In Retail (New Zealand): 2020 Edition
29 April 2021
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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.