Analysis Report on Retail Market in New Zealand

Description
The environment around us, competition in the market place, consumer shopping/buying behaviours, overseas trends and developments all impact on retail success or failure.

The Retail Market
in New Zealand
An Analysis
2013
Prepared by
John Al ber t son, CEO
New Zeal and Ret ai l er s Associ at i on
May, 2013
promoting excellence in retailing
The Retail Market in New Zealand - An Analysis

New Zealand Retailers Association – May 2013 1

Introduction

We believe information is the new currency.

The environment around us, competition in the market place, consumer shopping/buying
behaviours, overseas trends and developments all impact on retail success or failure.

In these rather difficult times retailers have to maximise their sales. A better understanding of
the market place will, hopefully, lead to more informed decision making and consequently a
better share of the consumers’ available dollars. Today we have the added complexity of a
generation or two who will drive the development of a whole new channel – the online
channel. Does my business need to be there? How do I integrate my physical presence and
my online presence to give the consumer a seamless experience with my brand?

Over recent years the New Zealand Retailers Association has reviewed available information
sources and has brought this information together to paint a picture of the environment we
operate in.

This report replaces that issued in April 2012.

We have added some more information on population as this is one of the key drivers of retail
development. We have also introduced a section on the tourism market as this is an
expanding sector and retail is one of the biggest recipients of the tourist dollar.

We realise the importance of the online space and are waiting on some new information on
this area. Once that information is available we will issue a supplementary report.

Much of the analysis in this report considers the ‘big picture’ only. More detailed analysis is
available. We would be happy to advise on this.

Most data in this report is sourced from Statistics New Zealand. (Visit www.stats.govt.nz.)

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2 New Zealand Retailers Association – May 2013
Sources Of Information:

A. Statistics New Zealand

• Business Demographic Survey

• Retail Sales Series

• Annual Enterprise Survey

• 2006 Census and subsequent SNZ estimates.

• Household Economic Survey

• Tourism Satellite Account

B. BusinessNZ

• Economic Background

C. Deloitte/National Retail Federation

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New Zealand Retailers Association – May 2013 3

Table of Contents
Page

Section 1 – The New Zealand Economy 4

1.1 Key Economic Indicators 4

Section 2 – The Retail Market 7

2.1 Store Numbers 7

2.2 Retail Sector Sales Performance & Growth 11

2.3 Retail Stock Trends 14

2.4 Business Performance 14

2.5 Staffing in the Retail Sector 18

2.6 Clothing Stores in New Zealand – A Case Study 20

Section 3 – The Consumer 23

3.1 Introduction – The Two Perspectives 23

3.2 2006 Population Census 23

3.3 Population Projections 24

3.4 Household Economic Survey (June 2010) 26

Section 4 – Key Retail Chains by Sector 27

Section 5 – The Global Powers of Retailing Top 250 Highlights 32

Section 6 – The Tourism Market 35

Section 7 – Top Retail Trends 2012 37

Appendix 1 – Industry Descriptions 40

Appendix 2 – ANZSIC 2006 vs ANZIC 1996 Reconciliation 42

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4 New Zealand Retailers Association – May 2013
Section 1 – The New Zealand Economy

1.1 Key Economic Indicators
(Source: BusinessNZ Planning Forecast December 2012)

Executive Summary

Comments:
a) The overall global economic growth outlook remains relatively benign. However, the
increasing influence of Asia (China) both in terms of exports and demand for protein
from its rapidly increasing middle class is positive news for New Zealand exporters
over the medium term.

b) Patchy growth is the order of the day in New Zealand. The housing market is showing
positive signs of life and the Christchurch re-build is starting to gain momentum.

c) Employment growth is clearly evident in Christchurch but elsewhere results are flat-
lining.

d) While business and consumer confidence is on the positive side of the ledger,
households and businesses continue to take a cautious approach to new investment
with debt reduction still a high priority. The household balance sheet is still being re-
balanced.

e) A low inflationary outlook is keeping interest rates at historic lows with no prospect of
increases over the short to medium term.

