Post-pandemic sales downturns for furniture, bikes, clothing and camping gear are forcing retailers to tighten their belts
When Robbie Bielby’s dad opened the original Target store in Auckland’s Dominion Rd in 1992, Robbie was still at primary school. “It’s part of our family,” he says.
Thirty-one years later, he’s managing director and has made the tough call to close the company’s flagship shop this month.
Sale consultant Manjula Mrinalini says she’ll shift to the new Sylvia Park store to do battle with the Swedish furniture giant Ikea opening in 2025; assistant manager Himal Dudhiya will move to the revamped Wairau Park store – but some won’t be so lucky. A couple of storemen have lost their jobs.
With marked downturns in categories like furniture, bikes, clothing and camping gear (no surprise given the weather!) retailers are being forced to tighten their belts. New figures from the NZ Institute of Economic Research’s quarterly survey of business opinion show retail is the most downbeat sector – a net 64 percent of retailers expect times to get even tougher.
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And with around half of household mortgages due for repricing over the coming year, NZIER principal economist Christina Leung expects retail spending to slow further.
At the same time, stats from credit agency Centrix show retail businesses are more likely to default on payments, and 50 percent more likely than other businesses to be forced into liquidation.
During the lockdowns, people hunkered down at home and made their spaces more comfortable, says Bielby. Now, they have other financial priorities.
“The industry is down. We’re finding it more challenging,” he says.
“It’s almost like the floodgates have opened on travel and tourism, and people are going overseas as a family again. It’s a different competitive environment for us than what it was during Covid,” he says. “It’s a hangover. People realise they overspent through that period, and now they’re really considering what their options are with a limited budget.”
His strategy is fight, not flight. His company has eight stores; they’re closing the “transactional” Dominion Rd store with its big floor footprint stacked with boxed furniture – but revamping other stores like Wairau Park and Sylvia Park to be more spacious with a “high-end instore experience”. That’s how they hope to survive against the big Ikea.
Then and now: The original Target store was white until the landlord painted it ‘heritage orange’ for the Rugby World Cup.
With house prices dropping and mortgage rates rising, he says people don’t feel as wealthy. They have to spend their money on food, not discretionary items like furniture. “People don’t typically need furniture, they want it.”
It’s a similar story for bicycles. During the lockdowns, New Zealanders went out and bought bikes. Now, according to retailer Torpedo7, bike sales are the main contributor to a 3 percent sales downturn, meaning gross profit margins were down 4.4 percent in the year to April.
That’s a global phenomenon: the UK, Germany, Singapore and the bicycle-friendly Netherlands have already reported downturns in bicycle sales; even e-bike sales have plateaued – though New Zealand’s Cycling Action Network insists any downturn is a blip.
The red shed sales were up 10.5 percent to $444.1 million, but that was offset by sales declines at Warehouse Stationery (down 2.5 percent to $65.7m), Noel Leeming (down 3.4 percent to $247.8m) and Torpedo7 (down 3 percent to $35.4m).
“We have reprioritised our focus on trading in response to the current economic conditions,” said Nick Grayston, chief executive of parent company The Warehouse Group, which is laying off 340 staff.
Clothing sales are down by 3.9 percent on last year, Stats NZ reports, and in May overall spending on electronic cards declined for the fourth time this year, month-on-month.
Retail NZ boss Greg Harford hopes the Reserve Bank will be true to its word in next week’s official cash rate decision, and not raise interest rates any further.
His group has surveyed members. The combined challenges of inflation, increasing wage costs and retail crime are hitting home, it’s found. Auckland flooding and the devastating effects of Cyclone Gabrielle have localised impacts for North Island retailers. And recruitment is still a real problem. “There just aren’t enough people to fill available roles.”
“Things are definitely gloomy,” Harford says. “Consumers are reprioritising spend to food, and suppliers continue to put up prices. We really need to see interest rates stabilise and a boost to the housing market to see consumer spending increase.”