New Zealand retailers are facing considerable economic pressure as they transition from summer to winter in 2024.
According to Retail NZ’s latest Retail Radar quarterly survey, a significant portion of the sector is grappling with a combination of inflation, rising costs, and declining consumer confidence.
Carolyn Young, Chief Executive of Retail NZ, expressed concerns about the current market conditions: “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.”
The survey indicates that 64% of respondents failed to meet their sales targets for the January-March period. Furthermore, nearly a third of businesses (32%) are unsure of their survival over the next 12 months, an increase from 28% in the same period of the previous year.
Financial Pressures
Inflation is the predominant issue for retailers, affecting all business costs and directly impacting consumer spending habits. Young elaborated, “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.”
Insurance costs have also become a significant burden, with nearly 60% of respondents reporting significant increases over the past year. This financial strain is compounded by other rising expenses such as council rates, and some retailers have even considered cancelling their insurance policies due to cost pressures.
Sales and Confidence
The first quarter of 2024 did not bring the expected boost from holidaymakers and international tourists, which traditionally uplifts spending. Only 10% of retailers exceeded their targets for this period, a stark contrast to the first quarter of 2023, when 44% of retailers did not meet sales targets, and 20% exceeded them.
Looking ahead, more than half of the retailers (55%) do not expect to meet their sales targets for the April-June quarter. This sentiment reflects a continued challenging economic environment with no immediate signs of improvement.
Industry Implications
For professional jewellers and other retailers, these trends suggest a need for cautious financial planning and possibly rethinking operational strategies. The increase in costs related to leases, rents, and particularly insurances, where some retailers reported a nearly 20% increase, requires careful management to ensure sustainability.
The upcoming budget announcement is anticipated with hope by the retail sector, as Carolyn Young remarked, “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.”
In summary, while the outlook appears daunting, understanding these dynamics allows jewellers and retailers to prepare and possibly mitigate some of the adverse effects through strategic adjustments and careful cost management.
