2014 – What does it bring for retail?

2014 has all the promise to be an interestingly competitive year in the NZ retail scene, fuelled by a positive economy, the pressure of global online shopping options, new entrants to the market and technology starting to more strongly influence our shopping behaviour.

What we see happen this year, I believe, will merely be a pre-cursor to some dynamic changes over the next 3-5 years as some of the trends really impact.

The economic situation

The NZ economy is in the best shape it’s been for years, and fuelled by currently suppressed interest rates Kiwis seem to finally feel a bit more comfortable going out and spending some of what they are earning.  December electronic transactions were up 7.5% year on year, which is a pretty significant amount especially when you factor in that a lot of people still like using cash, and is well above the overall rise in retail sales.  Sales before and after Christmas broke records.  And the NZ new car market had its best year for many, many years.

Interestingly, retail wages are also on the rise, up 10% in the last 12 months.  This shows pressure on the employment market, and arguably a rise in the value placed on good retail staff.  Certainly, a recent trip to retailers in the US particularly demonstrated the value of having great retail staff who can make a difference to the consumer experience and therefore sales.

This all points to strong consumer confidence, notwithstanding that Kiwis are still avoiding pre GFC levels of debt.

So when interest rates do rise later this year, hopefully the incredibly long telegraphing of it will ensure that everyone fixes their mortgages at a fair rate for a sensible period of time, and therefore we don’t see a dip in consumer confidence fuelled by mortgage pressure.  The flipside of course is a rise in interest rates will lead to the older generations with more in their pockets and a chance for them to let their hair down a bit.

The strong economy links nicely to the next point.

Online shopping  – the global marketplace

The currently very strong Kiwi dollar is of course making buying from overseas very attractive, whether you are a retailer buying stock to sell, or simply a shopper happy to buy online.  2012 figures showed us that c. 55% of people over 15 in New Zealand had bought something online in the last 12 months (Source:  NZRA), and it’s a market worth $5bn of which over 30% is from overseas.  So currently that’s over $2bn of product and lets face it, it’s only going to get bigger.

Combine this with the fact that websites are better at selling stuff, online downloads are huge (and lets not forget the rise of e-readers here which will increasingly undermine the overpriced book market in NZ) and general digital exposure across generations on Facebook and Instagram, and you have a market that is simply accelerating.  Creating a great ecommerce experience, from the digital environment through to delivery and follow-up, will also massively impact your success in this space.  We are increasingly finding this is a point of strong interest from clients – trying to make the etail experience as good as the retail one.

So heading into 2014 NZ retailers have to take the threat seriously that a generation are coming through who don’t care where stuff comes from so long as it is well priced and what they want.  So if you are slow to hop on a trend, or pricing highly compared to equivalents, expect to see an increasingly savvy and globally aware customer base shop where they like.

It’s interesting, because the health of your brand as a trusted retailer will never be under more pressure than it is now – so expect to see NZ retailers invest more in their brands (as at the end of last year we saw both The Warehouse and Briscoes doing, and of course Warehouse Stationery with a total rebrand mid 2013).

The others are coming (some of them at least)

Australia is currently being invaded by a range of international retailers, not least Top Shop and Zara in the fashion sector.  So far the NZ retail scene have successfully defended from Ikea coming here, but other retailers who don’t need motorway junctions and massive footprints will find it easier and their international flavour will (as we are seeing in Australia) be very appealing.  We don’t expect it in 2014 in a big way, but there are rumours (and more than that) of some international retailers arriving.   This is going to happen in categories with low barriers to entry, probably where their retail location can be amplified by an excellent online store to serve all NZ.

Technology is changing things

There’s a lot going on in the tech sector and this merits a whole piece.  Put simply, you can boil it down to the following:

Big data in retail is driving a focus on insights in terms of shopper behaviour, store arrangement, purchasing, and marketing tactics to leverage this behaviour.

The role of electronics in-store, with the offering of wi-fi, Apps, better information via kiosks, is going to accelerate (but slowly).  Learnings from overseas will inform bigger changes for the coming years.

Aspects like the ‘wired car’ are going to accelerate (no pun intended) so now’s a good time to buy a hi tech car.

In summary, it should be a good year overall and especially for those being brave, proactive and customer focused.

Author: Ben Goodale