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Retailers cross fingers for a Christmas spending surge

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As consumers tighten their belts and cut back on spending, retailers across the board are having to carefully consider both their product offering and the premises they occupy.

As 2023 winds down, Bayleys’ national director retail, Chris Beasleigh says business owners will be relying on good Christmas sales volumes to provide some confidence heading into 2024 after what has been a pretty tough year for many.

“Dampeners like wage pressures, still-high inflation, and the rising cost of imported goods means the Christmas season will be a decider for many retailers.

“Ongoing cost-of-living headwinds means retailers need to make sure they have product for the budget shopper and have optimised ecommerce frameworks and accessible delivery modes to meet the demands of online shoppers.

“There’s still a need for bricks and mortar retail stores, complemented by a slick online presence and those business owners who appreciate this are the ones who will continue to do well.”

Beasleigh says it’s important that retailers and hospitality providers right-size their premises so they’re fit-for-purpose for operational efficiencies and sound bottom lines. “Go larger, go smaller – but make it work,” he says.

“Despite some stories that make the press, landlords in the main are being realistic and accommodating of occupier needs.

“While rent does make up a big chunk of a business’s outgoings, landlords can’t be the bank, so all parties need to work together.

“Whether that’s looking at shorter lease terms, creating pathways to exit a lease or recycling existing fitouts for new occupiers – our experience shows that landlords genuinely want their tenants to succeed and having the right premises plays a huge role in that.”

Given construction costs and funding challenges, Beasleigh says there’s minimal new-build retail stock in the pipeline and rental rates in the retail sector are holding steady.

“I don’t foresee rents going down. They may flat-line and if they do rise, I expect it will be a gradual creep rather than a jump.”

While all segments of the retail market are facing a slowdown, Beasleigh says it’s particularly challenging for independent food and beverage businesses right now.

“It’s tough, as evidenced by a spate of recent closures but the retail sector always has a churn cycle and there are always businesses closing – and new ones opening.

“Being in the right location is pivotal - food businesses that are located within larger retail centres may well benefit from high foot traffic volumes – but opening hours may be restrictive within a larger centre and will that location work for app-based delivery services?

“Food and beverage operators need to consider using online delivery portals to remain competitive and despite the fact that margins are compromised, profile is so important in a market that is tight and where consumers have plenty of choice.”

Suburban retail is still performing well, largely due to the convenience factor for those working from home as part of a hybrid work approach. Auckland Transport data shows usage levels at around 60% of pre-pandemic levels confirming that the move back to the centralised office is well underway, but hybrid work models are still in play.

Looking ahead to 2024, rising immigration figures are a positive for the retail sector – both from a growing consumer base and a staffing perspective – and increasing tourism arrival numbers bode well for the sector.

Beasleigh says independent retail brands are finding favour with consumers that are more mindful of what they are purchasing and who they are purchasing from.

“That said, ‘cookie cutter’ franchise businesses with proven systems, support mechanisms and brand awareness are still popular with business owners throughout New Zealand, and we are fielding enquiry from overseas franchises looking to expand here.

“Fashion is one of the hardest hit retail sectors as growing consumer awareness around sustainability and ethics ramps up.”

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