So, for the retailer, this spells out another tough year with every sale being hard won. Stock
and margin management will be critical as will resource deployment and staff rostering. Like
never before the retailer must deliver what it is that the customer wants. Retailers must
consider all of the options – online presence, facebook, twitter, email marketing, texting etc.,
etc. If the customer wants it we must deliver – we have given the customer so much choice
they are now definitely in the driver’s seat.

The real game changer is the mobile phone.

So if we look ahead what are the experts predicting? How do the various bank economists
see the economy shaping up? The latest forward look released by Business New Zealand
indicates the following:

1 GDP % Growth
(Source: ANZ, ASB, BNZ, National and Westpac)

Forecasts: Year Ending

Dec 2012 Dec 2013 Dec 2014
% % %
Highest 2.5 3.2 3.3
Average 2.5 2.7 2.6
Lowest 2.5 2.2 1.6

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New Zealand Retailers Association – May 2013 5

2 % Change in Inflation (CPI)
(Source: ANZ, ASB, BNZ, National and Westpac

Forecasts: Year Ending

Dec 2012 Dec 2013 Dec 2014
% % %
Highest 1.3 2.6 3.3
Average 1.3 2.2 2.7
Lowest 1.1 1.9 2.4

3 Labour Cost Index
(Source: ANZ, ASB, BNZ, National, Westpac)

% Change (Wages & Salaries): Year Ending

Dec 2012 Dec 2013 Dec 2014
% % %
Highest 1.9 2.7 2.8
Average 1.8 2.1 2.4
Lowest 1.7 1.6 2.2

4 Unemployment (Household Labour Force Survey)

Unemployment %: Quarter Ending

Dec 2012 Dec 2013 Dec 2014
% % %
Highest 7.0 6.3 6.2
Average 6.9 6.2 5.7
Lowest 6.6 6.1 5.3

5 Interest Rates (90 Day Bills)

Period Ending

Dec 2012 Dec 2013 Dec 2014
% % %
Highest 2.8 3.5 4.8
Average 2.7 3.3 4.3
Lowest 2.7 3.2 3.8

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6 New Zealand Retailers Association – May 2013

6 Exchange Rates

a) Australian dollar
NZ$1 = Aust cents

Dec 2012 Dec 2013 Dec 2014
Highest 0.82 0.80 0.80
Average 0.79 0.79 0.79
Lowest 0.78 0.78 0.78

b) US dollar
NZ$1 = US cents

Dec 2012 Dec 2013 Dec 2014
Highest 0.83 0.85 0.76
Average 0.82 0.81 0.74
Lowest 0.81 0.78 0.685

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New Zealand Retailers Association – May 2013 7

Section 2 – The Retail Market

2.1 Store Numbers (Source: Statistics NZ)

Total Outlets by Region
Period: February 2012 (Released October 2012)

Statistics New Zealand has re-worked the classification system for businesses (ANZSIC) and
the numbers below have been produced under ANZSIC 2006 (previously, ANZSIC 1996).
These changes have had a significant impact on what is ‘in’ and what is ‘out’ in the retail
sector demography analysis. For example, we now exclude such sectors as automotive
repairs, household appliance repairs, footwear repairs, bakeries and cake kitchens, takeaway
food operators and panel beaters to name a selection. On the plus side we now include all of
those hardware retail stores that were previously included in the wholesale series.

Regional Council
Region
Total Outlets
(as defined above)

% of total
Northland 1,115 3.4
Auckland 12,018 36.4
Waikato 2,989 9.1
Bay of Plenty 2,111 6.4
Gisborne 270 0.8
Hawkes Bay 1,076 3.3
Taranaki 795 2.4
Manawatu/Wanganui 1,555 4.7
Wellington 3,349 10.2

Total North Island 25,278 76.7

West Coast 263 0.8
Nelson 444 1.3
Tasman 324 1.0
Malborough 303 0.9
Canterbury 4,014 12.2
Otago 1,674 5.1
Southland 672 2.0

Total South Island 7,694 23.3

Total New Zealand 32,972 100.0

The five major regions – Auckland, Waikato, Wellington, Canterbury and Otago - account for
73% of the country’s retail outlets. Auckland leads the way with well over a third.

