Disappointing December for retailers as shoppers seek out bargains

Monday, 7 January 2019

Kiwi shoppers spent more than $6 billion through the Paymark network in December but sales growth was sluggish.

Paymark, which processes 75 per cent of the country's electronic transactions, recorded 120.7 million transactions during the month, 2 per cent more than in December 2018.

Although the value of goods and services traded through the network was up 1.2 per cent for December, that was below the 5 per cent annual growth rate of the previous 11 months.

Spending in Auckland/Northland did not grow at all December to December and regional centres recorded the fastest annual growth in spending.

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Wanganui led the way, with transaction values up 6.6 per cent, followed by Palmerston North (5.8 per cent) and Southland (5.7 per cent).

Darren Hopper, head of e-commerce, digital experience and marketing at Paymark, said the figures showed an interesting trend in the payments' landscape.

'Paymark transactions reached new highs before Christmas and over the month in general but figures also point to several pressures on merchants,' he said.

'The annual growth rate was generally low and below the rate of the recent months that would have shaped retailer expectations.

'We also saw widespread discounting which appears to have accelerated the trend towards lower average transaction value. There continues to be growing use of scheme credit and debit cards which adds to the bank fees paid by merchants. And, to further pressure the bricks and mortar merchants, e-commerce growth has accelerated of late.'

The average transaction value was $49.77, down 0.8 per cent on 12 months earlier. The average value has been falling for several years as cards are increasingly used for lower-valued transactions but the recent decline also reflects downward price pressure within some sectors.

A drop in fuel prices had a negligible effect on the average transaction value across all sectors, Hopper said. Lower priced electronic and electrical goods had a bigger impact, with a 15.2 per cent lower average transaction value amongst retailers.

'Anecdotally there were also many sales, starting back on Black Friday, and this may have pushed the average transaction value lower as well, although this is difficult to see in Paymark figures as only the total transaction value is recorded. There may have been more, or fewer, items than usual within each transaction as well.'

Spending patterns varied among retailers, with toy sellers recording 11.3 per cent higher spending through Paymark December to December. Hardware and home decorating stores were also relatively strong, up 6.1 per cent, as were chemists, up 5.5 per cent.

Spending at supermarkets and liquor stores increased by 3.9 per cent while restaurants, bars and cafes saw sales grow 6.3 per cent.

Things were tougher for accommodation providers, where spending was down 2.5 per cent, and electrical and electronic suppliers, down 19.9 per cent.

Although spending through e-commerce channels made up only 6 per cent of Paymark's total transactions in December ($370 million), the annual growth rate of 16.1 was is rapid. In contrast, spending across the rest of the network grew just 0.4 per cent.

New Zealanders swiped, tapped and waved their way to more than $6 billion in electronic spending during December.

Black Friday sales may have put a dent in December spending, Paymark figures suggest.

'It is noticeable this year that spending growth was slow in early December. At the time, this was put down to a busy Black Friday weekend and expected heavy spending immediately before and after Christmas Day,' Hopper said.

'As it turned out, the days before and after Christmas Day were busy but the extra spending did not make up for the early December low growth. The net effect is that the annual growth rate is low whether December is considered in isolation or combined with November.'

The busiest day of 2018 recorded by Paymark before Christmas was December 20, with $296 million worth of transactions processed. Transactions peaked shortly after lunch on December 22, when a record 182 transactions per second were switched through the network.