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Inflationary pressure building despite strong March for retailers

5 April 2021.

Average retail spending per site at Retail NZ members was up 29.8 per cent in March compared to last year, but the results are uneven across the sector, and inflationary pressures are building, according to Retail NZ’s latest Retail Radar report.

“The Retail NZ Sales Index shows that average daily spend per site in March was up more than 29 per cent compared to last year,” Greg Harford, Retail NZ’s Chief Executive said today. “While this is positive, it is really a reflection of just how dificult trading conditions were in March last year, as the economy slowed and we went into Level 4 lockdown.  Despite the fact that spending was up in the first quarter of the year, not all retailers are seeing the benefits. 42 per cent of retailers did not hit their sales targets for the last quarter, and more than two-thirds of Auckland retailers failed to perform. This was attributable to Auckland yo-yoing in and out of a Level 3 lockdown in February and March this year.

“There are significant inflationary pressures building, as the cost of procurement and freight increase, and the cost of employing staff goes up. Around two-thirds of Retail NZ members expect to see prices increase over the next quarter. Retailers operate on very thin margins – the average net margin across the sector is just 3.9 per cent – so when you have big cost increases, such as we have seen with freight and wage inflation, retailers need to be able to pass these on.

“Two-thirds of retailers say that the Minimum Wage increases will have an impact on their businesses. The increase in the base Minimum Wage affects all wages in retail, as employers strive to maintain relativities within their businesses, but there are other consequences beyond cost. 37 per cent of retailers say that they will now have less ability to reward performance, while a third will be looking to reduce hours or the total number of people employed over time. In a market where many small business owners struggle to pay themselves the equivalent of the Minimum Wage, they need to take steps to manage cost increases.”

You can view the Retail Radar report here.

For further information, please contact:
Greg Harford
Chief Executive, Retail NZ
[email protected]
027 243 2842

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