Coronavirus: Level 3 won't be the magic tonic for retailers struggling under Covid-19 restrictions

Wednesday, 22 April 2020

Retail at alert level 3 could struggle to gain momentum, experts warn.

Derek Foy, associate director at economics consultancy Market Economics, said sales could be 60 per cent lower than normal.

'The precarious position of many businesses in the sector will improve little during level 3, most businesses will struggle, and some will fail,' Foy said.

Online shopping is the only option for shoppers at level 3, but will that mean a bounce in spending?

The restrictions on physical stores would be the main barrier for retailers, Foy said.

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Under level 3 restrictions, retailers are limited to online sales with delivery or contactless click and collect.

Retail NZ chief executive Greg Harford says retailers will struggle to make money under level 3.

About a quarter of retailers were not prepared to trade online, according to data produced by Retail NZ.

By the time New Zealand moves to level 3, the lockdown will have resulted in a loss of around $6.5 billion in retail and hospitality sales, a fall of more than 75 per cent, Foy said.

But the news was not all bad once retailers were allowed to open the shops, he said.

'Our economic modelling suggests that we will see a strong recovery in the coming months, and many growth opportunities as consumer demand rebounds and restrictions are removed,' he said.

The prime minister announced on Monday that the country will move to level 3 at 11.59pm on April 28 for at least two weeks.

But Retail NZ chief executive Greg Harford said he was skeptical that retail would reach even 40 per cent at level 3.

'I think that could be optimistic, to be honest. We don't really have any modelling on this because it's anyone's guess,' Harford said.

'We know that while there will be some online shopping available, the volume of shopping that is done online is relatively small.'

Before the spread of the coronavirus, online shopping accounted for 9 per cent of retail spending in New Zealand.

'That will jump up next week as customers who want to buy things can only buy online but I don't think we will see 40 per cent of retail sales going through the till.'

Harford expected most retailers to struggle to get 20 to 30 per cent of normal sales.

'My big plea to consumers is to shop local, support New Zealand businesses online,' he said.