The news was hot last week that we are outstripping our cousins over the Tasman; but what does this mean for retailers in real terms?
A new report from Retail NZ last week showed that New Zealand’s retail sales have grown at a faster rate, on average, since 2013 than Australia’s.
“The Dynamic Retail 2018 report shows that retail spending has grown steadily since the Global Financial Crisis in 2009 and is currently $92.3 billion – that’s $18,953 (plus GST) for every person in New Zealand,” said Greg Harford, Retail NZ’s general manager of public affairs when the report was released.
“This reflects the relative strength of the New Zealand economy, and the challenges that have faced Australia over that time.”
While it’s great to puff out our chest and feel momentarily superior, what does this actually mean for the retailer on the ground? Well for one thing, don’t sit on your laurels.
“It is important that the sector continues to evolve to meet changing customer demand,” said Harford. “Competitive pressure will mean that retailers need to innovate and be highly responsive to customer demand.”
NZ retailers may have averaged a growth rate of around 5 per cent between 2013 and 2017, but that growth is based on a small population spending more. Keeping that population interested is no doubt going to be the real challenge, and globally we are seeing a trend toward hybrid stores that offer a variety of experiences, including integrated food and beverage outlets.
Experiences continue to trump materialism, with $11bn of spend on eating out and takeaway food in the 12 months ending March 2018, according to the Restaurant Association Report. In September, The Herald stated there are 17,000 hospitality businesses in New Zealand, with seven new outlets opening a day, and they’re taking a significant slice of the pie.
The retail sector also cannot underestimate the importance of tourism for continued growth. A comparative dip in spend across the board in early 2018 has been attributed, in part, to the fact we had no Lions tour this year. Infometrics economist Mieke Welvaert told Stuff in August that accommodation dropped 1.4 per cent compared with last year, when the Lions rugby team visited New Zealand, and food and beverage spending was at its slowest pace in five and a half years. Infometrics also noted that even when the figures were mediated for the Lions visit, the July 2018 visitor numbers were struggling to grow, effecting tourism related retail spend.
The great figures we have just seen related to card spend in the third quarter are supported very much by grocery, fuel and home improvements rather than luxury purchases like apparel.
“The report was useful and did underline what we've known for some time in that the Australian retail environment is extremely challenged. There are, however, wider influences at play that have affected consumer confidence and spending that have come off the back of a strong period driven by property values, the minerals boom and other factors unique to that market,” says Chris Wilkinson from First Retail Group Ltd.
“There's a salient message to NZ businesses that we are in a unique position currently, however that won't last forever. We're already seeing the bigger retailers looking overseas at some of the initiatives compatriots are adopting to reduce costs, better engage online and be transformative in range and shopper experience. They are doing this because they recognise this country is also likely to see some realignment ahead.”
Wilkinson says small or medium size retail businesses should watch the bigger brands to determine which ideas they could scale successfully for their stores. This could include looking for greater staff productivity, self-service initiatives, improved online shopping or more experiential store environments.
“The key message is not to be lulled into a false sense of security. Look up and out to see what the best are doing, then look to emulate that in your business.”