Retail NZ suggested a $500 fine when the value of the stolen property is less than $250; $750 when it is between $250 and $500; and $1250 when it is between $500 and $1000.
The proposal would involve amending the Crimes Act.
Justice Minister Amy Adams said she acknowledged the concerns of Retail NZ and appreciated the impact that theft and shoplifting continued to have on retail businesses.
"Our Government is committed to reducing crime and welcomes discussion on more ways to achieve that."
The rate of retail theft and shoplifting had been declining, from about 7415 people charged in 2008 to around 3895 people charged last year, Adams said.
Police Minister Paula Bennett pointed out that the Government's recent $503 million investment in policing and justice would help police to proactively work with at-risk businesses.
"Our 880 new sworn police officers will help the ongoing work police do working closely with retailers at both a local and national level," she said.
The Labour Party's police spokesman, Stuart Nash, called Retail NZ's proposal "an elegant solution to a growing problem".
He compared it to a members bill introduced last year to crack down on windscreen washers, which will give police the power to fine them $150 on the spot, rather than charging them and clogging up the courts. The bill was supported by both National and Labour.
"This is very similar," Nash said. "Yeah sure the police can drag them into the cells, charge them under the Crimes Act and they can go through the courts, but that's a really expensive process within a system that is clogged up anyway.
"We've got to allow police to use their judgement: if it will help the police to be able to issue an instant fine or an infringement notice then let's give them that tool.
"I just think it frees up a whole lot of time, effort and energy and it deals with a situation that isn't being dealt with at the moment because the cost is just too high."
Nash said he would be happy to sit down with Retail NZ and the Labour caucus to talk about whether this could become a party policy.
'It looked like after the earthquake'
In less than two minutes, criminals had ram raided Mark Carter's Christchurch store and taken thousands of dollars' worth of goods.
They drove a car through the front doors of Anderson & Hill Sportspower at 3am last October, before reversing another car through the shattered facade and stealing more than $70,000 worth of sporting goods.
"Staff stress levels were high," Carter said. "The place looked much like it did after the earthquakes a few years ago.
"We had to wait for the police crime team to finish their inspection before we could get into the store. Despite the chaos, we just had to trade, it was going to be a busy day for us."
Carter estimated the damage to the building and the value of the stolen goods was about $100,000.
The community had rallied around the store and police caught the alleged culprits.
"Having your store broken into and damaged, and having your goods taken ... it's really not a pleasant experience as a store owner."
The shop had nine CCTV cameras and an alarm system, Carter said.
