A sharp tightening in financial conditions could weigh on Kiwis' spending power. Photo / 123RF
A sharp tightening in financial conditions could weigh on Kiwis' spending power. Photo / 123RF
This weekend will kick off the beginning of the holiday sales period as consumers look for bargains while at the same time, belts continue to tighten.
It also comes at a much-needed time for retailers feeling the pinch of weakening consumer spending, but will consumers be in the mood to splash the cash?
Singles’ Day, or November 11 (stylised as 11.11), while relatively new in New Zealand, is one of the biggest offline and online shopping events in the world.
Originating in China as an anti-Valentine’s Day holiday when everyone goes shopping, the once one-day shopping festival turned multi-week extravaganza has evolved into a global retail phenomenon, generating record sales of 540.3 billion yuan (US$84.5b) in 2021.
Carolyn Young, chief executive of Retail NZ, told the Herald it was an extremely tough trading environment for retailers at the moment.
Retailers were dealing with the cost of living crisis, rising inflation, wage pressures, freight increases and increasing levels of crime and aggression, she said.
“Many retailers have told us that they are holding on for this quarter hoping to see a turnaround in sales,” Young said.
“The discretionary spending of consumers feels like it has really started to bite retailers in the last three to four months.
“In the last quarter, 61 per cent of retailers advised us that they had not met sales targets so are hopeful that Black Friday and the Christmas season will offer some respite.”
But in a Westpac economic note last month, economists noted the sharp tightening in financial conditions over the past year was still expected to be a significant drag on demand.
“Financial conditions are continuing to tighten, and that means the softness in spending is set to continue through the New Year,” chief economist Kelly Eckhold said.
“Increasing numbers of households will have to wind back their spending, and many others will do so out of an abundance of caution,” he said.
Eckhold said pressure on households’ finances was coming through on two big fronts – continued large increases in living costs and household finances being put under pressure by increases in debt servicing (mortgage) costs.
“There’s likely to be weakness in interest rates sensitive areas, like spending on furnishings and other household durables,” Eckhold said.
Singles' Day has evolved into a multi-week extravaganza. Photo / AP
Helping households maintain their spending, however, has been the strength of the jobs market, with the number of people in employment rising 4 per cent and the average hourly earnings rising by close to 7 per cent in the past year, the report noted.
Recent Kiwibank data showed the urge to splurge was subsiding.
In China, where Singles’ Day is the country’s biggest shopping festival, consumers are planning to keep a lid on spending, a recent survey found.
The survey of more than 3000 Chinese consumers by global management consulting firm Bain and Company found 77 per cent did not plan to increase their spending from last year, while nearly half were turning to cheaper brands.
In New Zealand, according to price comparison website PriceSpy, which tracks the prices of more than 139,000 indexed products, 26 per cent of all products listed saw a price drop on Singles’ Day last year, with an average price change of -20 per cent.
A PriceSpy survey of 500 Kiwi consumers found Singles’ Day was growing in awareness on this side of the world, with 36 per cent of New Zealanders aware of the shopping event, up from 24 per cent in 2018.
“While Black Friday and Cyber Monday have dominated the retail space recently, Singles’ Day seems to be making significant strides in New Zealand’s retail landscape,” Liisa Matinvesi-Bassett, New Zealand country manager for PriceSpy, said.
“Singles’ Day may therefore present some great savings for shoppers, particularly in the current economic climate when costs are otherwise more elevated.”
Last year, some of the biggest average discounts came from the shopping categories of games (-33 per cent), power banks (-31 per cent) and perfume (-23 per cent).
“At a time when price is everything, these types of savings will no doubt be welcomed,” Matinvesi-Bassett said.
Cameron Smith is an Auckland-based journalist with the Herald business team. He joined the Herald in 2015 and has covered business and sports.