Relative to the latest regional population estimates the distribution of retail stores compares
as follows:

% Retail Outlets % Population

Feb 2012
2012 Latest
Estimate
Auckland 36.4 34.0
Waikato 9.1 9.4
Wellington 10.2 11.1
Canterbury 12.2 12.6
Otago 5.1 4.8

Auckland is a little more ‘over shopped’ relative to population and, if anything, Wellington is a
little ‘under shopped’. Christchurch has seen a reduction both in population and store
numbers.
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8 New Zealand Retailers Association – May 2013

Outlet Types By Region (selected outlets only)
Source: Statistics New Zealand
Period: February 2012

Notes: 1 As with the previous table, the table below is based on the new ANZSIC codes
(2006).

2 Store classification is based on turnover in the category. – For example, if an
outlet had 55% of its business in sports goods and 45% in footwear it would be
classified as a sports goods store.

Number of Outlets by Region

Supermarkets
/Grocery

Department
Stores

Clothing

Furniture***

Appliances
+ Electrical
Goods*

Chemists
****

Footwear

Books,
Stationery,
Newspapers
**
Northland 122 9 94 56 57 37 9 35
Auckland 1,232 68 1,501 775 722 462 219 339
Waikato 298 25 349 166 144 100 55 92
B.O.P 186 19 237 132 107 80 35 63
Gisborne 33 5 30 17 11 9 4 10
Hawkes Bay 105 9 120 77 47 51 16 30
Taranaki 88 6 89 50 37 33 17 33
Manawatu,
Wanganui
169 15 149 96 81 58 17 63
Wellington 379 35 430 213 174 144 80 121

Total North
Island
2,612 191 2,999 1,582 1,380 974 452 786

West Coast 35 2 19 12 14 6 5 8
Nelson 28 6 60 24 32 14 11 10
Tasman 28 3 30 16 13 17 4 8
Malborough 31 5 23 15 17 13 6 11
Canterbury 367 44 470 232 215 157 80 110
Otago 141 22 242 83 73 66 32 53
Southland 76 11 67 39 28 24 11 21

Total South
Island
706 93 911 421 392 297 149 221

Total New
Zealand
3,318 284 3,910 2,003 1,772 1,271 601 1,007

(*Includes specialist computer stores)
(**Covered by two different ANZSIC codes – ‘newspapers and books’ and ‘stationery goods’)
(*** Furniture, Floor Coverings, Houseware, Textile Goods Retailing)
(**** Includes Pharmaceutical, Cosmetic and Toiletry Goods Retailing)

This analysis of outlet type by area considers only eight different categories of store. The full
analysis from Statistics New Zealand covers 36 store types – this more detailed information is
available on request.

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New Zealand Retailers Association – May 2013 9

The full list of store types is:

Supermarket / Grocery Stores
Fresh Meat / Fish / Poultry Retailing
Fruit and Vegetable Retailing
Liquor Retailing
Other Specialised Food Retailing
Department Stores
Clothing Retailing
Footwear Retailing
Other Personal Accessory Retailing
Manchester and Other Textile Goods Retailing
Furniture Retailing
Floor Covering Retailing
Houseware Retailing
Electrical, Electronic and Gas Appliance Retailing
Computer and Computer Equipment Retailing
Other Electrical and Electronic Goods Retailing
Sports / Camping Equipment Retailing
Toy and Game Retailing
Newspaper / Books Retailing
Stationery Goods Retailing
Entertainment Media Retailing
Marine Equipment Retailing
Pharmaceutical, Cosmetic, Toiletry Retailing
Antique and Used Goods Retailing
Hardware and Building Retailing
Garden Centre Retailing
Flower Retailing
Watch and Jewellery Retailing
Car Retailing
Motor Cycle Retailing
Trailer and Caravan Retailing
Motor Vehicle Parts Retailing
Fuel Retailing
Tyre Retailing
Non-Store Retailing
Commission-Based Buying and/or Selling

