The Retail Market in New Zealand An Analysis 2013 Prepared by John Albertson, CEO New Zealand Retailers Association May, 2013 promoting eexcellencexcellence in retailing The Retail Market in New Zealand - An Analysis Introduction We believe information is the new currency. The environment around us, competition in the market place, consumer shopping/buying behaviours, overseas trends and developments all impact on retail success or failure. In these rather difficult times retailers have to maximise their sales. A better understanding of the market place will, hopefully, lead to more informed decision making and consequently a better share of the consumers’ available dollars. Today we have the added complexity of a generation or two who will drive the development of a whole new channel – the online channel. Does my business need to be there? How do I integrate my physical presence and my online presence to give the consumer a seamless experience with my brand? Over recent years the New Zealand Retailers Association has reviewed available information sources and has brought this information together to paint a picture of the environment we operate in. This report replaces that issued in April 2012. We have added some more information on population as this is one of the key drivers of retail development. We have also introduced a section on the tourism market as this is an expanding sector and retail is one of the biggest recipients of the tourist dollar. We realise the importance of the online space and are waiting on some new information on this area. Once that information is available we will issue a supplementary report. Much of the analysis in this report considers the ‘big picture’ only. More detailed analysis is available. We would be happy to advise on this. Most data in this report is sourced from Statistics New Zealand. (Visit www.stats.govt.nz.) New Zealand Retailers Association – May 2013 1 The Retail Market in New Zealand - An Analysis Sources Of Information: A. Statistics New Zealand • Business Demographic Survey • Retail Sales Series • Annual Enterprise Survey • 2006 Census and subsequent SNZ estimates. • Household Economic Survey • Tourism Satellite Account B. BusinessNZ • Economic Background C. Deloitte/National Retail Federation 2 New Zealand Retailers Association – May 2013 The Retail Market in New Zealand - An Analysis Table of Contents Page Section 1 – The New Zealand Economy 4 1.1 Key Economic Indicators 4 Section 2 – The Retail Market 7 2.1 Store Numbers 7 2.2 Retail Sector Sales Performance & Growth 11 2.3 Retail Stock Trends 14 2.4 Business Performance 14 2.5 Staffing in the Retail Sector 18 2.6 Clothing Stores in New Zealand – A Case Study 20 Section 3 – The Consumer 23 3.1 Introduction – The Two Perspectives 23 3.2 2006 Population Census 23 3.3 Population Projections 24 3.4 Household Economic Survey (June 2010) 26 Section 4 – Key Retail Chains by Sector 27 Section 5 – The Global Powers of Retailing Top 250 Highlights 32 Section 6 – The Tourism Market 35 Section 7 – Top Retail Trends 2012 37 Appendix 1 – Industry Descriptions 40 Appendix 2 – ANZSIC 2006 vs ANZIC 1996 Reconciliation 42 New Zealand Retailers Association – May 2013 3 The Retail Market in New Zealand - An Analysis Section 1 – The New Zealand Economy 1.1 Key Economic Indicators (Source: BusinessNZ Planning Forecast December 2012) Executive Summary Comments: a) The overall global economic growth outlook remains relatively benign. However, the increasing influence of Asia (China) both in terms of exports and demand for protein from its rapidly increasing middle class is positive news for New Zealand exporters over the medium term. b) Patchy growth is the order of the day in New Zealand. The housing market is showing positive signs of life and the Christchurch re-build is starting to gain momentum. c) Employment growth is clearly evident in Christchurch but elsewhere results are flat- lining. d) While business and consumer confidence is on the positive side of the ledger, households and businesses continue to take a cautious approach to new investment with debt reduction still a high priority. The household balance sheet is still being re- balanced. e) A low inflationary outlook is keeping interest rates at historic lows with no prospect of increases over the short to medium term. So, for the retailer, this spells out another tough year with every sale being hard won. Stock and margin management will be critical as will resource deployment and staff rostering. Like never before the retailer must deliver what it is that the customer wants. Retailers must consider all of the options – online presence, facebook, twitter, email marketing, texting etc., etc. If the customer wants it we must deliver – we have given the customer so much choice they are now definitely in the driver’s seat. The real game changer is the mobile phone. So if we look ahead what are the experts predicting? How do the various bank economists see the economy shaping up? The latest forward look released by Business New Zealand