Struggling retailers up ante on deals

By Beck Vass

Free TVs and grocery vouchers used to get customers to open their wallets again. Photo / Natalie Slade
Free TVs and grocery vouchers used to get customers to open their wallets again. Photo / Natalie Slade

Appliance stores hit by dwindling sales are offering free televisions when customers buy refrigerators, and grocery vouchers when they buy ovens.

Shops battling tough times as people spend less are using extra-special deals to lure customers.

While that's bad news for retailers, the deals could get even better for shoppers in the lead-up to Christmas.

Samsung is offering a free 59cm television worth $599 when customers buy refrigerators.

And LG is running a competition where shoppers can register online to get a free camera, 3D glasses and televisions - and go in the draw to win a car - if they buy certain products.

One appliance retail salesman said a lot of customers were coming in saying, "I'll wait until Boxing Day, it will be cheaper then."

But he didn't know what the Boxing Day sales would bring as most items had already been discounted throughout the year by greater percentages, and for longer, than ever before.

"We've got more percentages off over a longer period of time. Instead of it being just maybe the last two weeks of a month, it's been a whole month."

He said most customers, especially the "very rich", had cut back since last year. He and other retailers and economists spoken to were expecting Christmas to be slower than last year.

"Maybe they'd come in two years ago and buy a whole package," he said. "Now they're coming in and buying single items, or just a couple of items.

"They're not buying the big bulk. People who could spend $200,000 to renovate their kitchen ... now they're going to spend $80,000."

Many customers were now also opting for cheaper brands over high-end ranges. This has been most evident in Newmarket, where many stores have closed.

In August, retailers there said the rise of internet shopping and mega-malls, such as Sylvia Park, were taking their toll on high-street stores.

However, lower-priced clothing outlets such as Glassons and Hallensteins, and supermarkets, are doing well.

Clothing stores, which had winter sales earlier than usual, are having discounts of up to 70 per cent.

Furniture stores are back to advertising large discounts and interest-free deals.

Retailers Association chief executive John Albertson said the reason appliance stores were struggling was low profit margins.

He could not predict what Christmas-season sales might bring.

"If you look at the last three to four years, the level of discounting has got higher and higher and somehow the industry has to get the consumer out of that frame of mind because if you have a consumer who always expects a deal, you can't always afford a deal.

"There's got to be a day of reckoning somewhere."

Tax cuts which came into effect last month were the one positive for retailers, and the industry was hoping they would get people spending again.

However, Mr Albertson said he wasn't counting on it just yet.

"We're not more optimistic, we're less pessimistic."

DECEMBER SPEND
* 2007.......$3935.2 million
* 2008.......$4142.7 million
* 2009.......$4303.8 million

Source: Paymark, which processes about 70 per cent of New Zealand's electronic transactions.

SLUGGISH SALES TREND 'TO CONTINUE'

Retailers keep expecting business to pick up but are being continually let down by sluggish sales brought on by the recession.

New Zealand Institute of Economic Research deputy chief executive John Ballingall says there is no light at the end of the tunnel for them in the foreseeable future.

He said the NZIER quarterly survey of business opinion released three weeks ago showed that struggling business owners thought things would get better.

"But it's just not happening. Every quarter they say: 'Yeah, it's getting better, it's going to be all right,' but the reality is it's sadly not quite as cheery.

"Normally we'd expect to see, at this stage of the recovery, quite strong spending growth and retail growth but we're just not seeing it, which suggests that this recession is different to previous recessions. And by different, I mean worse for retailers," he said.

"Retail spending is about $50 lower per person per week than the trend of the past decade. There's a big shift away from spending at the shops towards saving, which is really, really important for our long-term recovery.

"But the short-term flip side of that is it's going to hurt retailers for a fair while to come ..."

Mr Ballingall said spending would not pick up again until the job and property markets recovered because it was harder to get credit and borrow money against a home.

Many New Zealanders had money tied up in property and, because house prices were "dropping or going sideways", many had low confidence and, in turn, were not spending.

"The big spend that we've had is now coming back to bite us and as a result we're being a lot more cautious and that's going to continue for some time. Reality is hitting households and I guess it's not a particularly attractive reality so they are keeping their hands in their pockets rather than spending.

"Households are saving and paying off their credit cards and mortgages instead of borrowing to buy a new TV or a new car."

Consumers had cut back on everything except essentials, Mr Ballingall said.

Low sales of appliances were partly due to a "wobbly" property sector.

"Anything to do with the housing sector is really going to struggle because that sector is in the doldrums.

"If there's not a huge number of new houses being built, there's not such a demand for fridges, carpets, big TVs and surround-sound systems."

People would continue to defer big-ticket purchases until they had more job security and less "stagnant" pay rises. Supermarkets, on the other hand, were doing well because people were staying at home and having a barbecue.

- NZ Herald

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