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10 New Zealand Retailers Association – May 2013
Retail Outlets By Store Type

Total New Zealand – February 2012

Store Type Number of
Outlets
% Share % Change
on Feb
2011
Supermarket and Grocery Stores 3,317 10.1 +0.8
Fresh Meat/Fish/Poultry Retailing 660 2.0 -0.5
Fruit and Vegetable Retailing 484 1.5 +1.3
Liquor Retailing 941 2.9 +3.1
Other Specialised Food Retailing 964 2.9 +3.3
Department Stores 284 0.9 -1.4
Clothing Retailing 3,910 11.9 n/c
Footwear Retailing 601 1.8 -0.5
Other Personal Accessory Retailing 186 0.6 -5.6
Manchester & Other Textile Goods Retailing 504 1.5 -2.5
Furniture Retailing 737 2.2 -1.1
Floor Covering Retailing 482 1.4 -1.2
Houseware Retailing 280 0.8 -5.1
Electrical, Electronic & Gas Appliance Retailing 1,149 3.5 -3.0
Computer & Computer Peripheral Retailing 405 1.2 +1.5
Other Electrical Equipment Retailing 218 0.6 +10.7
Sports/Camping Equipment Retailing 1,177 3.6 +2.0
Toy & Game Retailing 223 0.7 n/c
Newspaper & Books Retailing 642 1.9 -6.0
Stationery Goods Retailing 365 1.1 +1.4
Entertainment Media Retailing 118 0.4 -13.9
Marine Equipment Retailing 292 0.9 -1.4
Pharmaceutical, Cosmetic, Toiletries Retailing 1,271 3.9 +2.2
Antique and Used Goods Retailing 910 2.7 -5.3
Hardware & Building Supplies 1,447 4.4 -2.6
Garden Centre Retailing 437 1.3 -4.3
Flower Retailing 452 1.4 -3.8
Watch & Jewellery Retailing 584 1.8 -4.7
Car Retailing 1,638 5.0 -1.3
Motor Cycle Retailing 260 0.8 -8.8
Trailer & Caravan Retailing 101 0.3 -5.6
Motor Vehicle Parts Retailing 344 1.0 +2.1
Fuel Retailing 1,182 3.6 -1.1
Tyre Retailing 654 2.0 -0.6
Non Store Retailing 1,497 4.5 +3.1
Commission-Based Buying and/or selling 277 0.8 +1.1
Other Store-Based Retailing n.e.c.* 3,985 12.1 -3.8

Total All Retail 32,978 100.0 -1.0%

(*n.e.c. not elsewhere classified)

Comments

Overall store numbers at 32,978 were 1% down on February 2011 – a net loss of 321 stores.

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New Zealand Retailers Association – May 2013 11

Number of Outlets
If we look at the store numbers over the last decade we see some interesting changes. The
stand out movements are summarised below:

2000 2012 % Change
Total Store Numbers 30,160 32,978 +9.3%

The Big Movers:

Motor Cycle Retailing 156 260 +67
Motor Vehicle Parts Retailing 246 344 +40
Liquor Retailing 676 941 +39
Other Specialised Food Outlets 649 964 +49
Clothing Retailing 2,570 3,910 +52
Footwear Retailing 480 601 +25
Floor Coverings 358 482 +35
Housewares Retailing 208 280 +35
Electrical/electronic/gas appliances 997 1,149 +15
Computer/computer Equipment 254 405 +59
Stationery Goods Retailing 249 365 +47
Sport & Camping Equipment 836 1,177 +41
Watch & Jewellery Retailing 505 584 +16
Toy & Game Retailing 172 223 +19

The Big Losers:
Fuel Retailing 1,643 1,182 -28
Fresh Meat /Poultry /Fish Retailing 764 660 -14
Fruit & Vege Retailing 546 484 -11
Newspapers & Book Retailing 941 642 -32
Antique & Used Goods Retailing 1,174 910 -22

