SNAPSHOT
- Calendar year 2020 finished better than expected, with real retail spend in line with 2019 despite a year of COVID-19 uncertainty and lockdowns, and ahead of the broader economy, which fell 3.0%. The loss of international tourism and students, plummeting net migration and predictions of high unemployment were offset by Government stimulus, domestic travel, consumer spending and strong employment.
- How you experienced 2020 as a retailer varied significantly by your geographic location and sector. The South Island tourist hotspots were hit hardest (down 4.7%), with Auckland and Canterbury flat, while Wellington grew 0.9% and the rest of the North Island grew 2.3% as domestic tourism and work from home (WFH) supported regions more than cities.
- The loss of international tourism and COVID-19 restrictions affected the accommodation and food and beverage services sectors the most, down 20.2% and 11.6% respectively. The vaccine rollout and Trans-Tasman bubble may provide limited relief for this sector.
- Naturally supermarkets and grocery stores, which stayed open during lockdowns, were clear winners with sales up 8.8% and the total share of retail sales growing from 27% to 30%. The consumer shift to focus on the home (and WFH) also increased demand for electronic goods (up 14.8%) and hardware and furnishings for home renovation (up 4.8%), despite lost trading during lockdowns. Given recent house price appreciation and increased residential construction, we expect this trend to continue.
- Unsurprisingly, e-commerce boomed, with domestic online sales growing 38.9% to reach 68% of online sales, clearly reversing the historical trend of New Zealand retailers losing market share to international retailers.
- Overall, 2020 was a challenging year filled with uncertainty for retailers, but that ended up better than expected. Support from the Government and most landlords limited retail closures. A number of retailers restructured during 2020, with Burger King and Max Fashions successfully executing creditor compromises, Office Max closing all retail stores, a reduction in footprint from Bunnings (seven stores), H&J Smith (six stores), David Jones (Wellington), Flight Centre (c.100 stores) and the insolvencies of Kikki K and Nido.
- Uncertainty is likely to extend throughout 2021, with subsequent waves of the pandemic worldwide, a slow vaccination program, continued border restrictions, changing consumer behaviour and supply chain disruptions. Retailers who continue to adapt will remain successful.
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