What's happening to big box retail? Industry hangs tight on rate cut relief

Friday, 22 August 2025

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Retail is doing it tough.

That’s the view of Smiths City owner Colin Neal, who confirmed to The Post the century-year-old furniture and appliance chain is downsizing as store leases come to an end.

“It’s the economy … you don't buy a TV to eat.”

His experience seems to mirror the situation across the board in what is known as “big box” retail.

At Smiths, business is down 40% compared to two years ago. That was typical across the category and retailers in it, Neal said.

Some sites had not been trading well and the company had opted not to renew leases. Five have shut so far this year - Nelson, Blenheim, Wellington, Palmerston North and Tauranga - and the Wānaka and Hornby stores are in the process of closing.

Smiths City had 35 stores nationwide in its heyday and 25 stores when Neal acquired it five years ago. At the end of the month it will have 10 stores.

“Retail is tough,” Neal said.

You don’t have to look far to find a sale or discounts these days, and that’s a worrying tell-tale sign of the current economic state of affairs, experts say.

Interest rate cuts in recent months have done little, if anything, to help retailers’ bottom lines. Any meaningful rebound in retail spending following an extended period of reduced sales was yet to happen, according to Retail NZ. This put retailers in a situation where they had to constantly put goods on sale to entice shoppers.

Well-known brands like La-Z-Boy, Samsung and Panasonic have been disappearing from Smiths City website, and its product range is said to be getting smaller by the day. The retailer also stopped offering Airpoints as of July.

Neal declined to comment when asked how he saw Smiths City staying in business and carrying on if it was so hard to make a sale right now.

Smiths City had made all of its changes, he said. “We've reduced staff at head office, we've reduced staff in stores. We’re just doing business as usual, trying to do best in our environment.”

Kitchen Things is another whiteware retailer feeling the pinch in tough economic conditions. It is on the hunt for a buyer after going into receivership and closing its stores due to “sustained pressure from weaker consumer demand and increased competition on pricing, leading to ongoing trading losses” over the past two years.

Earlier this year BabyCity was saved last minute - acquired by the owner of baby pram and high chair manufacturers Phil&Teds and Mountain Buggy - after going into liquidation in late December. At the time it cited struggling due to economic pressure. Three of the stores seven stores were shut down, but new owner Campbell Gower told The Post of a recent re-opening and his plans to open further stores.

Retail NZ chief executive Carolyn Young said retailers were “doing it tough”, with many reporting declining sales and having to make difficult decisions around staffing and leases.

Big box retailers were feeling the same impacts as other retailers, but their pain was exacerbated on a much larger scale.

“A lot of money is being used on core, essential retail - fuel, telecommunications, electricity, especially in this time of year in winter - so there's nothing left for discretionary spend in other areas … there's been no quick wins for anyone.”

Young said it had been a challenging winter for retailers, and discounting and putting stock on sale was the only way to try to make sales and move stock.

“We don't actually see where the turning point is - we don't see visibility of that yet, so that's a challenge for everyone.

“On our advice line, the key things that are coming through are people asking about is restructures, closing stores, performance management, all of those things where businesses are concerned about the bottom line.”

‘No relief in sight’

On Wednesday the Reserve Bank cut interest rates to 3%, the seventh cut to rates since since the OCR peaked at 5.5% just over a year ago.

It signalled there may be scope to lower the OCR further, if medium-term inflation pressures continue to ease as expected.

Analysts say there has been no recovery or reprieve for retailers though.

Young said a turnaround in the economy could not come soon enough for the retail sector.

Business strategist Juanita Neville-Te Rito, managing director of RX Group, said some retailers were making good sales volumes, but their margins were lower in the current climate. It was hard to say whether this would improve any time soon.

“We are seeing green shoots in sales numbers and some demand. But larger geopolitical issues affect consumer confidence. We [New Zealand] are a thermometer on interest rates, aren't we? I think we’ve got a few more cycles until we can say we’re confidently out.

“From Labour Weekend onwards we tend to see a good upswing in spend. And, when the sun comes out, people feel a little bit better about the world, and we do actually see that in the sales.”

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