Christmas shoppers expected to give retailers the best present of all

If recent months are any guide, retailers are in line for the best Christmas present of all: record sales.

While Christmas shopping this year will feature scanning in with the Covid-19 tracer app and social distancing where possible, spending is expected to reach new heights.

That spending has already bucked economists’ predictions, and after falling off a cliff during lockdown periods, sales have bounced back more strongly than ever.

If New Zealanders’ spending behaviour could speak, it would say there is no chance that fears of a community resurgence of Covid are going to spoil the festivities. Kiwis are looking forward to letting their hair down after an unprecedented year, and retailers will welcome their willingness to spend.

Retail NZ chief executive Greg Harford says he expects Christmas trading to be “stronger” this year than in 2019. That’s a stark difference to what economists and analysts were expecting earlier this year.

“What we’re seeing quite consistently is that when the country is not in lockdown, and when there is not the risk of going into lockdown, retail spending is actually really strong, and stronger than last year,” says Harford.

“Part of that has been catch-up for when shops were unable to open, but more generally because people are here at home and are looking to make improvements to their houses, they are buying goods that they perhaps wouldn’t buy ordinarily. Otherwise they would be saving up for an overseas trip, so I think Christmas [spending] will be stronger this year.

“It should be a good Christmas for retail,” he says confidently.

Despite that positive outlook, Harford says the challenge for retailers will be getting stock, as delays plague international supply chains.

Spending last month was up 25 per cent on November 2019, according to Retail NZ’s sales index, and it believes total retail spending from March to November is now 3 per cent ahead of last year.

And Harford expects strong spending to continue for the “foreseeable future”.

“While the borders are closed, people aren’t able to travel, they aren’t able to think about booking travel realistically, and that means people have got a bit more cash and they want to get out and about and do things around New Zealand and at home.

“I think we could see a good few months ahead but the thing to temper that with is, if there is a further recurrence of Covid anywhere in the country or if there were further lockdown restrictions introduced, we’ve seen through this year retail spending fall off a cliff a couple of times so we just need to hope that doesn’t eventuate.”

Harford’s message to eager shoppers is to remain cautious in malls or areas with large crowds. “We still need to be cautious and social distancing, it’s a really good idea to be scanning in with those QR codes whenever you go into a store, and keep a solid track of your movements in case any issues emerge.”

In the stores, Christmas decorations are up, shopping centre Santas are in residence and the busy period is in full swing.

Kiwi Property’s general manager of retail and asset management, Linda Trainer, is also confident this trading season will be bigger than last year’s.

“If the last month or two … has been an indicator for Christmas, we’re feeling quite positive.”

Kiwi Property, which owns and operates shopping centres around the country, including the country’s largest – Sylvia Park – and The Base in Hamilton, begins planning for Christmas around the time decorations come down in the New Year.

About 1.6 million people visited Sylvia Park in December last year (equivalent to the size of Auckland’s population) and Kiwi Property expects that number again this year. More than 60,000 shoppers visited the centre on retail’s “Black Friday”, November 27, and nearly 175,000 in total over the Black Friday weekend.

Sylvia Park is already trading “exceptionally well”, up significantly on this time last year, and trading growth among all the other centres is encouraging, says Trainer.

“With Covid, there has been a change in domestic spend, people are not travelling overseas and we are seeing a greater propensity for people to spend on themselves, their families and their homes. We’re also seeing that retailers that are living that omnichannel environment are maximising opportunity available to them, and click-and-collect has become prevalent.”

Kiwi Property has implemented strict cleaning regimes with hospital-grade disinfectants and regular wiping down of play areas and handrails. Trainer says it has also set up a virtual queuing system for its Meet Santa experience, which texts parents when it is their turn to bring their child to have a photo with Santa.

“It means shoppers don’t have to stand in a queue with other people they don’t know and it gives them the comfort that when they see Santa he is ready for them, and if they want to they can also choose to have the child sit on a stool a metre or so away from Santa.”

Retailers are also setting up their own systems to manage queues.

“There’s a lovely energy about Christmas this year,” says Trainer. “People are very focused on spending quality time with family and you can definitely see that with the way people are interacting. There’s a really lovely vibe in the centres.”

One retailer's story

Rod Duke of Briscoe Group, which operates Briscoes, Rebel Sport and Living & Giving stores, expects this Christmas trading period to trump those of years past.

He is confident the year will finish with a record for the company after experiencing 50 days with all stores closed and another 10 days of Auckland store closures. “We’ve made up those 60 days [of lost revenue],” Duke tells the Herald.

