Consumers sit on wallets as retail spending continues to fall

Consumers are continuing to keep their wallets shut, as spending continues to fall.

The latest figures from Statistics New Zealand shows retail spending was down 3.7% in the last quarter – a drop of $740 million.

The largest fall was in motor vehicles, which was down 9.8% – a fall of $5.3 million.

Clothing is also down 0.8% to $2.4 million.

Durables such as electronics or household goods are also down 0.5% to $8.2 million.

Retail NZ’s Carolyn Young said there’s been “lots of redundancies, lots of businesses facing really difficult times, low consumer confidence”.

“You wrap all those things together and people are definitely keeping their wallets shut,” she said.

Multiple job losses are expected at The Warehouse Group’s head office next week in the wake of falling profits and sales.

Forsyth Barr retail analyst Paul Koraua said the big-box retailer will “have to focus on what their product is and what their price is, and what their value is to consumers”.

“If they can get those things right, it’s still a business model.”

The Temu effect

Part of the problem is the spending power of Chinese-owned online bargain giant Temu, which took off in popularity since it launched in New Zealand last year.

“The likes of Temu and Shein have positioned themselves in a place where they are low price and consumers are finding that to be quite an attractive value proposition,” he said.

“You know what you’re getting as a consumer, you’re not surprised to the downside when the product comes and it maybe doesn’t live up to their expectations because you’ve paid less for it.”

Beauty giant Sephora is closing its Queen St store next month as it joins the retailers moving online to cut costs.

“They’re looking at their structure and maybe in one location, they don’t renew a lease,” Young said.

“Staff resign, they may not replace them. They’re looking at all the levers that they can pull that can minimise costs.”

The hospitality spend is also continuing to slide after falling 0.5% in the last quarter – a drop of $6.6 million.

Ponsonby institution SPQR was the latest casualty after going into liquidation yesterday.