Retailers face a year of 'rocky uncertainty' that nearly a third fear they will not survive

Wednesday, 18 January 2023

The rising cost to supply produce to retail supermarkets is responsible for most price increases, up 24% in the last year.

Retailers face a potential tidal wave of closures this year as shoppers spend less and costs continue to escalate, Retail NZ chief executive Greg Harford says.

Retailers had been relatively unscathed by Covid-19 disruptions, lockdowns and unusual consumer spending patterns, but Harford warned 2023 would be the toughest yet.

“The reality is we are in a recessionary environment and consumers are tightening their belts, and we’re likely to see reduced spend, certainly in real terms, over the coming year,” he said.

Consumers were feeling increasingly squeezed with houses falling in value on the one hand and interest rates rising on the other, along with rising rent and council rates, Harford said.

* Fifth decline in a row for electronic card spending another blow for retailers

* Spending intentions on the rise, survey suggests

Retail NZ chief executive Greg Harford says 2023 will be the toughest year yet for the retail sector.

That meant less spending in shops, he said.

Harford said he expected the three months to September 30 to be the toughest.

“We’ve had a monumentally tough three years since Covid arrived in the early part of 2020, but the sector has come through relatively unscathed. But I think as more and more pressure goes on the sector it does become harder for businesses to keep absorbing additional costs and carrying on as normal.”

Many retailers could close for good over winter as sales revenue fell below the cost of debt taken on in recent years to keep the doors open, he said

December sales were not as strong as expected, and the months ahead are expected to be difficult for retailers.

“I’d say 2023 is the year of rocky uncertainty.”

Almost a third of retailers were not sure they would survive the year, a new report which paints a gloomy picture for the sector shows.

Retail NZ’s latest Retail Radar shows nearly half did not meet their sales targets in the last three months of the year, which included the crucial Christmas trade, and they did not expect to do so over the next three months.

l Electronic card spending dipped for first time in nine months in December, falling by $166 million.

The salesindex, recorded a 15.9% increase in daily sales per store in the December quarter compared to the same quarter the previous year.

Retailers expected prices to increase about another 7% over the next few months.

“A combination of influences continues to drive increases in retail prices, which are mostly outside the control of retailers,” the report said.

Stats NZ data shows electronic card spending fell 2.5% in December compared with spending in November, when adjusted for seasonal effects.

Westpac said retail spending was softer than expected in December, adding to signs that the domestic economy is turning down, while ASB said the muted end to the year signalled a challenging 2023 ahead.