2.2 Retail Sector Sales Performance & Growth
Source: Statistics New Zealand

Long Term Trend

12 Months
Ending
Total Retail Sales
$ m
% Change on Prior
Year
Index
(year 2005 = 1,000)
Dec 2012 70,300 +3.7 1,255
2011 67,800 +4.1 1,211
2010 65,100 +3.7 1,162
2009 62,800 -0.8 1,121
2008 63,300 +0.3 1,130
2007 63,100 +6.2 1,127
2006 59,400 +6.1 1,061
2005 56,000 +6.5 1,000
Note: The above includes all retail categories, including the motor vehicle sector, cafes
and restaurants, hotels, accommodation etc.

Comments
1 Over the eight-year period retail sales grew by $14.3b or 25.5% (around 3.5% p.a.).

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12 New Zealand Retailers Association – May 2013
2 Over this same period the ‘All Groups’ consumer price index demonstrated the
following:
Movement In CPI
All Groups – Year on Year

12 Months Ending
Dec

%
Index
(2004 = 1,000)
2012 +0.9 1,194
2011 +1.8 1,183
2010 +4.0 1,161
2009 +2.0 1,116
2008 +3.4 1,095
2007 +3.2 1,059
2006 +2.6 1,026
2005 +3.2 1,000

Thus, over this period, retail sales have grown in dollar terms by nearly 26% compared with
general price rises of just over 19%. The 4% increase in CPI in 2010 includes the increase in
GST.

How have the various regions of the country performed over the last year or so? Has there
been much variability from north to south?

12 Months Ending
December 2012
$m
12 Months Ending
December 2011
$m
% Change
Auckland Regional Council 23,848 22,976 +3.8
Waikato Regional Council 7,250 6,452 +12.4
Wellington Regional Council 7,560 7,452 +1.4
Remainder of North Island 14,206 14,283 -0.5
Total North Island 52,864 51,162 +3.3

Canterbury Regional Council 9,503 8,956 +6.1
Remainder of South Island 7,936 7,697 +3.1
Total South Island 17,439 16,653 +4.7

Total New Zealand 70,303 67,815 +3.7

Comments

The Waikato and Auckland regions have performed reasonably. Christchurch is making a
steady comeback after the earthquakes. Wellington and the remainder of the North Island
have been very sluggish.

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New Zealand Retailers Association – May 2013 13

Retail Sales - By Sector

12 Months ending December

Category 2012

2011
%
Change
$m % $m %
2012 vs
2011
Supermarket & Grocery Stores 16,693 23.7 16,563 24.4 +0.8
Specialised Food 1,378 2.0 1,329 2.0 +3.7
Liquor 1,354 1.9 1,266 1.9 +7.0
Non Store & Commission Based 851 1.2 837 1.2 +1.7
Department Stores 3,809 5.4 3,682 5.4 +3.4
Furniture/Floor Coverings/
Houseware/Textiles
1,873 2.7 1,726 2.5 +8.5
Hardware/Building/Garden
Supplies
4,859 6.9 4,553 6.7 +6.7
Recreational Goods 1,908 2.7 1,905 2.8 +0.2
Clothing/Footwear/Accessories 3,545 5.0 3,544 5.2 n/c
Electrical & Electronic Goods 2,643 3.8 2,704 4.0 -2.3
Pharmaceutical & Other Store
Based Retailing
4,786 6.8 4,522 6.7 +5.8
43,699 62.2 42,631 62.9 +2.5

Accommodation 2,736 3.9 2,672 3.9 +2.4
Food & Beverage Service 7,111 10.1 6,881 10.2 +3.3
9,847 14.0 9,553 14.1 +3.1

Motor Vehicles & Parts 9,138 13.0 8,207 12.1 +11.3
Fuel 7,619 10.8 7,425 10.9 +2.6
16,757 23.8 15,632 23.0 +7.2

Total 70,303 100 67,815 100 +3.7

In the latest year the growth slowed a little (3.7%) compared with what was achieved in 2011
relative to 2010 (5.5%). Last year we had a lift from the Rugby World Cup.

