Rising costs and inflation continue to hit some businesses hard. Photo / Getty Images
Rising costs and skyrocketing inflation could send more businesses to the wall as customers tighten their belts and close their wallets.
Retailer confidence is grim as industry reports show most are expected to increase their prices by 7.5 per cent and 35 per cent were afraid they would not survive the year.
It coincides with rising mortgage rates and increasing day-to-day living expenses.
Priority One chief executive Nigel Tutt said the impact of rising inflation was being felt widely.
''Retail spend is flat overall, consumers are spending more money on essentials like food and petrol, and less on other retail categories and hospitality.''
''Businesses have no choice but to pass on cost increases to consumers, for which some, unfortunately, will have a tough time doing. Local support for retail and hospitality businesses is really important at this time.''
The Western Bay was not insulated from inflation by any means ''but our strong economy means we're a little more able to ride out the effects of it''.
Tauranga Business Chamber spokeswoman Anne Pankhurst said most retailers operate a high volume, low margin model.
Some retailers had a great 2021/22 year, which would carry them through quieter periods.
But others who had struggled over the past two years and had few cash reserves might find it tough while households had less discretionary cash.
Managing stock, increases in commercial leasing, staff availability and the rising tide of costs were the biggest challenges for retailers, Pankhurst said.
''It is inevitable that retailers will need to pass on their rising costs to consumers, hence the rising inflation. Ultimately the consumer becomes the final destination of increased costs.''
Covid was entering its third year and retailers had been significantly impacted.
''Their emotional resilience will be depleting as many small retailers feel like they have been swimming against the tide over the past few years. We have anecdotal information of a number of people having issues around mental health and wellbeing.''
Rotorua Chamber of Commerce chief executive Bryce Heard said high government spending, rising wage expectations, difficulty with supply chains, gouging with international shipping charges, shortages of supply and resources, and now the Russian invasion of Ukraine with the fuel price impact – ''have all led to a perfect storm''.
''But these are complicated times and contradictory forces are at play. Business has been patchy, with some businesses doing well through the pandemic while others have suffered, depending on what product lines they are trading in.''
Interest rates were following inflation upwards and this would dampen property prices and investment, leading to a slowing of the economy.
Meanwhile, the primary sector was ploughing along, he said.
''We should all be thankful that this major part of the New Zealand economy has continued to generate strong export earnings which have carried us through the turmoil to date.''
Tourism Bay of Plenty general manager Oscar Nathan said the re-opening of the international border was a positive step in the right direction but many operators were feeling extra strain due to increases in the Consumer Price Index and inflation.
''This not only drives up costs but ultimately puts pressure on attracting and retaining staff who are seeking increased wages due to higher costs of living.''
He said businesses aimed at international visitors, [like backpackers] or tourism activities had been hit hard and staffing continued to be a big issue.
Retail NZ chief executive Greg Harford said businesses had seen ''wild swings in sales numbers'' and costs had substantially increased.
Many retailers had incurred additional debt to stay afloat and it was going to be challenging for some to recover.
''Many retailers are on a knife-edge.''
Its latest Retail Radar report of the retail sector shows the Omicron outbreak and record low consumer confidence meant 35 per cent were not confident they would survive the next 12 months.
Meanwhile, 90 per cent expected prices to rise by 7.5 per cent on average in the next three months.
''Pricing will be a significant issue as the year progresses.''
Harford said as consumers felt squeezed by higher costs in store, higher mortgage costs and a declining housing market they were less likely to be out shopping, and might buy cheaper brands than they did previously.
Restaurant Association chief executive Marisa Bidois said businesses were already being asked to absorb a number of costs including labour while revenues continue to be down.
''These price increases are putting increasing pressure on already tight margins.''
Member feedback since moving to orange shows things were starting to improve with revenues up on what they were at the red level setting.
However, many continued to struggle, particularly those city centre businesses which relied on local workers, many of whom are yet to return to office-based working, she said.
''While it is really great to see positive signs of a recovery starting there is still significant pressure on our businesses.''
Its March member feedback survey revealed 90 per cent of respondents said revenue was down on 2021 and the average decrease was 34 per cent.
A Westpac spokeswoman said a survey of customers revealed while 97 per cent of people were worried about the cost of living in the next 12 months, 69 per cent were confident they could cope.
The report said Kiwis were ''clearly feeling the squeeze, with roughly nine in 10 customers saying rising fuel and grocery prices are affecting their households''.
The survey also found many Kiwis were looking to boost their income to manage rising costs and 20 per cent in full-time work had already asked their employer for a pay rise.
They wanted an extra 10 per cent in their pay packet to keep pace with rising prices.
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