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Home / Business / Companies / Retail

Victoria Young: Local retailers are fighting back against global giants

NZ Herald
2 Dec, 2019 02:00 AM5 mins to read

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Data shows spend with local retailers is increasing. Photo / 123RF.

Data shows spend with local retailers is increasing. Photo / 123RF.

If you picked up an online bargain on Black Friday, chances are you got your deal from a local retailer and not an overseas giant, despite the foreign origins of the biggest sale event of the year.

New figures show more and more online spending is going to local vendors while international purchases have started to decline.

This drop off in spending on overseas websites may be further exacerbated by new GST rules which start this month, but are Kiwi retailers in good shape to capitalise on this change?

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New data show New Zealanders' online spending with local retailers is increasing year-on-year, while overseas spending has started to move the other way.

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According to BNZ figures, September was the third month in a row of double-digit year-on-year growth for domestic online spending, up 15 per cent at $225 million.

More significantly, September was the second month in a row that New Zealanders' year-on-year spending on overseas retailers' websites has fallen, down 1 per cent at $160 million.

While this growth had been slowing - and was certainly outpaced by gains for domestic online retailers - a decline had not been expected.

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Retail specialist Chris Wilkinson describes that as a "seismic change".

"This is the first time we've seen this - what's happening now is consumers are re-orientating themselves around the intended tax and government scrutiny on incoming goods."

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This month the Inland Revenue Department will add GST to low-value goods purchased from overseas websites. By last week, 230 international retailers had said they would collect this tax for the Government.

However, the devil will be in the detail because along with adding the 15 per cent tax, making items more expensive, the Government is removing customs duties from imports valued at less than $1000.

According to an NZ Post study, the top reason for choosing to shop online at an overseas website is price, followed by range.

It's hard to see consumers being put off international retailers that compete on price.
A 15 per cent price increase is not going to stop my addiction to buying junk from AliExpress - where, for example, a fidget spinner costs $3 instead of $10 at Farmers.

I know I'm not alone because the Chinese e-commerce giant is the New Zealand consumer's preferred e-commerce platform with 18 per cent of the market.

Hobson Wealth Partners analyst Grant Cotty reckons that those after greater convenience will buy local. Where international retailers will remain strong is in their range.

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"I always think that choice dominates, and in New Zealand you aren't going to get choice with local websites."

Online shoppers are increasingly opting for local shops. Photo / 123RF
Online shoppers are increasingly opting for local shops. Photo / 123RF

Wilkinson agrees and adds that overseas websites dominate in the niche and luxury end of the market.

That's where brands matter, and it's difficult to see NZX-listed retailers Briscoes Group, Kathmandu or The Warehouse competing in this space.

Those retailers could take comfort in statistics from NZ Post which show clothing and footwear is the fastest-growing domestic sector with 45 per cent growth. More than half of online spend on apparel now stays in New Zealand.

However, coming back to the importance of niche, Rebel Sport stocks a lot of Nike shoes, but they don't sell the type of shoe that hard-out sneaker enthusiasts are interested in. Those consumers have to look overseas for their fix.

It's too early to evaluate the performance of The Warehouse's e-commerce play - its $12 million version of Amazon - TheMarket.

The website is an aggregator which stocks its el cheapo products alongside fancier stuff like World, Karen Walker and Billabong.

The retailer says the point is to offer a wider range to Kiwis, although most of its range -
70 per cent in fact - comes from domestic retailers.

Where The Warehouse does bring a broader range is through its Red Rack parallel importing initiative, introducing designer handbag brands Coach, Michael Kors and Kate Spade.

These are entry-level designer brands with lower price points, and while the juxtaposition of a Coach $329 crossbody bag sitting alongside house brand H&H's $15 version is quite remarkable, The Warehouse could make inroads here.

Kathmandu is also in the early days of achieving more brand-driven growth, with its acquisition of Oboz and more recently Rip Curl.

The outdoor equipment retailer's online sales growth as a percentage of total sales has outpaced other retailers. In the past three years it's up from 7.5 per cent to 10.1 per cent, while Warehouse's figures have been static around the 7-8 per cent mark over the same period. Meanwhile, Briscoe Group has moved from 6 to 10 per cent.

Perennial struggler Smith City doesn't even break out these figures in its reports.
Despite these incremental gains and consumer spending trends in their favour, it's hard to see how well these retailers are positioned to win the online war against international counterparts.

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