Can Kiwi retailers expect a positive year as costs rise and spending continues to drop? Photo / Andrew Warner
Retailers are preparing after a year that kicked off with severe weather and ended with less-than-satisfactory retail spending, along with ever-increasing costs.
The Herald spoke to some major industry players to get their view on the outlook for 2024, key challenges and opportunities.
Retailers are looking to a new government for relief from a year of rising production costs, inflation, interest rates and economic uncertainty.
Briscoes Group chief executive Rod Duke said the retailer was relatively confident heading into the new year.
Duke said the new Government was making positive moves quickly, which is a good sign and is likely to boost retail around the country.
“I think with a new Government, there will be a new-found enthusiasm in the suburbs that wasn’t there before.”
“Like the vast majority of New Zealand, I’m confident and hope they will do very well.”
Last month, Retail NZ chief executive Carolyn Young told the Herald the Government’s work to remove fair pay agreements and changes to the number of tobacco retailers were welcomed by the industry.
Despite businesses starting to recover from the pandemic, retailers were hit last year with a raft of new problems after Cyclone Gabrielle and severe weather events around the North Island.
Mighty Ape chief executive Gracie MacKinlay said similar events might be an annual trend.
“Every year, there seems to be something that is not planned that’s very disruptive for businesses,” MacKinlay said.
“You have to expect the unexpected.”
She said the key was building an adaptable and positive team.
“In tough times, with the likes of Covid and flooding, it’s a test of your team’s agility and a test of how you can solve problems quickly,” MacKinlay said.
Duke agreed: “We in the retail business just hope there are no disasters.”
“We hope there are no floods, cyclones, Covid or the like, to interrupt the normal,” Duke said. “Let’s hope for a normal year.”
Retail NZ’s Carolyn Young said retailers are “on edge about what 2024 looks like climate-wise”.
“The ferocity and extent of [climate] events were quite significant compared to storms in the past - they were more impactful,” Young said.
“The resilience of business and people are likely to be tested.”
She said businesses in Hawke’s Bay, on the East Coast and in the Coromandel are still feeling the impact of severe weather events last year.
While it’s hard to prepare for environmental events, Young said, “We need the right infrastructure in towns and cities for the impacts to lessen.”
With cost of living still climbing, First Retail managing director Chris Wilkinson said it’s “very hard to understand 2024 at the moment”.
“We’re seeing petrol and food prices drop. If we do see an ease on mortgage rates, that inflation stabilising is a key driver in consumer confidence, appetite and ability to spend,” he told the Herald.
“Many people are navigating challenging times [in which] discretionary spend has been hit.”
Meanwhile, Duke said he was “cautiously optimistic” that this year will be better than the last.
“Expensive items like the cost of food and utilities won’t be higher, and it looks like food prices have peaked,” he said.
Warehouse Group chief executive Nick Grayston said the company aimed to make essentials affordable for Kiwis as cost of living pressures persist.
“With Kiwis continuing to grapple with cost-of-living pressures and high supermarket prices, we will focus on keeping essential groceries affordable at the Warehouse as we fight for fairness in the grocery sector,” Grayston said.
MacKinlay at Mighty Ape said, “The escalating cost of living is still high, but we are anticipating things will ease in the latter half of 2024.”
In response, she said Mighty Ape focused on improving business efficiency and passing savings to its customers.
“If the business can operate more efficiently, there’s more value you can pass on to the customer and [you can] be more competitive in the marketplace,” MacKinlay said.
Chris Wilkinson said data from data company Bellwether showed foot traffic in the Auckland and Wellington CBDs showed “some encouraging growth”, but regional retailers might bear the brunt of dropping discretionary spending.
“It does seem like there are more people in city centres, which is quite a turnaround, but the regions have seen an overall drop in footfall,” Wilkinson said.
But, he said, that hasn’t stopped retailers from targeting regional growth.
“While consumers have immediate challenges, retailers are taking the opportunity to consider their options, consider their locations and go back to regions which haven’t been a focus for a while.”
He said retail gaps in city streets, including Auckland’s Queen St, are starting to fill up, especially as more Kiwis go back to working from the office.
He said retailers are still pushing e-commerce.
“There is a push from big retailers to go online. This is a continuing trend, but more notable this season,” Wilkinson said.
At Mighty Ape, MacKinlay said, “For online retail specifically, we’re still seeing the behavioural change of more people shopping online, simply for convenience and to compare prices to get the best deals possible.”
The biggest concern in the new year is the economy.
Financial research firm BMI in its New Zealand Consumer Outlook report said high levels of Kiwi household debt are still a drain on disposable income.
It showed New Zealand household consumer debt remained high at 93.3 per cent of the national GDP in quarter one of 2023, a drop from 94.4 per cent in the last quarter of 2022.
“The majority of household debt (89 per cent) is from housing, mainly due to increased mortgages due to the boom in property prices,” the report said.
“The risk to consumer spending is that the cost of servicing this debt at higher interest rates becomes a larger-than-anticipated draw on disposable incomes, to a point where consumers have to cut back spending, especially in more non-essential segments.”
Warehouse chief Nick Grayston said: “We expect the retail environment to continue to be challenging as New Zealanders consider every dollar carefully.”
Retail NZ’s Carolyn Young said the retail outlook was going to be very challenging.
“Interest rates are high, [there’ve been] no Reserve Bank interest rate cuts, spending will be diminished - it will make it a tough year for retail,” Young said.
She said surviving the next year means focusing on “customer service, price and product”.
“Knowing your customer is critical to success,” she said.
“A connection with customers and having good products will be successful in a challenging environment.”
Alka Prasad is an Auckland-based business reporter covering small business and retail.
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