2020 was a difficult year for all with COVID-19 bringing extreme uncertainty to businesses, particularly in the retail, tourism and hospitality sectors. Despite international restrictions still firmly in place, New Zealand retailers hoped for a summer of strong trading to recover shortfalls from lockdowns.

In this holiday trading edition of In Retail (New Zealand), we look at numbers from 16 November 2020 to 10 January 2021 to examine the impact of a very different holiday season for New Zealand. On average, in-store spending was down approximately 5% during the holiday period, with the data suggesting the following.

• A lack of foreign tourism is negatively impacting New Zealand’s South Island, particularly in Otago and the West Coast, as well as major cities (likely focused on CBDs). Domestic spending and tourism appear to be propping up in-store spending within rural North Island regions.
• In-store spending is significantly down throughout traditional tourism and hospitality subcategories for the entire period, with a brief spike in domestic tourism post-Christmas.
• In-store home and recreational retailing continues to be the big winner, experiencing year-on-year growth of 7% in the week of Black Friday and 6% in the two week run-up to Christmas (W/E13-Dec-20 and W/E 20-Dec-20).

This is a brief summary of what happened in the New Zealand retail environment over the holiday period. It is important to consider the detail, not just the headline numbers, as results varied markedly by retail subsector and region.

Overall retail spending (in-store only) down c.5%

On average, in-store retail spending from 17 November 2020 to 10 January 2021 was down c.5%. However, this headline figure masks large disparities by sector, region and domestic versus international spending.

Unsurprisingly, spending via the Paymark network from cards issued by international financial institutions was down 72% to 82% year-on-year throughout the holiday period, as a lack of tourism showed.

Domestic spending was broadly in line with last year, with spending down in the weeks of Black Friday, Cyber Monday and the two week run-up to Christmas, but up 5% in the week of Christmas, including Boxing Day and up 2% in the two weeks post-Christmas.

The shifts in domestic card spend initially suggests that New Zealanders are delaying spend until after Christmas, but may also reflect New Zealanders favouring online shopping prior to Christmas and in-store shopping post-Christmas.

In-store card spending (year on year % change)

Source: MBIE – Paymark transaction data (W/E 22-Nov-20 to W/E 10-Jan-21)

Retail spending by region varied significantly (in-store only)

Retail spending by region shows a disparate picture, with international tourism hot spots Otago (15.0% down year-on-year) and West Coast (9.3% down) being most severely hit. Auckland, Canterbury, Southland and Marlborough regions all experienced reductions between 5.0% and 6.0%, again likely due to missing tourism and international students. Contrary to this, typical domestic holiday hot spots such as Manawatu, Hawke’s Bay and Northland were all up 2.3% year-on-year.

In-store card spending (year on year % change)

Source: MBIE – Paymark transaction data (W/E 22-Nov-20 to W/E 10-Jan-21)

Previous retail spending trends by subcategory continued (in-store only)

The pre and post-lockdown trends continued, with in-store spending on home and recreational retailing the big winner, with year-on-year gains of 7% in the week of Black Friday sales, 6% in the two week run-up to Christmas and 8% in the two weeks post-Christmas, as consumers continue to nest.

Food & liquor retailing also continued to be up between 1% and 5% year-on-year during the holiday period, although gains have softened from the previous panic-buying highs.

All other retail subcategories suffered a year-on-year reduction in spending with the hardest hit being transport and travel (c.70% down), accommodation (c.35% down) and arts and recreation services (c.30% down). Food & beverage services was also down c.9% year-on-year throughout the holiday period, as domestic spending could not make up for lost international tourism, meaning tourist hotspots and major cities are likely to be bearing the majority of the reduction in hospitality spending.

While less significant, clothing, footwear and department store spending also took a significant hit year-on-year, down 4% in the week of Black Friday, 16% in the week of Cyber Monday, 3% in the two week run up to Christmas and down 6% in the week of Christmas (including Boxing Day) and the two weeks post-Christmas. In a sector that has struggled in the last decade, a poor Christmas trading season could leave many of these retailers struggling financially. If the reductions are simply movements onto online purchases however, those retailers who have invested in a strong online presence should be resilient.

In-store card spending (year on year % change)

Interestingly though, domestic spending bounced back for some of these categories post-Christmas (shown separately in the chart below), with accommodation showing a domestic spending gain of 17% in W/E 03-Jan-21 as New Zealanders, restricted to domestic travel only, made the most of the holiday season. This is unlikely to be sustainable when families go back to work and school.

In-store domestic card spending (year on year % change)

Source: MBIE – Paymark transaction data (W/E 22-Nov-20 to W/E 10-Jan-21)

It is clear from the above that headline figures do not provide a true picture of the retail environment in New Zealand for any particular retailer. Each retail subcategory and region are being impacted by events differently and retailers and stakeholders should be aware of this when planning for the future.

Footfall significantly down on last year

The Kepler Analytics retail index tracks footfall at certain New Zealand retailers and showed (in the chart below) that footfall was significantly down year-on-year, with passers-by averaging 20% down and those entering a store (’inside’) averaging 29% down over the holiday period. The largest reductions occurred in the two-week lead into Christmas where passers-by dropped 26% and inside dropped 35%. Given overall in-store spending was not affected to anywhere near this level, this significant drop in footfall points to either an increase in spend per visit, or consumer preferences shifting away from the retail environments monitored by Kepler Analytics, more commonly large malls and city centre high streets.

One interesting trend that we saw immediately post the first lockdown was that passer-by footfall was more impacted than footfall inside stores, which appeared to be due to targeted shopping by consumers, rather than general recreational browsing, perhaps due to continued concerns around personal safety. This trend reversed around July 2020, suggesting shoppers were happy to engage in more recreational and exploratory shopping behaviours (browsing shopfronts), rather than previously being focused on targeting specific stores. The gap was widest during the holiday period, suggesting that most browsing is done during this period.

Footfall (year-on-year % change)

Source: Kepler Analytics – Kepler Retail Index (W/E 23-Nov-20 to W/E 11-Jan-21)

A note on the supporters of this release

The underlying data used in this release has been sourced from MBIE’s publicly available ’Consumer Spending Dashboard – COVID19 response’ and provided by Kepler Analytics for the benefit of New Zealand retailers and those associated with the industry.

For information regarding how Kepler Analytics can help you better capture the data surrounding your business and assist you in better understanding it, contact to info@kepleranalytics.com, quoting ’McGrathNicol‘ as a reference.

MBIE’s spending data can be accessed here and is sourced from MarketView, a Verisk Analytics business. For detailed transaction data, relating to both online and in-store transactions, in your specific retail subcategory contact Michael.Stechman@verisk.com, quoting ‘McGrathNicol’ as a reference.