Stark choice facing NZ retail as Amazon-like online shopping grows.

New Zealand shops must "constantly evolve" if they are to meet the competition from online-only operators like Amazon, a major national retail group believes.

Roy Campbell, chief executive of nation-wide furniture and appliance retailer Smiths City, says the company is one of many facing this issue as online shopping significantly intensifies competition.

He says the company is three years into a five-year programme to transform its business because of the rapid rise in online retailing.

"You must constantly evolve to meet the ever-growing demands of customers or you get left behind," he says. "Amazon (last week the US giant opened a distribution centre in Melbourne) and others like them will come to New Zealand so we have to adapt what we do best - serving our customers well."


He says the company has qualities which "will beat - hands down - a good deal from an online-only retailer."

Campbell was speaking ahead of the Christchurch-based company's opening tomorrow of two new Smiths City stores in Auckland - taking its total throughout the country to 33.

The stores - in Wairau Park on the North Shore and Mt Wellington - feature a new format designed as "a response to the transformation taking place in retailing" and is being rolled out across the company's national network.

The new stores follow Amazon's Australian opening, fuelling fears within the New Zealand retail industry it is only a matter of time before the American monolith establishes an operation here.

But Campbell says the price advantages offered by retailers like Amazon are not the only factors shoppers look at.

"Of course we'll be competitive on price but it won't be our only focus," he says. "In fact our stores become more important as customers want to touch and feel products before they buy; they want to sit on the sofa, test the comfort of the bed; see whether their chosen fridge has all the storage compartments they need.

"It would be disingenuous of me to ignore the reality people will buy products the way they want," he says. "Traditional 'bricks and mortar' retailers must now not only embrace online themselves but also make the most of the instore experience which cannot be matched by online competitors.

"All our products are also available online and sales are growing solidly," he says. "But the bulk of our products are still bought through bricks and mortar stores."

Online has had a big impact on traditional shopping particularly in the US where this year alone thousands of physical stores have closed. But there are signs - both here and overseas - the industry is not lying down in the face of the online revolution.

Although Amazon dominates the online market (last year it accounted for 43 per cent of all online sales in the US, shipping 1.6 million packages every day), some industry experts think the threat has been overstated.

In a post earlier this year published in NZ Retail's digital newsletter, Paul Keane, a retail and property consultant, said while the response to online shopping has been positive, it has not negatively impacted the retail industry.

"The reason? People can be 'remote' if they wish, but by and large the majority of us want to retain some level of social connection," he said. "This is the key reason retail trading or retail merchants will continue to be around far longer than Amazon's threat suggests."

A report in Reuters last month suggested size will be a factor in weathering the online storm - Walmart's distribution network being a key lifeline for it, for example. It also suggested small niche retailers can survive.

"Unless you know exactly what you're going to order and it is mass market, you don't go to Amazon," Kim Forrest, senior equity research analyst at Fort Pitt Capital Group in Pittsburgh said in the report.

"Holiday shopping means meaningful gifts," he said. "If you're a good retailer you can take advantage of that."

Campbell says the new Smiths City stores are easy to navigate with wide aisles and colour-coded departments to help customers find their way around: "Furnishings are also displayed in 'lifestyle sets' to show customers how a new sofa, bedroom suite or dining room table may look in the home."

Knowledgeable staff, product warranties and an in-house finance service are other qualities the company can offer shoppers, Campbell says.

The new formats are already in use at Smiths City stores in Hastings and Whangarei which were opened earlier this year and sales in both are going "really well", says Campbell. The new designs will be introduced to other key Smiths City stores next year.

Campbell said the fact 45 per cent of New Zealand's population live in the "golden triangle" formed by Auckland, Hamilton and Tauranga, was a compelling commercial reason to open stores in Auckland.

"We are number three and four in our sectors in New Zealand, a position we have achieved without a presence in Auckland, so it seemed like a logical decision to go there."

Both Auckland stores - and Whangarei - were part of the Furniture City group acquired by Smiths City last year. The company was founded in Christchurch in 1918 by Henry Cooper Smith.