New Zealand's online retail growth is slowing, despite increased growth from rural consumers, according to a BNZ report released this morning.

The report found that sales growth for the month of May 2014 was up seven per cent on the previous year. The growth rate was described by the report as "respectable" but a decline from the previous year where growth rates were consistently in the double digits.

The report which was produced using data provided by intelligence company, Marketview, stated that this drop was consistent with trends of slowed growth observed since February this year.

According to BNZ director of institutional research, Gary Baker, the trend was likely due to a maturing market as well as growth coming off a larger base.


"As the base grows, the percentage change gets smaller and also there's a maturity aspect as well. It's hard to pinpoint one thing as being responsible," Baker said.

"I did notice that Australia had very similar trends though. Their NAB measure showed for May, growth compared to the previous year was five per cent so it was quite similar." Rural online spending growth was also accelerating at a much faster rate than urban spending, with offshore spend also increasing in rural areas.

Over the twelve months to 31 March 2014, online spending by rural New Zealanders had increased by 20 per cent, compared with 14 per cent for urban New Zealanders.

According to Marketview managing director, Stephen Bridle, the trend was likely due to online shopping becoming easier, as well as better internet in rural areas.

"Online retailers are making it a lot easier for people to buy. Certainly international ones with free shipping and easy returns. I think broadband has definitely changed things as well, I suspect as you get better internet connectivity out in rural areas, you're probably going to see that pick up again," said Bridle.

Bridle also noted that growth in the rural sector was coming off a lower base, and that the second half of the year was when online spending tended to pick up.

Despite the difference in growth, the report noted that the percentage of online spend between urban and rural was proportionate -- rural New Zealanders make up 13.6 per cent of the population and 13.3 per cent of online spend.

Much higher growth was also seen in international and offshore spend than domestic, with increase in offshore online spending up 27 per cent for rural consumers and 20 per cent for urban, compared with 17 per cent and 11 per cent respectively for domestic sales.

Nielsen's online retail report for 2014 also found growth in offshore online spend had doubled since 2010, with 34 per cent of online shopping, representing $1.3billion, being spent overseas this year.

Nielsen research director, Tony Boyte, said he expected this trend to continue, with online spend predicted to reach $4.15billion by the end of 2014.

"A considerable proportion of spend will continue to go off-shore but the opportunity remains for New Zealand retailers to take advantage of growth in the online retail space," said Boyte.

* Total online spending for the month of May 2014 was up seven per cent on May 2013
* Online retail spend is up 20 per cent for rural New Zealanders this year compared with 14 per cent for urban New Zealanders
* This year, 1.9million New Zealanders have spent $3.8billion online
* Online sales expected to reach $4.15billion by the end of 2014

Read BNZ's online retail sale report here: