Retail and Consumer Insights

Spend trends

Changes in consumer spending habits can be seen in the Stats NZ electronic card transactions series data that includes all debit, credit, and charge card transactions with New Zealand-based merchants. Using the Retail and Consumer Dashboard developed by PwC New Zealand, we are able to compare year-to-date retail related electronic spend data by sector with the comparable periods in 2019 and 2020. 

Analysis of August 2021 spending (released by Stats NZ on 10 September 2021) is potentially problematic given the decision to move all of New Zealand to Alert Level 4 on 17 August 2021. While coincidentally Auckland was in Alert 3 Level between 12 and 20 August 2020, the only retail category to achieve a year on year increase for August 2021 was Consumables (+6.5%). With significant declines recorded in all other key categories, total electronic spend on retail for the month of August declined by $867 million (-11.9%) from $7.3 billion in August 2020 to $6.4 billion in August 2021.

The categories most significantly impacted include: (i) Durables down $365m year on year (-26.9%); and (ii) Hospitality down $235m (26.7%). Within the Consumables category, supermarket and grocery store spending increased $240 million (12.4%), while specialised food declined $46 million (22.1%) and liquor sales declined $44 million (24.7%).

This relative out-performance in the most recent lockdown is most likely attributable to the flexibility / agility that New Zealand businesses have achieved over the last 18 months, including an acceleration in online adoption / ecommerce sales and ‘contactless’ deliveries, as well as greater resilience (less fear) demonstrated by consumers. i.e. “We've been here before”. Consumer confidence and (recent spend) has also benefited from ongoing strength in the residential property market (with two thirds of consumers owning their own home) and the exceptionally tight labour market.

Auckland footfall insights

Our PwC Retail and Consumer Dashboard also tracks pedestrian footfall data on an hourly basis across the Auckland CBD³. While particularly focused on the Auckland region, it is interesting to compare the August 2021 footfall to the equivalent period in 2020 and the periods prior to COVID-19. Coincidentally, and perhaps now forgotten by most, the Auckland region reverted to Alert Level 3 on 12 August 2020 and remained at this heightened Alert Level until 30 August 2020. As a result, the year on year comparison for August 2021 also provides a good indicator on the current Alert Level compliance (and therefore economic impact) compared with the previous year.

Based on this analysis, the year on year footfall for the month of August fell a further 7.6% from 2.5m pedestrians in August 2020 to 2.3m in 2021 (notwithstanding the fact that August 2020 included an extra five days at Alert Level 3). To put the economic impact of the most recent lockdown in context, the level of pedestrian traffic recorded in Auckland in August is 61.6% below the three year (pre COVID-19) average calculated between 2017 and 2019.  

Locations most significantly affected by the shift back to Alert Level 4 on 17 August 2021 include:

• Commerce Street West - footfall fell 52.6% from 137k to 65k, which compares to a three year (pre COVID-19) average of 282k; and
• 205 Queen Street - footfall fell 81.4% from 254k to 47k, which compares to a three year (pre COVID-19) average of 281k. Interestingly, this location doesn’t appear to have been adversely impacted by the Alert Level 3 restrictions in August 2020.

International insights⁴

With Apple’s iOS 15 update anticipated to be released in September 2021, many digitally focused retailers and consumer-facing brands more broadly are waiting to see what amendments Apple will make to its user data framework and how this will impact their digital marketing ecosystems and strategies.

Before considering the potential impacts of the iOS 15 release on ad spend and customer reach, it makes sense to revisit the genesis of where this ongoing discussion began – Apple’s iOS 14 update:

• As part of the iOS 14 update, Apple announced that it would give users the choice to block the Identifier for Advertisers (IDFA) at the app level. Among other changes, this means that the iOS 14 update required apps to ask users for permission to collect and share data, thus an ‘opt in’ approach, which generally results in lower consent and acceptance rates. According to reports, Apple took the position that privacy is a user right and chose to grant users the ability to opt out of some forms of targeting or tracking by third parties. This stance fell under Apple’s new privacy policy at the time, called App Tracking Transparency (ATT).
• Apple then previewed a package of new privacy protections for iOS 15 in June 2021 at its annual Worldwide Developers Conference (WWDC).
• The pending changes are expected to make it more challenging for digital marketers to target and track consumer data, requiring them to develop alternative ways to find potential customers and engage with existing ones. For instance, the update will hide users’ IP addresses (a unique identifier to connect activity across websites) from trackers, thus minimising the ability for advertisers to build a granular user profile.
• As a result, many digitally-focused retailers and consumer-facing brands are actively developing new strategies to transform their current digital marketing approach, with those with bigger budgets more likely to retain a larger share of ‘reach’ than smaller participants.
• Given the enhanced focus on privacy amongst consumers and this move by Apple, Google and Microsoft may consider implementing similar changes to respond to customer demand for privacy, which would impact Android and broader digital strategies further.