“We’re expecting to have a record year and that means I’m going to make up for the entire period of lockdown.”

Christmas trading is off to a “spectacular” start, says Duke. “We’ve just come out of Black Friday and it is fair to say that Black Friday trading – the Friday, Saturday, Sunday, Monday- was at record levels.” Spending was “significantly” up on last year, he says.

“Black Friday itself was the biggest single day in the 165-year history of this company, and those four days were the biggest four consecutive days in the history of the company.”

Briscoe Group’s Christmas trading quarter finishes at the end of January, and Duke expects it to be the biggest fourth quarter “by a significant margin”.

The group has hired more than 250 casuals to help out during the season.

The managing director, who is also the group’s largest shareholder, will take some time away from the controls over Christmas and will be able to let his hair down. “I’m very much relieved that because of our performance, I’ve still got the same job next year,”laughs Duke.

He believes that strong retail spending will continue until the border reopens and travel restrictions end. “That travel money that people have got put away is being largely spent either on themselves or on their homes.”

However, he is not convinced the entire retail sector is experiencing the spending boom.

Covid's legacy

A study by global consulting company Accenture, which surveyed more than 700 New Zealanders in October, found Kiwis plan on using their wallets to reward companies that looked after their staff during the Covid-19 pandemic.

Half of those surveyed said they would not shop with retailers that laid off staff or reduced benefits during the year, while half said they would be inspired to shop with a retailer that responded well and supported their staff and customers.

And while close to two-thirds of Kiwis said they would shop in malls for their Christmas gifts, 18 per cent said they would stay away from the malls because of health and hygiene concerns.

Economists' predictions

Kiwibank economist Mary Jo Vergara also believes this Christmas spending period will be particularly strong. “Retail spending remains elevated since coming out of lockdown and I think the upcoming holiday season might give it that leg higher.

“We saw spending bounce back dramatically in the September quarter by around 28 per cent and there are signs suggesting that pace has continued into this December quarter.

“I think there will be huge demand going into Christmas and the Boxing Day sales, but the issue there is will there be the supply to meet it?”

“What our economic recovery needs is for that spending that we’re going to see in this holiday season be directed towards local businesses,” says Vergara. “The more we pump into the local, the better it is for our economy.

Vergara says spending has been fuelled by people stuck at home and wanting to invest in their properties and add value through renovations.

ASB senior economist Mark Smith says retail spending will end the year about 10 per cent above pre-Covid levels – a “remarkable” result, he says – and early figures point towards a record Christmas trading period.

“It’s been quite remarkable how resilient the retail sector has been, and we expect that to carry through into Christmas,” says Smith.

“We’ve had a number of dynamics that have helped consumer spending; there’s been a lot of policy support, like the government wage subsidy, and while it has rolled off now, it has kept people in jobs.

“The housing market has surprised a lot of people with how strong it has been and there’s been a flow-through from that to wider consumer spending. What we’ve seen is people have been focusing a lot more on nest building because they can’t go overseas, spending more time at home and spending more money on the home. Kitting it out with electronics has been one [big spending area], repairs and renovations has been another factor, spurring a lot of hardware sales.

“Consumer sentiment is still not as high as it has been, it’s still down, people still seem reluctant to buy major items according to the surveys, but what people are actually doing is quite the opposite.”

Any potential post-Christmas drop in spending is likely be the result of issues with international supply chains and reduced stock, says Smith, rather than consumers not wanting to spend.

However, retailing is likely to feel the plunge in immigration from around the middle of next year. Net migration will go from 60-70,000 people in the year to June down to 10,000 or fewer, he says.

“Migration has been a massive driver of consumer spending over the last few years, and now with that tap turned off next year is going to be trickier for retail.

“Spending has been brought forward now, it’s been great, but you’re not going to see the same impact next year as New Zealanders will by then be stocked up on durables.”

While Kiwis continue to spend up large, Harford says a much larger proportion of that spending is occurring through buy-now pay-later schemes, which allow consumers to defer payments over a few weeks.

There is also a big increase in online shopping, which could mean fewer crowds in the shops this season and more spending happening digitally, he says.

Last Christmas, about 10 per cent of all retail spending happened online, and Harford estimates it will be between 18 and 20 per cent this time round.

However shoppers spend, the all-important Christmas trading period could be the ultimate gift for retailers, after a disruptive 2020. “We’re certainly hoping that it will be a positive end to a very difficult year,” says Harford.

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