Winter Blues Hit Early For Retailers

At the end of a slow summer of trading, New Zealand retailers are not feeling positive about their business prospects as they head into winter, according to the latest Retail Radar quarterly survey of Retail NZ members.

“The post-election optimism recorded in the Retail Radar survey at the end of 2023 has dissipated as retailers struggle with inflation and soaring costs. Skyrocketing insurance costs and a lack of consumer confidence are impacting heavily on profitability,” Retail NZ Chief Executive Carolyn Young says.

The latest survey covered the first quarter of 2024. The first months of the year are important for many retailers, with holidaymakers and international tourists typically lifting spending.

However, a whopping 64% of respondents reported they did not meet sales targets for the January-March period and almost a third of businesses (32%) are unsure whether they will survive the next 12 months.

“This is more pessimism than we saw in the equivalent period of 2023 when 28% of businesses were not feeling confident of survival,” Ms Young says.

With no improvements expected in the near-term economic outlook for Aotearoa New Zealand, respondents do not expect their sales to improve in the coming April-June quarter, with more than half (55%) saying they do not expect to meet their targets.

Inflation remains the most significant issue (62%) for retailers, followed by insurance cost increases (55%) and wage increases (52%). Inflation and wage increases were the top two issues in the previous quarter.

“Inflation is affecting all business costs, plus consumer spending is slowing with retailers reporting that customers are shopping less and buying less when they do shop,” Ms Young says.

Almost 60% of respondents said their insurance costs had increased significantly in the past year. With council rates and other costs also rising, at a time when sales are falling, some retailers reported that they were considering cancelling their policies.

“As we enter the traditionally slower winter months, retailers will be tightening their belts in anticipation of slow sales and uncertainty. Retail NZ is hoping the upcoming Budget will help restore confidence to the marketplace and provide a pathway out of recession,” Ms Young says.

To read the full Retail Radar report, go to https://retail.kiwi/insights-media/benchmarking-data/retail-radar/

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