The New Zealand retail landscape is currently a study in contrasts, a place where flickers of hope meet the sobering reality of a tough economy. To help us decipher these mixed signals, we’re joined by e-commerce strategist and retail expert Zainab Hussain. We’ll delve into the nuances behind the latest spending figures, exploring the paradox of rising business liquidations alongside increased credit demand. Zainab will also offer her insights on how retailers can build resilience against unpredictable events, like severe weather, and share innovative strategies for capturing consumer spending in an environment where every dollar is carefully considered.
January saw a slight 0.6 percent lift in core retail spending, yet the unemployment rate recently hit a high of 5.4 percent. How should retailers interpret this glimmer of hope against economic headwinds? Please elaborate on specific steps they can take to navigate this uncertainty.
That 0.6 percent lift in January is indeed a glimmer of hope, especially after the disappointing December sales figures. However, retailers must view this through a lens of extreme caution. When you have the unemployment rate climbing to 5.4 percent, its highest point in over a decade, it signals that consumer wallets are going to remain tight. This isn’t the time for bold, risky expansion. Instead, retailers should be preparing for a period of flat or even slow months ahead, focusing on operational efficiency and managing inventory tightly. The key is to nurture those small “green shoots” of growth without overextending, all while bracing for a market where many consumers are simply focused on getting by.
We saw significant regional differences in spending, with Bay of Plenty down 3.4 percent after storms while Auckland/Northland grew 1.3 percent. What specific strategies can retailers in weather-vulnerable regions use to build resilience and mitigate the financial impact of such unpredictable events?
The regional data is stark and shows just how vulnerable physical retail is to localized disruptions. We saw a single day of storms on January 21st cause a 5.6 percent drop in spending compared to the previous year, with the impact lingering over the long weekend. For retailers in these weather-vulnerable regions like Bay of Plenty, which saw a 3.4 percent decline for the month, building resilience means not putting all your eggs in one basket. This is where a robust e-commerce and digital strategy becomes a lifeline, allowing you to continue serving customers when they can’t physically reach you. Furthermore, it’s about agile inventory management and community-focused marketing that can adapt quickly to changing local conditions and reassure customers after a disruptive event.
While retail business liquidations have surged 34 percent year-on-year, we’re also seeing a 13 percent rise in credit demand. What does this paradox suggest about the current mindset of business owners? Could you describe the different types of retailers likely driving these opposing trends?
This paradox is fascinating because it paints a picture of a sector splitting in two. On one hand, you have a 34 percent surge in liquidations, which reflects the businesses that have been “treading water” for too long and are now succumbing to the persistently tough trading conditions. These are likely smaller, independent retailers with thin margins who can no longer absorb the pressure. On the other hand, the 13 percent rise in credit demand signals a very different mindset. This group is likely composed of more established, confident business owners who see an opportunity. They might be investing in technology, renovating their stores, or even expanding their footprint to capture the market share left behind by those who have closed their doors. It’s a classic case of turmoil creating both casualties and opportunities.
With many consumers reportedly focused on just getting by, discretionary spending is under pressure. Beyond simple discounting, what innovative tactics can retailers in non-essential sectors use to improve customer confidence and encourage sales over the next few flat or slow months?
In a climate where discretionary spending is under severe pressure, deep discounting can become a race to the bottom that erodes brand value. Retailers in non-essential sectors need to get more creative. It’s about building a connection that transcends price. This could mean investing in exceptional in-store experiences, creating exclusive loyalty programs that offer real value, or using digital channels to build a strong community around the brand. The goal is to improve consumer confidence in your specific brand, even if their confidence in the overall economy is low. It could be some time before we see a broad upturn, so the focus must be on fostering loyalty now, ensuring that when customers do decide to treat themselves, your business is the first one they think of.
What is your forecast for the New Zealand retail sector?
My forecast for the New Zealand retail sector is, frankly, a sobering one for the immediate future. The data suggests the economy is moving sideways rather than forwards, and many retailers will continue to feel like they are just treading water. We can’t ignore the pressure from the 5.4 percent unemployment rate, which will keep a lid on any significant recovery in discretionary spending for several flat or slow months. However, it’s not all bleak. The fact that some business owners are increasing their investment and that we saw any growth at all in January shows there is a baseline of resilience. I expect we’ll see a continued divergence, with well-run, adaptable businesses surviving and even thriving, while others may not make it through this challenging period.