Across the various store types there is considerable variability – “electrical and electronic
goods” went backwards (-2.3%) but this is likely to be the result of deflation in this store type.
The supermarket sector showed only modest growth (+0.8%) and this no doubt reflects the
competitiveness of these stores.

The focus in the short to medium term is going to be margin management. Retailers will need
to retain their competiveness but take every opportunity to improve margin. The necessity for
this is underscored by the margin analysis that follows later in this document.

The store type classifications used in this analysis are based on the ANZSIC 2006 codes. For
the first time we see the appearance of non-store sales as a specific category. This will
include all pure play online retailers but it will not include the online sales achieved by retailers
with a bricks and mortar presence.

Note
1 There are some minor differences in some totals – this is due to rounding at the sub-
category level.

2 An outline of what stores are in each category follows in Appendix 1.

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14 New Zealand Retailers Association – May 2013
2.3 Retail Stock Trends

We have seen how the sales levels have changed over time but how good is the stock
management? How have retail stocks varied relative to change in sales performance?

Category Sales 12 Months Ending
December 2012 vs. 2011
%
Stock % Change
End Dec 2012 vs. 2011
%
Supermarket & Grocery Sales +0.8 +8.1
Specialised Food +3.7 +23.4
Liquor Retailing +7.0 +1.1
Non Store & Commission Based
Retailing
+1.7 +17.9
Department Stores +3.4 +3.1
Furniture, Floor Coverings,
Houseware, Textiles
+8.5 +6.3
Hardware, Building, Garden
Supplies
+6.7 n/c
Recreational Goods +0.2 -2.6
Clothing, Footwear, Accessories n/c +5.3
Electrical & Electronic Goods -2.3 -4.8
Pharmaceutical & Other Store
Based Retailing
+5.8 +4.8

Accommodation +2.4 -3.3
Food & Beverage Sales +3.3 +0.8

Motor Vehicles & Parts +11.3 +12.5
Fuel +2.6 +7.8

Total +3.7 +5.0

Comments

In the main, retailers have managed their stocks reasonably well. The increase in stock was
slightly ahead of the increase in sales and in fact, was more in line with the sales growth of
the previous year. This may have reflected a degree more optimism than the market
delivered. There was some variability by store type.

2.4 Business Performance

Statistics New Zealand conducts an annual survey of business performance (Annual
Enterprise Survey). The latest results available are for the 2011 year (gathered during 2012).

Note:
• Some retail categories are not available due to issues of confidentiality. For example,
specific data for supermarkets and department stores is not available.

• Data is, in general, at a level lower than that normally reported by Statistics New
Zealand, therefore the details shown must be treated with caution.

• Definitions of terms used are as follows:-

a Sales: Closing Stock – This is a crude measure of stock turn based on stock
valued at cost. For example: Liquor retailing showed total sales of $1,149m and
stock at the end of the period of $145m. The ratio calculated is 7.9.

b Salaries & Wages/Sales - This is the total cost of salaries and wages, including
that paid to working proprietors, divided by total income.
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New Zealand Retailers Association – May 2013 15

c Gross Margin – This has been calculated on the basis of sale of goods not
further processed, minus purchase of goods for re-sale, divided by sale of goods
not further processed.

d Employee Count Is Based On RME – Rolling, monthly employee count. This
replaces full-time equivalents (FTE) which has been used in the past.

e Surplus Before Income Tax - Total income less total expenditure (excluding
salaries and wages paid to working proprietors) divided by total income.

The figures are derived from a specific survey. Therefore, the turnover figures will not
necessarily be the same as those derived from the retail sales series.

