In recent years, tourism has swooped into New Zealand’s regional centres to provide much-needed support for regional retailers, but what about the small towns the tourists don’t visit? As part of a new series, we examine what retail looks like in 2019 for seven regional centres: Paihia, Tokoroa, New Plymouth, Bulls, Kaikoura, Greymouth and Arrowtown.
Last year was one of mixed fortunes for retailers. For many, the mid-decade’s gloom had been replaced with optimism, thanks to a boom in tourism.
An increase in overseas holidaymakers and a weaker dollar boosted spend by international visitors, which grew six percent to $11.1 billion for the year ending September 2018. This growth is forecast to continue over the next five years.
But tourism isn’t strong in every region, and many towns, such as Tokoroa and Greymouth, have been hit hard when lifeblood employers pull out. Other centres, like Paihia, contain both of these dynamics at once – it’s a resort-style tourist town in the middle of hardship-struck Northland.
Westpac senior economist Satish Ranchhod says that there have been some “starkly different” trends around the country.
Spend remains flat in Auckland and Christchurch, but many other parts of the country have been boosted by strong increases in house prices and population growth. Regions with links to faster growing export industries like horticulture are particularly strong, he adds.
Last year, spending in the overall economy grew by around 4.5 percent - “not a bad rate of growth, but still a step-down” from six percent growth seen the previous two years, Ranchhod says.
Many retailers have faced a “challenging” set of trading conditions.
“Operating costs, including wages, have been pushing higher. We’re also seeing continued strong competition in the retail sector, particularly in the online space.”
Chris Wilkinson, managing director of consultancy First Retail, says 2018 was a stronger year in provincial retail.
“The rural economy has stabilised, consumers have become more confident and are spending in the stores that meet their needs and expectations.”
Ever more retailers embraced digital to reach beyond their immediate market.
Overall, Wilkinson says, successful retailers “focused on differentiating their range and experience to help set themselves apart” and those doing it well are buoyant.
Ranchhod warns that the economy’s current strong momentum won’t persist indefinitely.
Seismic strengthening has been particularly tough on retailers in the provinces, says Wilkinson, “where investment will not necessarily produce an economic return”.
But tourism is set to stay strong, and many towns are benefiting. Even those not traditionally on main visitor routes, such as New Plymouth, Porirua and Balclutha, are seeing an influx in visitors.
Strong digital visibility is “a fundamental” for towns and businesses to attract tourists. “That's what helps get them in travellers' consideration set.”
Then it is “down to basics” like consistency in opening hours and offering payment systems such as China’s Alipay.
Prosperous regionalretailers have created “an aspirational shopping environment, have a great back-story for their businesses and ably tell the story of their town”.
But whether its small towns or city centres, successful CBDs always have a well-documented strategy that brings everyone along, says Wilkinson, who works with councils around Australasia. “Those without that flounder, with businesses going in different directions.”
Check out other articles in this series:
Selling to the Kardashians from Matiere
This story originally appeared in NZ Retail issue 760 February/March 2019