Sales supported by economic recovery but hampered by frugality
A good economic performance for New Zealand towards the end of the review period resulted in strong economic confidence among consumers, while rising employment and increases in minimum wage levels also boosted disposable income levels. However, consumers tend to have a strong focus on frugality in the country and often enjoy seeking out the best bargains, while internet retailing is also putting pressure on prices. As a result of these conflicting trends there was growing price competition in retailing towards the end of the review period, with overall sales seeing only sluggish growth.
Popularity of internet retailing forces players to adapt
There was a surge in internet retailing towards the end of the review period, particularly mobile internet retailing, as sales of smartphones and tablets continued to see strong growth. Strong competition from internet retailing had a marked impact on store-based retailing at the end of the review period, resulting in overall outlet volume decline. Many leading players are meanwhile counting on a multi-channel strategy, with players such as Progressive Enterprises and Warehouse investing heavily in driving internet retailing sales via easy-use shopping apps and online marketing.
Increased costs put pressure on city-centre and smaller operators
A rise in retail rental rates and minimum wage levels had a heavy impact on some players towards the end of the review period, particularly those operating in city-centre locations. Farmers notably closed its last department store in Auckland's Central Business District in 2014, being unable to negotiate a workable lease. Within grocery retailers, convenience stores and independent small grocers also saw outlet volume decline as a result of this trend. Non-grocery retailers are meanwhile also facing strong pressure on prices due to most overseas internet retailing purchases being exempt from GST.
Strong grocery retailers continue to lead
Overall retailing is led by domestic cooperative Foodstuffs and Australian-owned Progressive Enterprises, with both deriving the bulk of their sales from supermarkets. These players represented distinct approaches to retailing, with Foodstuffs lacking a significant internet retailing presence at the end of the review period. In contrast, Progressive Enterprises is the leading player in internet retailing, with this player's Countdown supermarkets also competing strongly on price in 2014. Progressive Enterprises' approach proved most successful in the year, with this player gaining share at the expense of Foodstuffs.
Price competition and mobile internet retailing to shape forecast period growth
The forecast period is expected to see mobile internet retailing becoming increasingly important in New Zealand. The leading players are thus set to focus on a multi-channel approach, with it being important to offer an internet retailing site that can easily be accessed via smartphones and tablets. Online marketing is also expected to see growing investment in the forecast period. There will also continue to be a strong focus on price competition within many channels, with this resulting in a slight decline in value sales for overall retailing in the forecast period.