Few shoppers, resulting in a drop in revenue, could result in staff being let go. Photo / Andrew Warner
Few shoppers, resulting in a drop in revenue, could result in staff being let go. Photo / Andrew Warner
Retail NZ says up to 10,000 retail workers could lose their jobs over the next few months as retailers big and small grapple with disruption from Covid-19.
Greg Harford, chief executive of the retailer membership organisation, says Retail NZ had been in contact with businesses that were concerned about "whatthe next couple of months will hold for them" as their revenue drops and the consequences for staff.
"There is real concern about whether some business will be able to keep trading and there are certainly businesses that are already restructuring fast, reducing hours, reducing people, and that's likely to get worse over the next little while," Harford told the Herald.
Retailers both big chains and smaller independent operators were grappling with this situation, he said. He could not reveal which companies.
"From an employment point of view, the wage bills of bigger businesses are also of concern. There are some larger businesses, more in the discretionary spending areas of retail, that are expressing concerns."
The impact of the outbreak on businesses' top line was being felt across the sector, Harford said, and was expected to get worse as tourism trickles to a halt over the next couple of months following the ban of cruise ships coming into New Zealand.
"The big issue is the massive drop in sales. People aren't getting out about and people aren't shopping and that's having some big impacts on revenues and cashflow," Harford told the Herald.
"It's about the ability of the business to weather the storm."
Grocery retailers had recorded a jump in spending following the first recorded case of Covid-19 in New Zealand two weeks, and as such jobs in this space would likely be safer than those working with discretionary retail companies, Harford said.
He said Retail NZ said the impacts on the sector because of Covid-19 could be worse than that of the Global Financial Crisis.
"The impacts of the current situation are significant, and there will likely be casualties. Over the coming months, much is going to depend on how quickly [business] can return to normal and on the availability of Government stimulus package."
The Government is expected to announce a financial support package for businesses affected tomorrow. Prime Minister Jacinda Ardern has said it would be the biggest financial aid package initiated during her tenure in office.
Few shoppers, resulting in a drop in revenue, could result in staff being let go. Photo / Andrew Warner
"During the GFC in 2008, we saw a drop in job numbers in the retail sector of about 10,000-15,000 and it took several years for that to recover," Harford said.
"We're hearing that firms are under real pressure at the moment and the sense we're getting is the impacts on businesses could well be worse than the GFC."
A Retail NZ survey found that 60 per cent of retailers had already been negatively impacted by the outbreak and of those 30 per cent had cut staff hours, and 16 per cent had cut staff numbers as a result.
Half of those surveyed said they expected to make further reductions in staff hours and 20 per cent expected staff numbers to be reduced further. Harford estimates that "north of 10,000" retail staff could lose their jobs due to the direct result of Covid-19 over the next few months.
"There are quite substantial numbers that could be impacted, much is going to depend on consumer confidence, how quickly things return to normal and what assistance the Government is prepared to provide."
Insolvency experts contacted by the Herald this morning say they are gearing up for a spike in businesses going under, or through a restructure, in order to survive over the next few months.
Ben Goodale. Photo / Richard Robinson
"We are very much on the periphery of the problem and so we don't really know how [hard] it will hit," said retail and marketing expert Ben Goodale.
The outbreak had so far had a bubble affect on retailers and hospitality businesses, with those more reliant on tourists the worse affected, Goodale said.
"All it is going to take is an Italian-style order that people are told to stay at home for two weeks and basically everything is going to shut."
Goodale said New Zealand did, however, had a better chance of keeping the virus at bay compared to the likes of Italy because of its geography.
"If I was a retailer I'd be preparing for the fact that I might have to close stores."
Some staff within retail companies, and businesses in other sectors, were already being asked to take leave as organisations come to terms with a hit to revenue.
Chris Wilkinson, managing director of First Retail Group, said he did not believe the outbreak would kill off the sector, but he said it would "flatten spending" for a while.
He anticipated that the drop in spending would rebound "once the immediate danger is past and confidence returns" among consumers.
"In terms of performance its been interesting to watch the trends. Over the past week we've seen the grocery sector do well and we anticipate this will continue to be strong as people do more at home," Wilkinson said.
"The big box home improvement retailers have also been doing well as consumers focus on resilience planning and prepare for mini-projects around the home. In times of distress we know consumers want to 'nest' - making their living environments comfortable and safe - and we're seeing this through the grocery and home improvement trends and also some good performance in homeware retailers over the past week."
Wilkinson said the impacts of consumers travelling less would "refocus consumer spending, and time, in people's home environments, which would ultimately be beneficial, once the risk is rationalised."
The outbreak had already had an impact on many discretionary segments of the market, including the electronics sector, Wilkinson said, and as a result job uncertainty would have a "downstream impact on retail".
"This is new and uncharted territory for retailers - adding a further risk consideration for businesses. While most strategise for risk, the scale of this is something that is difficult to plan for, so the biggest operators are adopting an agile and responsive approach."
