interact within.
Retailers shouldn’t shoulder the sole responsibility for this, but they can make their significance to the town well known to local shoppers and town stakeholders.
With this in mind, Remetis says each town and its retailers must figure out how to fight back.
“I know how hard it is, but they must get political and they must get strong. Organisationally, functionally strong.”
Steps for those that are struggling:
1.Find strength in numbers. Band together with other retailers and businesses in the area to create a community where you can share advice and ideas.
2.Create a platform that you can engage with customers on and get feedback on what’s working and what’s not, be it your store’s social media page, a loyalty programme, or an in-store feedback form.
3.See if there’s a retailer, retired or active, who’d be willing to be a mentor.
4.Contact a retail consultancy and ask for advice.
5.Talk to the local council about what options there are; ask for examples of other New Zealand towns in hand to show there are solutions out there.