Amazon's looming arrival across the Tasman could make this the last traditional Christmas bonanza for local bricks and mortar shops.

But traditional retailers don't expect to be affected, with Retail NZ estimating that Kiwis will spend a record $17.4 billion this Christmas.

In a survey by credit card company Mastercard, which questioned 1000 New Zealanders, 55 per cent said they would use local shops and service providers to make the bulk of their Christmas purchases this year, 22 per cent will use local online retailers and 10 per cent will choose international online retailers.

Amazon is widely expected to launch its Australian operation any day now, offering a much closer delivery point for New Zealand consumers, and more competition for many retailers.


David Murray, chief operating officer of retail marketing firm Crossmark New Zealand Australia, says retailers need to make sure that what they are offering customers is what those customers want.

"They need to be able to differentiate themselves from an online offering.

"If they do have one, they need to make sure their online offering ... matches the likes of Amazon," Murray says.

"Amazon arriving in Australia will probably get shoppers to explore the online capability a little bit more if they haven't done so already. It will become a bigger focus for [bricks and mortar retailers] but I don't think the impact of it will be as dramatic as other people think."

Demonstrating value - such as price or convenience - is important for bricks and mortar retailers, he says.

"With the increasing presence online, it's likely to be harder to do so on price, because the consumer can [often] see something online which is dramatically cheaper," Murray says.

"Convenience is what bricks and mortar seem to have in their favour in New Zealand."

As online retailing evolves and removes inconveniences such as delayed shipping, it is likely to become more enticing for consumers looking to spend money.

But Retail NZ's general manager of public affairs, Greg Harford, says the increase in the number of people shopping online will not displace bricks and mortar retail.

"Physically, going out and shopping is part of what we like to do as a society; it's a great family pastime and often people go out to the shops to pick up a few things and have a bite to eat - it's a social experience, and you don't get that online.

"While the volume of online shopping will undoubtedly continue to grow, it is not going to completely displace bricks and mortar any time soon," Harford says.

"There's always going to be a significant place for bricks and mortar retail because bricks and mortar is simply one of the channels retailers need to reach customers, and it's really important because it's one of the ways it can deliver customer service that you can't get online - being able to touch and feel goods, being able to talk to a real salesperson and having your questions answered."

Looking ahead, Harford says he still expects retailers to be busy during the lead-up to Christmas, as logistics are not in e-commerce's favour.

"The closer you go to Christmas, the harder it is to shop online because you need [certainty] around the fulfilment, and so malls and physical shops will still be busy in the lead-up to Christmas next year, would be our pick."

Eftpos payment service Paymark expects Christmas spending this year will be 156 per cent of the usual weekly average, as recorded in the first 10 months of the year.

Traditionally, pre-Christmas spending starts to build up in November, before climbing to a frenzy in the last few days of December, previous figures show.

Paymark is expecting December 22 - the last Friday before Christmas - to be the busiest shopping day of the year.

Retailing has lately been going through a period of change, and Amazon's arrival Down Under adds yet another challenge, says retail consultant Chris Wilkinson, managing director of First Retail Group.

"There's no doubt that by this time next year, Amazon will be on most consumers' radar and be a key part of their consideration set when shopping journeys start. Where they spend will be reliant on local retailers' online visibility and content, overall proposition and shopping experience."

Retailers will need a solid game plan to compete against the US retail giant, says Wilkinson.

First Retail Group has been analysing Amazon's evolution in the UK, and how it has cemented its position as a dominant player.

"There, it took time for Amazon to reach a position where it was such an influncer, however it will come to this part of the world with a lot of that experience and can deploy that to accelerate their market entry [here]."

Traditional retailers will need to be "aspirational" and "experiential" to survive.

"Stores will need to develop differentiated offers in terms of range, shopping experience and brand values - likely locating in strong 'clusters' and benefiting from 'daily connectors' such as cafes or a unique food and beverage offer that brings people past their doors regularly," Wilkinson says.

