Retail businesses are reporting bleak trading prospects for the first quarter of the year — with a third concerned they won't be able to make it through the next 12 months, according to a Retail NZ report.
The latest Retail Radar Survey reports 64% of members did not meet sales targets for the January-March period, which Retail NZ chief executive Carolyn Young described as "pretty significant".
"We're heading into those quiet months between autumn and winter and if you look at the data from April through to September, those months [are] quite flat with traditionally lower sales periods."
"The numbers are all down, the sentiment is down, hitting targets is down, so all the data tells us we're heading into the quiet winter months with a lower base and we know that consumer confidence is well down compared to where it was previously."
She said the sector would "continue to head in that direction," with over half of respondents reporting they did not expect sales to improve in the coming April-June quarter and likely would not meet those targets either.
According to the report, 62% of retailers listed inflation as their most significant issue, followed by insurance cost increases (55%) and wage increases (52%). Young also said freight and lease costs going up were making things "really difficult" for retailers.
"There's a whole range of things that are impacting retailers in terms of their expenses which are cutting into margins and making it really difficult. That uncertainty is rolling through into their confidence around how they feel they'll survive in the next 12 months, knowing that the economy is really tough," said Young.
She said almost a third of businesses were unsure whether they could survive the next 12 months with the resources they currently had.
Young cited consumer confidence as a factor, saying people are still going into stores but not spending as much as they typically used to or have less money in the discretionary spending area, which is a "large part of retail".
"The thing to consider is that once the Reserve Bank reduces interest rates, people's mortgages won't change immediately. It will only be when they come up for renewal, so there will be that lag-factor of when that actually occurs and how long it takes for people to notice a difference in that wallet."
She said families will be looking to tighten discretionary spending over the next nine-month period and redirect unnecessary spending into essentials such as heating the home and putting food on the table.
'People are doing more considered buying'
Oleene Wells has run her speciality confectionery shop Munchkins in Palmerston North for more than 30 years and has become well-established while still having to adapt through varying economic environments.
"Over that time there has been huge variance globally and nationally. We're probably pretty lucky in Palmerston North that we have a reasonably stable economy, we don't have the big peaks and troughs that some areas have."
She told 1News the business has made changes during that time to keep things profitable.
"When we're ordering, [we are] making sure we can maximise what we can ship per cost. So being aware of whether we are ordering one carton of something when it would be more economical to order six."
Last year Wells took this a step further with her decision to attend chocolate school in Melbourne to learn the technical processes for making luxury treats in-house.
"By being able to implement that, we can keep the shipping costs down [and] we can maintain the quality so we're still using really good ingredients and still getting a nice fresh product."
Wells noted turnover in the first quarter of this year was "down slightly" at 3.5% compared to the previous year, and transaction numbers were down too as consumers tightened their budgets.
"I think it's more that the unit sale has dropped away, not heaps but people are probably [doing] more considered buying. So they're really putting a little bit more thought into it."
Wells said it was "really concerning" that a third of businesses in the survey reported they may not make it through the next 12 months, however she did not have too much concern given how well-established her business was within the community.
She described her position in the market as "a little bit high-end" within the treat market and said her products provide "a little bit of luxury that is affordable".
"You might not go and buy a big, extravagant gift for someone, but for that $30-$50 mark you can get something still really lovely."
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