indicates the following: 1 GDP % Growth (Source: ANZ, ASB, BNZ, National and Westpac) Forecasts: Year Ending Dec 2012 Dec 2013 Dec 2014 % % % Highest 2.5 3.2 3.3 Average 2.5 2.7 2.6 Lowest 2.5 2.2 1.6 4 New Zealand Retailers Association – May 2013 The Retail Market in New Zealand - An Analysis 2 % Change in Inflation (CPI) (Source: ANZ, ASB, BNZ, National and Westpac Forecasts: Year Ending Dec 2012 Dec 2013 Dec 2014 % % % Highest 1.3 2.6 3.3 Average 1.3 2.2 2.7 Lowest 1.1 1.9 2.4 3 Labour Cost Index (Source: ANZ, ASB, BNZ, National, Westpac) % Change (Wages & Salaries): Year Ending Dec 2012 Dec 2013 Dec 2014 % % % Highest 1.9 2.7 2.8 Average 1.8 2.1 2.4 Lowest 1.7 1.6 2.2 4 Unemployment (Household Labour Force Survey) Unemployment %: Quarter Ending Dec 2012 Dec 2013 Dec 2014 % % % Highest 7.0 6.3 6.2 Average 6.9 6.2 5.7 Lowest 6.6 6.1 5.3 5 Interest Rates (90 Day Bills) Period Ending Dec 2012 Dec 2013 Dec 2014 % % % Highest 2.8 3.5 4.8 Average 2.7 3.3 4.3 Lowest 2.7 3.2 3.8 New Zealand Retailers Association – May 2013 5 The Retail Market in New Zealand - An Analysis 6 Exchange Rates a) Australian dollar NZ$1 = Aust cents Dec 2012 Dec 2013 Dec 2014 Highest 0.82 0.80 0.80 Average 0.79 0.79 0.79 Lowest 0.78 0.78 0.78 b) US dollar NZ$1 = US cents Dec 2012 Dec 2013 Dec 2014 Highest 0.83 0.85 0.76 Average 0.82 0.81 0.74 Lowest 0.81 0.78 0.685 6 New Zealand Retailers Association – May 2013 The Retail Market in New Zealand - An Analysis Section 2 – The Retail Market 2.1 Store Numbers (Source: Statistics NZ) Total Outlets by Region Period: February 2012 (Released October 2012) Statistics New Zealand has re-worked the classification system for businesses (ANZSIC) and the numbers below have been produced under ANZSIC 2006 (previously, ANZSIC 1996). These changes have had a significant impact on what is ‘in’ and what is ‘out’ in the retail sector demography analysis. For example, we now exclude such sectors as automotive repairs, household appliance repairs, footwear repairs, bakeries and cake kitchens, takeaway food operators and panel beaters to name a selection. On the plus side we now include all of those hardware retail stores that were previously included in the wholesale series. Reg ional Council Total Outlets Region (as defined above) % of total Northland 1,115 3.4 Auckland 12,018 36.4 Waikato 2,989 9.1 Bay of Plenty 2,111 6.4 Gisborne 270 0.8 Hawkes Bay 1,076 3.3 Taranaki 795 2.4 Manawatu/Wanganui 1,555 4.7 Wellington 3,349 10.2 Total North Island 25 ,278 76. 7 West Coast 263 0.8 Nelson 444 1.3 Tasman 324 1.0 Malborough 303 0.9 Canterbury 4,014 12.2 Otago 1,674 5.1 Southland 672 2.0 Total South Island 7,694 23. 3 Total New Zealand 32,972 100.0 The five major regions – Auckland, Waikato, Wellington, Canterbury and Otago - account for 73% of the country’s retail outlets. Auckland leads the way with well over a third. Relative to the latest regional population estimates the distribution of retail stores compares as follows: % Retail Outlets % Population 2012 Latest Feb 2012 Estimate Auckland 36.4 34.0 Waikato 9.1 9.4 Wellington 10.2 11.1 Canterbury 12.2 12.6 Otago 5.1 4.8 Auckland is a little more ‘over shopped’ relative to population and, if anything, Wellington is a little ‘under shopped’. Christchurch has seen a reduction both in population and store numbers. New Zealand Retailers Association – May 2013 7 The Retail Market in New Zealand - An Analysis Outlet Types By Region (selected outlets only) Source: Statistics New Zealand Period: February 2012 Notes: 1 As with the previous table, the table below is based on the new ANZSIC codes (2006). 2 Store classification is based on turnover in the category. – For example, if an outlet had 55% of its business in sports goods and 45% in footwear it would be classified as a sports goods store. Number of Outlets by Region Books, Supermarkets Department Clothing Furniture*** Appliances Chemists Footwear Stationery, /Grocery Stores + Electrical **** Newspapers Goods* ** Northland 122 9 94 56 57 37 9 35 Auckland 1,232 68 1,501 775 722 462 219 339 Waikato 298 25 349 166 144 100 55 92 B.O.P 186 19 237 132 107 80 35 63 Gisborne 33 5 30 17 11 9 4 10 Hawkes Bay 105 9 120 77 47 51 16 30 Taranaki 88 6 89 50 37 33 17 33 Manawatu, 169 15 149 96 81 58 17 63 Wanganui Wellington 379 35 430 213 174 144 80 121 Total North 2,612 191 2,999 1,582 1,380 974 452 786 Island West Coast 35 2 19 12 14 6 5 8 Nelson 28 6 60 24 32 14 11 10 Tasman 28 3 30 16 13 17 4 8 Malborough 31 5 23 15 17 13 6 11 Canterbury 367 44 470 232 215 157 80 110 Otago 141 22 242 83 73 66 32 53 Southland 76 11 67 39 28 24 11 21 Total South 706 93 911 421 392 297 149 221 Island Total New 3,318 284 3,910 2,003 1,772 1,271 601 1,007 Zealand (*Includes specialist computer stores) (**Covered by two different ANZSIC codes – ‘newspapers and books’ and ‘stationery goods’) (*** Furniture, Floor Coverings, Houseware, Textile Goods Retailing) (**** Includes Pharmaceutical, Cosmetic and Toiletry Goods Retailing) This analysis of outlet type by area considers only eight different categories of store.