Retail Sector Pessimism Deepens

Slow sales and uncertainty have continued to dog the retail sector, with low consumer confidence and rising costs impacting customers’ willingness to open their wallets, according to the latest Retail Radar quarterly survey of Retail NZ members.

Retail NZ’s quarterly ‘temperature check’ shows that tough economic conditions have continued to impact retail sales and confidence through the second quarter of 2024 (April-June).

Both confidence and sales are at even lower levels than earlier in the year, Retail NZ Chief Executive Carolyn Young says.

Almost 43% of respondents are unsure whether they will survive the next 12 months, a substantial jump from 32% in the previous quarter. In the same quarter of 2023, 36% of retailers were not confident about whether they would continue to trade.

“Pessimism about trading conditions has definitely deepened in the last few months. This is traditionally the quietest time of the year for retailers but they are really struggling for sales right now,” Ms Young says.

Some retailers were worried about how they would pay for next season’s stock when current sales were not enough to cover costs.

Over 70% of retailers reported that they did not meet sales targets for the quarter – even though targets are lower at that time of year. This was a significant increase from the 64% who failed to meet their targets in the first quarter of the year.

“Worryingly, most retailers are not expecting trading conditions to improve through the July-September quarter, with only 2% saying they expect to exceed their targets,” Ms Young says.

Despite the tough trading conditions, many retailers continue to seek staff with good skills in sales and service. But training new staff is difficult when businesses are not seeing many customers.

Almost half (48%) the respondents’ businesses were fully staffed but 25% had not replaced departing staff, and 5% had to make staff redundant during the quarter.

“Retail NZ is very concerned for the 8% of retailers who said the lack of staff was impacting their ability to take rostered days off. This raises fears over their mental and physical wellbeing,” Ms Young says.

Looking ahead, a number of respondents plan to recruit for the summer season but are waiting for trade to pick up before they can afford to do so.

Inflation/cost of living was cited by the majority of retailers (79%) as the biggest issue for their business. However, last week’s Consumers Price Index gives some hope of a light at the end of the tunnel, Ms Young says.

“Summer still feels a long way off but I’m confident we are seeing the first signs of the economy warming up. We are getting nearer to the Reserve Bank’s target range for inflation of 1-3%, indicating that a cut in the Official Cash Rate is closer than previously expected. This will lead to a turnaround in consumer confidence and a greater willingness to support local retail businesses.”

In spite of the challenging times, it’s important to note that some retailers are still doing well, Ms Young says.

“There are some bright spots across the sector, with some of our members trading strongly. Five percent of Retail Radar respondents said they exceeded their targets for the quarter and 57% are confident they will survive into 2025.”

Read the Retail Radar Q2 2024 report here: https://retail.kiwi/wp-content/uploads/2024/07/RetailRadarReport-Q2-2024.pdf

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