KEY POINTS:
It may be blustery on Queen St, but that's not the only reason shoppers are flooding into stores.
Workers on their lunch breaks, students and a scattering of tourists are lured in by windows plastered in psychedelic signs blaring "nothing below 20% off here" and "first ever 50% off all stock across the street".
At Michael Hill Jeweller, customers don't have to place a deposit until 2010, and last week it ran a promotion urging customers to "make an offer".
Teenage girls are sifting through racks of imported clothes - all reduced by 70 per cent.
Next door retail assistants are rushed off their feet as business women on lunch breaks snatch for suits reduced by 50 per cent.
But not enough are buying. Industry bellwether Briscoe has already warned shareholders to expect up to an 80 per cent drop in half year earnings, while The Warehouse Group has had to revise down its annual forecast by 10 per cent.
Consumer confidence is at its weakest level since 1991 and Statistics New Zealand's March quarter figures for the various retail sectors is a sea of red. Apart from supermarkets and petrol stations, sales in all major sectors are in decline. Departmental stores had their first month of stagnant sales in exactly two years, while bars, cafes and restaurants - despite still being in the black - have experienced an acute slowing in growth.
But it's those most reliant on discretionary spend that hurt the most. Furniture and floor coverings took an 11 per cent dive from March last year, appliance retailing is down 15 per cent, and clothing sales have experienced a 6 per cent hit.
John Perillo, managing director of shoe store Andrea Biani, said he has never had such a difficult year since he started working in retail 20 years ago.
"It has been felt right across the board. Traffic is down, and the feedback from management is that the consumers seems reluctant to spend as freely as they used to."
It has also become very competitive. Andrea Biani was forced to start its winter sales earlier than it would have liked because surrounding stores brought theirs forward. But that has not reduced stock any further than usual, said Perillo.
Retail analyst Tim Morris, of Coriolis Research, said it was normal for retailers to discount more during a slump, but they often lack "cut-through" because everyone else is doing it too.
"It's the belief that somehow the reason that people aren't buying is because the price isn't cheap enough, and if we can only get the price cheap enough then they will buy ... When there's a slowdown, they're just sort of scrummaging for a smaller pool of customers.
"To keep their sales constant, they've got to fight for a bigger slice of a smaller pie."
Business intelligence company Euromonitor's latest report into global consumer trends speaks of a sense of anxiety and gloom among consumers due to economic uncertainty. This translates into a cutback in spending on food, clothing, and personal care products, and delays to purchases of apparel and durables.
A 2006 AC Nielsen study which surveyed consumers all over the world on their top three money-saving strategies found largely the same pattern - takeaways and entertainment spends were the first to go. In New Zealand, clothes spending took third place.
But Morris said even sectors that are obviously discretionary had an element of need: "You have to have clothes for work, you have to have underwear, but you don't need that new dress."
And the need for sustenance means consumers will still have to fork over to the supermarkets.
Less eating out means more eating in.
But a slowdown also causes a shift in grocery retailing patterns. Morris has 40 years of data out of the United Kingdom showing a spike in the market share of store brands - cheaper, less prestigious labels such as Budget and Homebrand - during recessionary times. When the economy emerges from the slowdown, store brand market share dips, but never back to pre-recession levels.
"People learn that new behaviour, and so it's like a one-way wrench."
This is the phenomena analysts call "trading down", when consumers sacrifice little luxuries like sirloin for silverside.
"Cheaper cuts of meat is your classic example of what happens in a slowdown."
But for those peddling less essential goods, the customers simply stay away.
"You don't necessarily see it on a rainy weekend at a mall, but certainly during the week, there's fewer people," said Morris.
Retailers Association chief executive John Albertson said the market was essentially flat: "But it is varying by sector - that's the thing that is quite different this time to any slowdowns we've had previously. We're seeing certainly at this stage grocery and fuel probably taking a bigger slice of the budget, and more pressure on discretionary items."
Albertson said while factors such as growing fuel costs and high interest rates were at play, the unusual element in this slowdown was that it arrived against a background of record low unemployment.
The housing market correction and an election year - which typically sees a drop in sales due to consumer uncertainty - also does not help the sector.
"What we've got is a situation at the moment where consumers are unsure. They know that their budgets are being hit reasonably hard - some more so than others - so they are being cautious."
