The changing face of retail: How shifting demographics are rewriting the industry

  • News
  • March 31, 2016
  • Sarah Dunn
The changing face of retail: How shifting demographics are rewriting the industry

In Retail NZ’s latest ‘Big Issues in Retail’ survey, retailers reported that managing diversity was likely to be a concern, but probably not for three or more years. However, big changes in our population are already in effect. Statistics New Zealand senior demographer Kim Dunstan says the four key shifts to be aware of right now are:

1) New Zealand’s population is becoming more racially diverse.

Diversity is increasing for two reasons: increased reliance on immigration for population growth; and uneven fertility levels within different ethnic groups.

Currently, New Zealand is experiencing relatively fast growth at two percent per annum, but this is expected to slow over the next decade. We already gain population most years through immigration – Statistics New Zealand says net migration has been regularly breaking records since August 2014.

Growth in the Asian population is largely driven by immigration, says Dunstan. The size of this group of New Zealanders is expected to increase by 60 percent over the next 20 years.

Pacific Island and Maori families are also expected to grow faster than those of Europeans. This population growth is driven by higher fertility rates, as these groups currently have a median age 10-20 years younger than their Asian and European counterparts.

Asia New Zealand Foundation’s executive director Simon Draper told Idealog that he worries about the New Zealand business community’s attitude to interactions with Asia.

“We seem to have a short-term mercantilist view that by ‘relationship’ we actually just mean ‘we want to sell you things’,” Draper says. “From my own knowledge, I am not sure this is what our Asian counterparts mean when they say ‘relationship’.”

Speaking about marketing within New Zealand, Agency 88 director Nick Siu has a similar criticism. He told New Zealand Marketing that those in the Asian community have considerable spending power but companies tend to “just pay lip-service” to the Asian consumer in their marketing campaigns.

It doesn’t have to be this way, he says: “If a campaign is well communicated, and the service is appropriate to them, and they feel they are represented and understood, then they will spend money, significant amounts of money.”

Stella Muller, 4pi Marketing Communications managing director, says corporate brands are yet to realise the potential of the Maori and Pacific consumer base. She told NZ Marketing that, at least on a small scale, Chinese and Indian entrepreneurs are currently doing a better job.

“I have to take my hat off to the Chinese and Indian entrepreneurs who truly understand the day in the life of a Pacific consumer… just take a walk down Otahuhu or Mangere town centre and there are plastic flowers galore for the mafutaga tina (mother group) requiring flowers to decorate the church, and 50 different white church hats for every kind of church occasion.”

She believes businesses need to find new and authentic ways to express Maori and Pacific stories without defaulting to “frangipanis and korus”.

Foodstuffs led some promising changes in June last year when it started to make targeted product changes in some Auckland stores situated within clusters of particular ethnic populations.

Foodstuffs North Island general manager of merchandise Baden Ngan Kee said individual stores had been customising their mix of products to fit their communities for a long time, but Foodstuffs was starting to put more science behind those decisions. Pak‘n Save Mt Albert and New World Mt Roskill have had goat meat and Indian herbs and spices to meet the needs of customers in the area – Pak’n Save Mt Albert also stocks the Pacific Island staple, taro.

2) More New Zealanders are living in Auckland.

National changes in racial diversity will be replicated more or less across the country, albeit in very small numbers in some centres. Asia New Zealand’s report on the Asian presence in small-town New Zealand, ‘Beyond the Metropoles’ indicates that while Auckland, Wellington and Christchurch have the highest concentrations of Asian populations, Hamilton and Palmerston North also have Asian populations which account for more than eight percent of residents.

“It’s always worth remembering that roughly two thirds of our Asian and Pacific populations live in Auckland,” says Dunstan.

He feels this dynamic is unlikely to change. Around 34 percent of New Zealand’s total population currently live in Auckland. This is projected to increase “slightly” – Aucklanders will account for between 50 and 70 percent of New Zealand’s total population growth over the next 30 years.

Dunstan says Auckland will continue to dominate New Zealand economically, politically and demographically. Other regions are predicted to have increased populations by 2043 but growth rates will be much lower than Auckland’s.

It’s likely Canterbury will stick to the national average, but every other region will grow below the average over the next 20 to 30 years. Dunstan expects the regions to have very stable populations or slight drops.

“The main reason we’re likely to see more parts of New Zealand experiencing population loss is to do with our ageing population as people die and aren’t replaced,” Dunstan says.

3) New Zealanders are getting older.

You’ve probably heard about New Zealand’s ageing population in the context of the havoc it’s set to play with the public health system. It’s also the main reason why New Zealand’s population is slowing – bluntly, even as life expectancy continues to rise, the gap between annual births and deaths is narrowing.

This is why migration is making more of an impact on New Zealand’s population.

According to the UN, population ageing is a global phenomenon, although some countries are more advanced in the process than others. Europe currently has the highest proportion of elderly - people aged 60+ currently constitute

between one fifth to nearly a quarter of the population of Austria, Czech Republic, Greece, Italy, Japan, Slovenia and Spain.

In New Zealand, there’s currently a gap of about 30,000 between births and deaths – this gap is also known as “natural increase”. By the 2030s, this is likely to close to around 20,000 and by the 2050s, there will only be around 10,000 more Kiwis born than those who die each year.

“The fastest-growing segment of our population is the older ages,” Dunstan says.

This dynamic isn’t just driven by the headline-grabbing Baby Boomers. There’s been a less-publicised population spike in people aged in their forties, Generation X, and also those who are about to move into the over-65s. A further population spike has been identified in the 85+ segment.

This set of changes is relatively good news for retailers, from a sales point of view. Dunstan says personal income and household income tends to peak when people are in their 40s and 50s. Costs fall as children leave home, and a wealth of experience translates into higher salaries.

From a retail workforce perspective, Service IQ’s 2014 report, ‘A profile of the retail sector in New Zealand’ used data from the 2013 census to determine that retailers have 25 percent fewer workers aged over 55 than the national average. Fifteen percent of the retail workforce were over 55 in 2013, compared with almost 20 percent across all industries.

As New Zealand’s population continues to age, retailers may need to consider taking on older workers – not only will they be better able to relate to an older customer base, they can offer great depth of knowledge and expert customer service.

4) New Zealand is becoming more globalised.

Ethnicity isn’t the only difference between the immigrants currently entering New Zealand and those who flooded in after the Second World War. Dunstan says that in recent years, most of New Zealand’s migrants have come on work visas and student visas and are thus more temporary citizens. As late as the 1980s and 1990s, they tended to arrive on resident’s visas instead.

The shift to more temporary visas reflects a more global world, Dunstan says: “International travel is as easy as it’s ever been.”

“The notion of people upping sticks and moving from one country to another is an increasingly anachronistic one.”

This story originally appeared in NZRetail magazine issue 742 February / March 2016

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