Recent news

• MBIE’s Consumer Spending Dashboard shows that New Zealand’s recent lockdown resulted in a drop of 46.2% in total weekly consumer spending when compared to 2019. This was a smaller drop when compared to the initial week of the April 2020 lockdown (spending fell by 53.8%).

• The September Freight and Supply Chain Updates report published by NZTE continues to highlight the current supply chain issues that New Zealand is facing. According to Sea Intelligence, sea freight reliability is at an all time low, and according to Business Desk, sea freight cost increases are typically three to four times greater than pre COVID-19 levels. This is largely due to global demand for shipping far outweighing the available capacity for vessels and port infrastructure. Capacity for air freight also remains constrained at 9.7% below pre COVID-19 levels.

• Latest Auckland city centre spending figures released by Heart of the City show that city centre businesses lost over $45m during the first two weeks of the recent Alert Level 4 lockdown. Viv Beck, CEO of Heart of the City has expressed the need for additional funding on top of the resurgence payment to help businesses survive, stating “All stops must be pulled out to help businesses survive what is still a very uncertain period ahead... Sympathy for our businesses is not enough, they need tangible support.”

• New Zealand is seeing a large rise in luxury shopping, with luxury brands such as Balenciaga, Alexander Mcqueen and others set to open stores in Westfield’s Newmarket. Domestic luxury shopping has seen a large increase, potentially due to New Zealand wealth growing substantially over the past few years. Internationally, luxury retail brand owners have also bounced back strongly from COVID-19, better than the rest of the Standard & Poor’s 500 index.

• Mānuka honey exporter Comvita has entered a strategic partnership in North America with Caravan, a joint venture with entertainment and sports agency, Creative Artists Agency (CAA). Comvita said central to the partnership was the formation of a celebrity-backed lifestyle brand. Chief executive David Banfield said Comvita was seeking opportunities to extend its global leadership in the mānuka honey trade. Comvita last month resumed its dividend payment after posting a near 200 percent turnaround to make a net profit of nearly $10 million for the 2021 financial year.

• Taranaki-based medicinal cannabis company Greenfern Industries has applied to have its shares quoted on the NZX main board. This would mark the first time in 20 years a company in the region has publicly listed. The application would provide Greenfern Industries with new capital and growth opportunities to drive objectives in New Zealand and overseas, co-director and independent shareholder, Philip Brown said.

• Fonterra has brushed aside supply chain and shipping disruptions to send a record 2.59 million tonnes of product to export markets. The record came as shipping schedule reliability plunged from a long-term average of around 75 to 80 percent to below 35 percent in the year ending July.

• New Zealand eco-friendly lifestyle sneaker brand Allbirds has unveiled a plan to become a publicly traded company in America, filing a registration statement with the SEC for an initial public offering (IPO). The company could seek a valuation of USD2 billion or more in the IPO, according to Bloomberg reports.

• Foodstuffs has announced that on November 8th, retail expert Mary Devine will become the acting CEO of Foodstuffs South Island. Devine has held the roles of Chief Executive for Ezibuy, managing director for Ballantyens, and was most recently a managing Director for Hallenstein Glasson.

Recent deals - recently announced transactions in the retail and consumer sector include:

August:

• Woolworths has sold its AUD 54m shareholding in listed Australian food box delivery business Marley Spoon.

• The Warehouse Group has acquired a cornerstone 26% shareholding in the pharmaceutical delivery startup Zoom Health. Zoom is an online pharmacy company that can deliver prescriptions to customers. The corporate office records show that The Warehouse is now the second largest shareholder in Zoom, behind founder David Taylor, who owns 32 percent.

• Plexure, an NZX listed mobile engagement (marketing) and loyalty company, has entered into a binding conditional agreement to buy the Australian transaction platform TASK for AUD$120 million. Plexure shares rose 9.3% following the announcement. This merger is expected to give access to large customers both internationally and at home including Starbucks and SkyCity.

PwC Retail and Consumer Dashboard

The PwC Retail and Consumer Dashboard is updated monthly, to include the latest data on electronic spending, consumer sentiment and Auckland pedestrian analysis. Through our dashboard we identify and analyse trends over time, particularly in the aftermath of the COVID lockdowns.  If you are interested in online access to our dashboard to help inform your decision making, please contact: Matt Gunn