New Zealand shops are performing better than those across the Tasman, despite what analysts have described as a "challenged" market.

Retail sales across New Zealand have grown at a faster rate than Australia's since 2013.

On a state-by-state basis, Kiwi shops have done better than every Australian territory except for New South Wales, according to Retail NZ's latest dynamic retail report.

New Zealand's retail industry is now worth $92.3 billion a year.


Around eight per cent of all shopping in New Zealand is done online. If groceries and liquor are excluded, online sales account for 11 per cent of all sales.

Australians do eight per cent of their shopping online and Americans nine per cent. The UK does 19 per cent of its shopping online and China 23 per cent.

Kiwis spent $4.4b online last year - 32 per cent of that was at offshore retailers.

On average there is one retail store for every 135 people in New Zealand. Ten years ago there was 128 people for every store.

Retail NZ general manager of public affairs, Greg Harford, said the strong performance of the retail sector could be attributed to a stable economy.

"Incomes have grown over the last two decades, but even taking that into account, we are spending more in retail than we were 20 years ago," Harford said.

Retail spending has grown steadily since the 2008 global financial crisis and at a rate of about five per cent year-on-year in the past five years.

Non-store and commission-based retailing - including online-only retailers - has been the largest growth category in the past 10 years, up 335 per cent.


The report, published today, outlines that the average margin for retail businesses last year was 3.7 per cent, with the clothing, footwear and personal accessories categories performing best at 7.5 per cent.

"Retailers are operating in a highly competitive, and now global, market," the report states. "This competition and high costs for New Zealand-based retailers, particularly those with physical stores, will keep pressure on margins."

Harford said the sector was positioned well for the future but would need to adapt to changing customer preferences.

"Over the next 10 years we will see a move to larger stores but also a strong niche small retail environment, a continued move to digital channels, and a move towards vertical integration," he said.

"Competitive pressure will mean that retailers need to innovate and be highly responsive to customer demand."

Last year was the first time since 2012 that there was a net decrease in the number of retail outlets in New Zealand, the report states: "The growth in online shopping may also be contributing as businesses need fewer [or no] physical outlets to reach customers."

The retail sector accounts for 10 per cent of New Zealand's workforce and is made up of 35,367 physical retail premises.

There has been a large increase in retail store closures since 2014. There were 3906 retail closures last year and 3804 opened resulting in a net decrease.

What retail will look like in 10 years

While online retail sales are set to increase significantly, in 10 years time there will still be a large offering of bricks and mortar stores, according to the report.

By 2030, Retail NZ predicts $120.6b annual retail sales, 13 per cent of retail spending will be online, and 50 per cent of online transactions will be with offshore retailers.

"The domestic supermarket sector will experience strong growth while books, clothing and footwear will likely be dominated by international merchants," the survey outlines. "Domestic retailers operating online will continue to operate in a highly competitive global playing field, and 'being found' online will be essential."

In 10 years time successful retailers will be designing and manufacturing their own branded products, competing with manufacturers seeking to retail their products direct to consumers, and adapting to consumers' desire for ethical and sustainable products, the report says.

"Retailers of the future, whether online or in-store, will need to be highly responsive to consumer demands for service and products.

"Online platforms will allow retailers to understand and keep up with customer demand like they never have before."