James Ihaka

James Ihaka is a Herald reporter based in Hamilton.

Bonanza of bargains in shops as prices tumble

Customers are spoiled for choice and retailers are forced to discount and operate on razor-thin margins in buyers' market.

There are bargains galore in the shops as retailers operate on wafer-thin margins. Photo / Paul Estcourt
There are bargains galore in the shops as retailers operate on wafer-thin margins. Photo / Paul Estcourt

Shoppers are being spoiled for choice with low inflation, a strong New Zealand dollar and tumbling prices of whiteware and electrical goods making for a buyers' market.

The consumer price index rose 0.3 per cent in the three months ended September 30, taking the annual pace of inflation to just 0.8 per cent - the slowest rise since December 1999.

The index showed the level of discounting by retailers accelerated in the quarter - with 12 per cent of prices analysed having fallen - compared with 11 per cent in the June period.

Major household appliances saw their prices fall 35 per cent while small electrical household appliances fell 29 per cent and audiovisual equipment dropped 28 per cent.

Noel Leeming Group merchandise manager Jason Bell said televisions in particular had seen "significant price erosion" with the average sale price down by about 20 per cent on the same time last year.

He blamed a number of factors that now see a 40-inch full high-definition LED television with 3D capability sell for $1000.

"If you look at a category like televisions, everything is imported, the dollar has been strong and then there's the technology life cycle.

"With things like 3D and Smart TVs they start dropping price correspondingly with which stage they are at in their life cycle ... but TVs will come back because people are getting ready for the digital switchover."

He said the year had been tougher for retailers after a bonanza last year brought on by sales preceding the Rugby World Cup - mainly for televisions.

But there had been growth in the appliances sector, driven by more people buying tablets, iPads, Samsung Galaxies and smartphones at the low and top end. There had also been strong sales of food preparation devices and coffee machines.

"In terms of better times to buy, this is probably the best time, especially while the New Zealand dollar is where it is as well," he said.

New Zealand Retailers' Association chief executive John Albertson agreed that the squeeze on retailers meant there had "probably never been a better time to buy".

"Consumers are taking advantage of this and certainly it is a great time to do so [buy goods]," he said.

The small growth in the retail sector was being driven by "continuous consumer offers".

The flip side was the "very thin" retailer margins with net profits sitting at about 3 per cent compared with five years ago when that figure was closer to 7 per cent - creating problems for employers paying their staff and rent bills.

New Zealand Institute of Economic Research principal economist Shamubeel Eaqub said anecdotal feedback from the retail sector was that discounting was the norm and customers would not buy unless goods were on special.

But despite excellent buying conditions for consumers, New Zealanders were still choosing to pay off debt and live more conservatively.

He said people were spending more of their weekly budgets on food and fuel while cutting back on discretionary items such as recreational goods, hardware, appliances and furniture compared with before 2007.

Mr Eaqub said the economy was halfway through a seven-year adjustment after a build-up of too much debt.

"In time, the economic recovery will gather pace and it will be more sustainable than the past decade. But the adjustment process is hurting, with patchy sales and razor-thin margins. Some firms are not lasting the distance."

Retail sales were improving and would continue to do so but "the pace of growth will be less exuberant than before the recession".

The figures come after the institute's quarterly survey of business opinion showed a net 21 per cent of firms experienced dwindling profits in the quarter, and just a net 3 per cent expected profits to improve. A net 14 per cent saw prices rising in coming months, up from a net 10 per cent in June.

- NZ Herald

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