The quarter to June 30th has been a disappointing one for the 51 percent of retailers, according to Retail NZ’s latest Retail Radar Report. More than half of the respondents failed to meet their sales targets, citing aggressive competition and constant discounting; competition from foreign websites; and consumer uncertainty caused by the upcoming election.
New Zealand’s total retail sales for the quarter were up 6.7 percent at $21.3 billion. The total North Island accounted for $16.3 billion of this, with Auckland alone covering $8 billion, and the South Island earning $5 billion in total.
Spending on hospitality, entertainment and food was driven by North Island events like the Lions tour in July; the World Masters’ Games in April, the Adele concert in March and Fieldays in June, says Retail NZ’s general manager for public affairs Greg Harford.
This supported stronger performance in the North Island than the South, with the central North Island (excluding Auckland, Waikato and Wellington) with the strongest growth of all. This area was up $353 million on the same quarter of 2016, or around 9 percent, taking its total to $4.3 billion. By comparison, Canterbury saw just 2.6 percent growth.
Harford says strong growth of around 15 percent was recorded in accommodation, liquor and motor vehicle segments of retail, but the retail industry as a whole has not flourished. The worst-performing categories were supermarket and grocery stores; non-store and commission-based retailing, and department stores.
"While retail trade spending has been steady, with Statistics NZ reporting a 1.6 per cent increase in seasonally adjusted terms, some parts of the retail sector are under signficant pressure," Harford says.
He reiterated Retail NZ’s long-held stance that companies selling into New Zealand should have to pay tax.
"Retailers continue to face strong competition, both domestically and from foreign websites who don't have to pay their share of tax,” Harford says. “This is keeping prices down, but is creating unsustainable pressure on businesses in the long-term, particularly SMEs that may lack scale. Many retail businesses are looking to develop a more experiential offering and to connect with consumers in an attempt to retain business in a highly competitive market."
Retail NZ’s Retail Radar Report indicates a negative outlook for the next quarter, with just 55 percent of retailers expecting to meet their sales targets. Nearly 30 percent expect to miss their targets.
While the general election traditionally slows economic activity, and offshore competition is unlikely to let up, some retailers are anticipating an increase in shoppers as the weather improves and daylight hours lengthen. There’s also hope in sight from new season products, and those in rural areas notes that improving dairy prices mean farmers have more money in their pockets.