Online shopping no substitute for bricks and mortar

Online sales were growing strongly, operating good stores was more important to most New Zealand retailers. Photo / Herald on Sunday

December quarter retail sales:
• $21.8 billion - up $921 million or 4.4% from the same period in 2014
• Sales boosted by tourism/travel and home improvement
• Auckland sales growth sits at 7.1% year on year - above the 2.9% for the rest of the country
• 12 of the 15 sectors saw sales growth compared to the September quarter

Travel and home improvement spend helped lift overall retail sales for the December quarter and retailers are increasingly optimistic about future market changes.

The latest retail sales data from Statistics New Zealand showed total retail sales for the 2015 quarter were up $921 million or 4.4 per cent from the previous year to $21.8 billion. Spending on accommodation for the period rose 4.8 per cent, and hardware, building, and garden supplies spend rose 5.3 per cent - the largest sector increase. The rise in this industry coincides with a lift in the building sector and an increase in the number of building consents issued in December.

"Combined with strong population growth and low interest rates, low prices have provided a significant boost to spending," said Westpac senior economist Satish Ranchhod. "This has been reinforced by a strong tourist season which has given spending in areas such as accommodation a boost," he said. "These factors are expected to continue providing some supporting for spending over 2016, though over the coming year the strength of spending will be challenged by the deterioration in the global economy and weakness in export prices."

Twelve of the 15 retail industries had higher sales volumes in the latest quarter compared with the September quarter. Pharmaceutical goods, recreational goods and motor vehicles and parts all declined in sales.

Despite all the rhetoric around internet and multichannel retailers, most were very firm about the importance of having a significant physical presence.

Jonathan Elms

The latest data comes off the back of a survey into the issues facing retail in Australasia conducted by Massey University in collaboration with Monash University (Melbourne) and Retail NZ. Results from the 263 retailers surveyed over the last two months found that 60 to 89 per cent of their retail revenue came from stores, rather than online.

Lead researcher Associate Professor Jonathan Elms said although online sales were growing strongly, operating good stores was more important to most New Zealand retailers, as it also provided a customer experience that online sellers could not offer.

"That was one of the most interesting results from the survey," Elms said. "Despite all the rhetoric around internet and multichannel retailers, most were very firm about the importance of having a significant physical presence."

"That's because the store is the brand experience, it offers a level of personal customer service and provides a direct experience that can't be emulated online," he said. Even Amazon is opening stores now."

The survey also found that business activities had increased in the past three months with retailers, particularly larger ones, appearing to be more optimistic about future market changes.

Greg Harford, general manager public affairs at Retail NZ, said it was heartening to see that most retailers were feeling positive about the coming year.

"The retail sector is entering autumn on the back of a generally strong summer sales period," Harford said. "Although some areas of heartland New Zealand are less confident, retailers in the main centres are generally expecting to meet or exceed their targets over the year."

"We have seen retailers striving over the last few years to create a whole in-store experience, moving away from a mainly transactional environment," he said. "A great in-store experience is key to driving brand development and consumer loyalty, hence the continued focus on bricks and mortar stores from both domestic and international retailers."

Elm said ecommerce was still an important aspect of the retail industry but should be viewed as an add-on, rather than a replacement for good retail stores.

See the latest Stats NZ retail trade survey here: