In Retail (New Zealand): 2021 Edition
05 May 2022
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SNAPSHOT
Despite COVID, 2021 was a good year for the majority of retailers, with core retail growth of 4.3% and GDP growth of 5.6% on 2020. All geographic regions grew versus 2019 (pre-pandemic), except Rest of South Island (down 3.7%), which continued to suffer from the loss of tourism. By contrast, Rest of the North Island (up 6.8%) benefited from domestic travel and relatively few lockdown restrictions. Major city centres Auckland and Wellington grew 2.8%, while Canterbury grew 5.8%, also benefiting from fewer trading restrictions.
Four sectors that benefited from restricted travel and changing consumer behaviour were electronics (up 28.7%), recreational goods (up 16.6%), hardware and building supplies (up 17.4%) and furnishings (up 13.1%). As consumers saved on international travel and during lockdowns, they reallocated spending to improve their living and WFH environments and made use of their free time. Retailers in these sectors should be cautious of spending returning to pre-pandemic levels when international travel resumes.
The ongoing lack of international tourists and extended lockdowns continued to impact the food and beverage (down 6.3%) and accommodation (down 16.3%) sectors, a common theme from 2020. Opening borders and easing lockdown restrictions from April 2022 onwards will hopefully provide relief to the remaining operators after many have closed.
Consumer behaviour has changed however, with footfall in 2021 on average 21% below pre-pandemic levels (excluding lockdowns). While consumers visit stores less often, they spend more when they do, with in-store spending up on pre-pandemic levels (excluding lockdowns). Meanwhile, online spending grew rapidly at 28% per annum to $7.7 billion and appears to be sticky. New Zealand is quickly catching up to other developed countries with online retailing now making up 9% of core retail sales.
2022 got off to a challenging start, with the whole country in the Red COVID protection framework level. This impacted hospitality and apparel sectors significantly, down 22% and 12% respectively (in-store spending down c26% and c33% respectively) for February and March 2022.
The outlook for retailers and the economy is uncertain. Retailers face rising costs from minimum wage, commodity and rent (for leases linked to CPI) increases, along with continued shipping and supply chain disruption. Meanwhile, consumers’ discretionary funds will reduce as costs of living and interest rates rise, compounded by a potential return to pre-pandemic experiential spending on overseas travel and hospitality. Retailers will need to carefully consider stocking, store, staffing and pricing decisions this year.