In Retail (New Zealand) - 2024 Edition

Report Snapshot

• 2023 was a tough year for retailers with core real retail growth of negative 1.2% (nominal 3.4%) compared with GDP growth of 0.6%. Consumers have significantly reduced consumption volumes with nominal retail growth falling consecutively each quarter in 2023 from 5.3% in Q1 to 1.0% in Q4, despite inflation. As expected in our previous In Retail edition, cost of living pressures and high interest rates have reduced discretionary budgets, compounded by consumers redirecting spending to travel and experiences.

• Domestic and international tourism has returned, with accommodation (up 17.0%) and food and beverage services (up 5.3%) both above pre-COVID spending levels on a real basis. Grocery (up 3.1%) was the only other retail category reporting positive real growth in 2023. Weaker real spending in the “home” categories, which performed strongly post-COVID, continued in 2023.

  Electrical and electronic goods was particularly weak, down 20.4% on 2022 following a similar result in that year, which is now at 80% of pre-COVID levels.

• All regions, except Rest of South Island (up 0.3%), reported negative real growth in 2023. Overall New Zealand retail growth declined 2.6%, after reporting modest growth of 0.8% in 2022. Auckland declined 1.7% following growth in 2022 and 2021, Wellington and the Rest of North Island were particularly poor performing, doubling and tripling the declines reported in 2022, falling 4.7% and 4.8%, respectively. Canterbury declined only 1.0% following a year of marginal growth in 2022.

• Online spending declined 4% in 2023, following a 5% fall the prior year according to NZ Post. Consumers appear to have moved back in store with 2023 being the first year since COVID without any lockdown disruptions and the return of tourism. The story for retail rents and vacancy rates is location dependent, prime CBD sites in Auckland and Christchurch are faring well, however elsewhere vacancies are rising.

• With low forecast GDP, elevated inflation, high mortgage rates and rising unemployment, we expect retail will struggle during 2024. So far, this year saw the collapses of retailers Godfreys, Silvermoon and others, alongside the Warehouse Group’s sale of Torpedo7 for $1 and potential sale or closure of its ecommerce division, The Market. While net migration is at a record high, tourism has returned, and inflation is falling, although core inflation less so, consumer confidence fell 9% (ANZ-Roy Morgan) likely due to the concerns New Zealand is in recession and general market sentiment. Retailers must continue to carefully manage stock, staffing, and store decisions, with scenario analysis for forecast demand and inventory management to mitigate these risks.

• Note that we are not adjusting for COVID in this year’s forecast review, with each year compared directly with the prior year.

All quoted percentages, other than GDP, are in real terms