Business Performance
Retail Trade and Accommodation

2011 2010 2009 2008
Sales: Closing Stock (stock
turn)
10.4 10.4 10.5 10.1
Salaries/Wages % Sales (%) 13.3% 13.2% 13.2% 12.7%
Gross Margin (%)
26.2 26.2% 26.2% 26.6%
Income Per Employer ($000) 208.2 202.0 193.9 195.4
Surplus Per Employer ($000) 6.2 5.9 3.9 5.9
Return on Equity (%)
17.6% 17.4% 12.7% 19.1%
Return on Total (%) Assets 6.0% 6.0% 4.3% 6.7
Net Margin (before tax and
excluding salaries and wages
paid to working proprietors)
3.0 2.9 2.0 3.0

Comments

Over the four years under review, performance across the whole industry has been
reasonably consistent.

On some measures the 2009 performance was below 2008 but it would appear the necessary
corrections have been made in 2010 and this has been sustained in 2011.

However, when we look at the bottom line achieved year by year for the last eight years we
see the impact of the competitive price driven market:

Net Profit Before Tax
As % of Total Income

2011 3.0
2010 2.9
2009 2.0
2008 3.5
2007 4.1
2006 4.2
2005 5.2
2004 5.5
2003 6.3

Margin erosion has been significant.
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16 New Zealand Retailers Association – May 2013

Analysis for 2010 (data gathered during 2011)

Sector Sales:
Closing
Stock
(a)
Salaries &
Wages
% to Sales
(b)
Gross
Margin

(c)
Income
Per RME

(d)
Surplus
Per RME

(d)
Ratio % % $000 $000
Fresh Meat/Fish/ Poultry
Retailing
23.7 14.1 27.7 209.7 0.5
Fruit/Veg Retailing 21.5 11.6 20.6 216.4 2.8
Liquor Retailing 9.9 7.0 20.4 463.9 7.4
Other Specialised Food
Retailing
7.8 18.8 25.8 134.4 (-2.8)
Furniture Retailing 5.0 16.0 33.0 245.4 (-9.1)
Floor Coverings Retailing 13.1 12.2 29.0 400.5 8.8
Houseware Retailing 6.0 19.7 43.3 143.6 (-13.6)
Manchester Other Textile
Goods Retailing
4.7 22.0 31.8 165.1 (-11.1)
Electrical/ Electric/Gas
Appliance Retailing
7.3 11.5 21.8 326.2 2.8
Computer & Computer
Peripheral Retailing
11.7 10.4 26.9 371.8 18.7
Hardware & Building
Supplies Retailing
6.3 12.3 27.1 306.9 6.0
Garden Supplies Retailing 6.7 19.5 36.2 157.4 2.7
Sport & Camping Equipment
Retailing
4.0 15.3 39.0 221.9 8.9
Entertainment & Media
Retailing
5.3 12.0 40.0 221.6 5.3
Newspaper/Book Retailing 4.4 15.2 45.1 161.3 6.6
Clothing Retailing 5.2 16.7 48.9 156.7 5.3
Footwear Retailing 5.0 18.2 50.2 145.1 5.3
Watch & Jewellery Retailing 2.8 14.6 48.2 227.6 50.2
Pharmaceutical/ Cosmetics/
Toiletry Goods Retailing
12.4 17.9 34.9 201.2 12.4
Stationery Goods Retailing 7.2 16.1 34.4 220.0 8.7
Flower Retailing 15.7 18.1 45.6 160.1 16.1
Antique & Used Goods 6.7 19.2 36.1 170.1 2.3
Non Store Retailing 12.6 13.4 46.5 323.5 22.1
Total Retail 10.4 13.3 26.2 208.2 6.2

Note: For reasons of confidentiality, supermarket and department store data is combined.
These two sectors account for some 46% of ‘regular retail’ and nearly 30% of all
retail. Their absence has a marked impact on the ‘total retail’ figure above and the
comparison with other sectors.

