Store closures prompt rethink over how and where retail operates - The Front Page

Smith and Caughey's is the not the only victim of a declining retail environment. Photo / Steven McNicholl

Changing habits from brands and shoppers is behind a shake-up of the local retail market.

Auckland department store Smith and Caughey’s announced it would close later this year after 144 years of operations. That was followed a day later by the news Flybuys would be exiting the New Zealand market by the end of October.

The cost-of-living crisis has hit retail hard generally. The latest figures from Stats NZ show a monthly decline in retail spending between February and April, after stable but steady decreases last year.

FirstRetail’s Chris Wilkinson told The Front Page that increasing costs in areas like mortgage, insurance and utilities are affecting discretionary spending.

“The sectors that are finding the greatest challenges are those discretionary sectors. The products that people want to have but don’t need to have, such as perfumes, cosmetics, clothing, furniture, white goods. Those are the ones that are finding the challenges because in many cases people can put those purchases off till later.”

What hasn’t helped big department stores like Smith and Caughey’s is that brands are focusing on their own profile now, Wilkinson said, with stores like Mecca choosing to open here with their own flagship stores instead of selling to department stores. That’s reflected in a focus on setting up their own loyalty programmes as well, rather than buy into a scheme like Flybuys.

Wilkinson said there’s also been a big shift in where people go to shop, with malls becoming an increasingly big player in where people chose to shop, and where businesses need to open stores.

“Once upon a time, brands coming to New Zealand would have almost certainly needed to be in Queen St. That would have been their flagship site, because that’s where the population was, that’s where the audience was.

“Nowadays, those retailers are being attracted by the likes of Sylvia Park, or Westfield, or Commercial Bay. And those malls need those types of businesses to create that differentiation, so that’s where the consumers are as well. That’s where very certain audiences and in particular those types of environments play into this big shift that we’ve seen from goods to experiences.

“So going to a place like Sylvia Park will give you a great range of food, it’ll give you entertainment, it’ll give you the likes of health services, and all these other types of things that you would need on a day-to-day basis. So that’s where our big shift is happening, and this is a global trend that we’re seeing.”

More international brands are moving in, with Ikea now under construction near Sylvia Park, after the successful opening of Costco in 2022.

Wilkinson said those stores are “localised threats” but have wider benefits.

“The likes of Ikea will be good because it will re-inspire people. It’ll come at about a time when people will be actually starting to think about getting back into their home environments and doing things because the last big thrust we had with that sector was around lockdown. So that will be useful because it starts a fire in people’s minds and that drives people searching wider.”

Listen to the full episode to hear more about the struggles for retail, the ongoing threats to the sector, and why the regions are seeing huge retail growth.

The Front Page is a daily news podcast from the New Zealand Herald, available to listen to every weekday from 5am. The podcast is presented by Chelsea Daniels, an Auckland-based journalist with a background in world news and crime/justice reporting who joined NZME in 2016.

You can follow the podcast at iHeartRadio, Apple Podcasts, Spotify, or wherever you get your podcasts.