Worried retailers advised to get online

Friday, 20 October 2017

Shoppers may not always buy online but the majority will go there to research a retailer.

Despite a string of recent receiverships and Kiwis continuing to shop overseas, New Zealand retail sales are growing.

In the year to June, retail growth was up 3.7 per cent, outpacing economic growth at 2.7 per cent.

McGrathNicol partner Conor McElhinney says retail failures have largely been about an inability to change.

McGrathNicol partner Conor McElhinney said the doom and gloom about retail was unfounded, and recent upsets in New Zealand's retail market such as Topshop, David Lawrence, Marcs, and Pumpkin Patch going under, had nothing to do with overall retail sales.

'The retail failures we're seeing in New Zealand are driven by issues with specific companies, not with retail itself,' he said.

Massey University retail expert Jonathan Elms says smaller retailers can use Amazon as another platform to sell goods.

* Lower Hutt's rebuilt Queensgate Mall announces new stores**

'Based on the ones that have gone insolvent, the issue has been an inability of management to quickly respond to changes in consumer habits and respond appropriately.

'There's this misconception out there that's now pervading the space that retail is in trouble but what's happening is very, very slow and gradual disruption in the sector.'

But international websites were taking more than 44 per cent of online spending, and retailers needed to focus their efforts online, McElhinney said.

About 41 per cent of retailers that responded to a Massey University survey said they did not have a website or product available to look at online.

The majority of retailers said improving in-store experience was the top priority to keep customers loyal, and improving the online experience was only somewhat important.

'Online retail is no longer about the 7.5 per cent of transactions that occur online, it's about the research consumers do online before buying in store,' McElhinney said.

Figures from United States showed 80 per cent of shoppers went online to research a product before buying.

First Retail managing director Chris Wilkinson said spending attrition overseas was 'one of the highest rates in the developed world'.

'We've got a well travelled and highly expectant market in New Zealand; our people travel well and they know what's out there and people are seeking differentiation,' he said.

But New Zealand's retail sector was doing well and better than Australia, where consumer confidence has been negative for the ninth month in a row.

Despite high confidence here, 18 per cent of retailers in the Massey survey expected sales to fall, compared with 12 per cent last year.

Massey University researcher professor Jonathan Elms said Amazon, and possible changes to the tax system, were worrying retailers.

'If you look at what has happened in overseas markets, shopping malls are struggling and department stores that compete on price have been obliterated,' Elms said.

Retail New Zealand general manager Greg Harford said an 'Amazon tax' on overseas internet shopping, which could raise $235 million in its first year, is more likely following the change of government last week.

Retail NZ has been lobbying for New Zealand to join Australia in forcing overseas e-commerce companies such as Amazon to charge GST on all sales they make to Kiwis from July. Currently, most purchases costing less than $400 are tax-free.

But McElhinney said Kiwi shoppers were in a spending phase.

'They've deferred a lot of spending post GFC and repaid a lot of consumer credit debt, but in the last four years they've felt more comfortable spending because of property appreciation. People are very comfortable spending when their house price is going up.'