The October reduction in personal tax rates may help, as would anticipated interest rate cuts.
"We think the conditions will probably be fairly trying at least until the end of the year. And even then so much of it is outside our control.
"We may see some who will leave the industry but for everyone that leaves there always seems to be others who are keen to come into it."
Morris is loathe to say how long the downturn will last.
"Everyone thinks that when you go into a slowdown, it's just going to be like the last one but there's a whole lot of different patterns. Sometimes you get a slowly deflating balloon that takes a long time to reflate, sometimes it just goes pop.
"This one has the feel of a longer but shallower drift downwards. It sort of has been dragging on now for a year.
"How long do these things go on for? Two to three years? You can get that completely wrong."
MARSHALL'S OPAL AND FINE GOLD JEWELLERY
Marshall's Opal and Fine Gold Jewellery at 93 Queen St has never held a blanket 50 per cent sale before.
Sales are a rarity for the store, but if it does hold one the jewellery is usually only reduced by 20 per cent.
"In all my years in retail I've never seen anything like this before," owner Joyce Bell said.
She has experienced slumps before - the 1987 crash, for example - but agrees the sheer competitiveness of the retail sector this time around has hit businesses where it hurts.
Most of Bell's customers are tourists looking to buy something special for themselves. But when consumers are hurting, the first thing they cut are personal luxuries, she says.
As with the tourism industry, winter is always a quiet time for the store, "but of course with the currency the way it is and the general climate around the world, it has been particularly tough [this year]".
Bell says customers seem eager to indulge in the sale - snapping up the opportunity to purchase a $6000 ring for $3000 - an indication that people do still have some money to spend.
Customers who walk out with a few purchases are often back later as they realise this is a rare opportunity to buy at such prices, she says.
She is optimistic business will pick up in the summer as it always does, but says: "I don't have a crystal ball."
SUPERMARKETS BUSY, BUT SHOPPERS CANNY
FOODSTUFFS
If in-store customer numbers are any indicator, supermarkets must surely be recession-proof. After all few enter a supermarket just to browse. And everyone needs to eat.
Mark Baker, general manager of retail at Foodstuffs Auckland, acknowledges that sales are holding up. But only just.
"It is tough - not only have our customers got less money to spend, but we have increased cost pressures."
In a slowdown, grocery buying patterns shift in a trend retail analysts call "trading down".
And Foodstuffs, the country's biggest grocery operator, is noticing it in a big way.
Its no-frills supermarket chain, Pak'nSave, has seen "very healthy" customer count increases, while sales of private labels Pams and Budget have experienced "double digit" percentage growth over the past three months.
"The reality is that the likes of Pams is as good a quality as a branded alternative, but at a cheaper price. And Budget is an acceptable quality at a good price.
"Certainly as times get better you will expect people to trade up from the budget products."
And while meat and fresh produce sales continue to grow, frozen goods which can be stored for longer, have soared.
Even alcohol sales, a more discretionary spend, are holding up.
"When times are tough people tend to stay at home more. Rather than going to bars, they will purchase from a supermarket and then drink at home."
A MOST UNHAPPY BIRTHDAY FOR RETAILER
NOEL LEEMING GROUP
Lunch hour on a weekday at Bond & Bond in Queen St and the number of salespeople outnumber the customers 4 to 3. Despite a "birthday bash" of specials, the tills simply weren't ringing.
And sister chain Noel Leeming is feeling the effects too.
Chief executive Andrew Dutkiewicz says the squeeze is being felt across every category in store, from big ticket items, like widescreen TVs, to smaller purchases, like mobile phones.
"There's no one particular category that's holding up while the others are down. It's reasonably across the board that we're seeing the pain." It's been like this since late last year.
"Other than a small blip at Christmas where I think people went back out and spent, we've seen that downturn continue all the way through since October.
"One of my senior guys has been here for 12 years and he says in his 12 years he's never seen it this bad."
Dutkiewicz says management had been braced and ready.
"We actually picked the downturn in September-October, and on the basis of that, we've really done a whole lot of work to match our store wages to the new sales."
With a reasonable "churn" anyway, staff that resigned were simply not replaced.
"We're avoiding the urge to just stick everything on sale. We just don't think longer term it's good, because all the consumer sees now is sale, sale, sale so it's starting to dilute the believability."