"Malls and retailers that have strong, unique and defensible propositions will remain strong and likely gain ground - winning business from weaker competitors - that will be impacted and may fall."

There's no doubt that by this time next year, Amazon will be on most consumers' radar


A shift towards so-called "experiential" service has already been a focus for some of New Zealand's largest retail chains.

Noel Leeming, The Warehouse, Farmers and David Jones have been shifting their in-store offerings, extending post-purchase services, stocking exclusive in-store products and hosting events to entice customers.

The volume of people shopping online is not likely to slow down any time soon. Photo / 123RF
The volume of people shopping online is not likely to slow down any time soon. Photo / 123RF

The Christmas trading period is a golden time for The Warehouse, says Pejman Okhovat, chief executive of The Warehouse and Warehouse Stationery.

"We call it the golden quarter - it's [the time] where our customers' engagement with the brand goes through the roof."

The big red retailer has been repositioning itself recently, including introducing everyday low prices. "We've been making a number of changes, particularly over the last year or two and not necessarily because of Amazon coming, but more importantly about what we do in the marketplace," says Okhovat.

The company has seen growth in customer interaction, through both its online and physical channels in the past two years, he says.

"There are a lot more people who are getting more accustomed to buying things online ... that's a global phenomenon, and as the customers get more used to it, the infrastructure for delivery will become easier and more and more people will choose that. What we find is customers shop across both of our channels really well."

Consumer electronics retailer Noel Leeming sees approximately 350,000 customers in its stores, and the same number online, from the end of November through to December per week.

The volume of people shopping online is not likely to slow down any time soon. Photo / 123RF
The volume of people shopping online is not likely to slow down any time soon. Photo / 123RF

Tim Edwards, Noel Leeming Group chief executive, says he is confident that the company's strategy will withstand Amazon's allure.

"It's about adding value to customers and making sure that we are doing more than just the [selling] product side of things," Edwards says.

Noel Leeming recently launched MyTechSolutions, a paid add-on which offers on-call help services, extended warranties and tutorials on using purchased items.

Farmers chief financial officer and acting chief executive Michael Power says he believes traditional retailers still have a bright future - if they are prepared to adapt.

"Bricks and mortar retailers can provide real tangible points of difference that online operators cannot, such as unique product ranges not available online, excellent personalised customer service and an engaging in-store experience."

Up-market Australian department store David Jones is hosting Christmas events in its Wellington store, including photo days with Santa and its own Christmas parade.

Ananish Chaudhuri, a University of Auckland professor of economics, says the social element of bricks and mortar retail will always be appealing for consumers.

"Psychologically, we are reluctant to buy high ticket price items without physically interacting with the item," Chaudhuri says.

"Human beings are social animals and the act of shopping is often a social experience. It's not just the shopping. Very often the shopping is intertwined with catching up with friends or family - an outing."

Will Amazon have an impact? Yes. Will that impact be as large as what people think? No.


He says he isn't sure if online shopping will ever be a substitute for physical shops.

"E-commerce will be complemented by a significant bricks and mortar presence, whether it's books or clothes or electronics.

"Will Amazon have an impact? Yes. Will that impact be as large as what people think? No."

Last year, Kiwis spent close to $6b in electronic card transactions in the month of December, up 6.6 per cent on the previous year.

Chris Gudgeon, chief executive of Kiwi Property, which owns New Zealand's largest mall, Sylvia Park, says shopping centres are still in demand and occupancy rates remain high.

"Over the four years to 2017, e-commerce sales have grown at nearly three times the rate of in-store sales, and now comprise around 11 per cent of total retail sales in New Zealand," Gudgeon says.

"But, over the same period, we need to remember that in-store sales in New Zealand have grown by around $20b to $110b and they still comprise around 89 per cent of total sales."

Charging GST for products worth less than $400 bought online is top of many retailers' wish lists, and Retail NZ says it would be beneficial for local retailers and business generally.

"Retailers will be hoping that the Government carries on and does go down the track and make the likes of Amazon pay its share of GST - that would be a really good present for the retail sector," says the organisation.