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New Zealand Retailers Association – May 2013 17

Net Profit Before Tax As % Of Total Income

Sector 2011
%
2010
%
2009
%
2008
%
Fresh Meat/ Fish/ Poultry Retailing 0.2 2.1 1.4 0.9
Fruit & Vegetable Retailing 1.3 * 1.6 2.9
Liquor Retailing 1.6 0.8 2.4 3.2
Other Specialised Food Retailing (-2.1) (-2.3) 1.2 1.7
Furniture Retailing (-3.8) (-3.8) (-2.4) (-2.3)
Floor Coverings Retailing 2.2 2.2 0.8 0.3
Houseware Retailing (-9.1) (-4.4) (-8.1) 2.6
Manchester and Other Textile Goods (-6.6) 2.7 1.2 3.6
Electrical/Electronic/Gas Appliances 0.9 0.9 0.5 4.7
Computer & Computer Peripheral
Retailing
5.2
3.0 2.2 10.4
Hardware & Building Supplies
Retailing
1.9
1.4 (*) 4.3
Garden Supplies Retailing 1.7 0.3 (-1.8) BE
Sports & Camping Equipment
Retailing
4.0
6.1 3.8 0.5
Entertainment Media/Toys/Games 2.3 3.1 (-0.9) (-1.3)
Newspaper Book Retailing 4.2 5.5 2.9 4.1
Clothing Retailing 3.4 1.8 1.3 3.0
Footwear Retailing 3.6 3.0 1.7 4.8
Watch & Jewellery Retailing 22.4 16.4 9.9 9.4
Pharmaceuticals/cosmetics/Toiletry
Goods Retailing
6.2 6.7 5.9 5.6
Stationery Goods Retailing 4.0 2.5 1.0 3.4
Flowers Retailing 9.5 3.6 * (-4.4)
Antique & Used Goods 1.3 2.8 2.8 3.0
Non Store Retailing 6.8 4.7 4.8 5.1
Total All Retail 3.0 2.9 2.0 3.0

Note: * = less than 0.5%
(*) = less than -0.5%
BE = Break Even

Comments

This analysis has been taken to a detailed level and the output should be viewed with caution.
The numbers are indicative only and due to small base sizes the sampling error is, in some
cases, quite large. The numbers should not be relied upon for any significant decisions.

The net profit calculation excludes salaries and wages to working proprietors from the cost
side of the equation.

Across the past decade we have seen the margin available in the sector shrink. From 6.3%
in 2003 we are now down to 3%. The latest year (2011) was slightly better than 2010 which in
turn showed a little improvement over 2009 – let’s hope this is an indicator of improvements
to come.

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18 New Zealand Retailers Association – May 2013
2.5 Staffing in the Retail Sector

Geographic Distribution of Retail Staff

Note: The table below is based on ANZSIC 2006 and ties back into the outlet analysis in an
earlier section.

2012

Share Of Outlet
Numbers
%
Staff Numbers
000’s
Share Of Staff
Numbers
%
Northland 3.4 6,120 3.1
Auckland 36.4 61,010 31.4
Waikato 9.1 17,370 8.9
Bay Of Plenty 6.4 12,220 6.3
Gisborne 0.8 1,680 0.9
Hawkes Bay 3.3 6,820 3.5
Taranaki 2.4 5,060 2.6
Manawatu/Wanganui 4.7 10,630 5.5
Wellington 10.2 21,680 11.2
Total North Island 76.7 142,590 73.4

West Coast 0.8 1,600 0.8
Canterbury 12.2 27,000 13.9
Otago 5.1 10,820 5.6
Southland 2.0 4,880 2.5
Tasman 1.0 2,060 1.1
Nelson 1.3 2,950 1.5
Malborough 0.9 2,250 1.2
Total South Island 23.3 51,560 26.6

Total NZ 100 194,150 100

Comments

Auckland accounts for over 36% of the store numbers but only 31% of staff. This could be a
reflection of bigger stores leading to economies of scale or it could simply be greater cost
awareness in Auckland leading to fewer staff.

Wellington is the reverse of this – 11.2% of staff vs 10.2% of store numbers.

So… if that’s the geographic spread how does the staffing level compare with store numbers
at a store type level?

Once again, this analysis has been undertaken on the basis of the 2006 ANZSIC codes – see
section 2.1 – ‘Store Numbers’ for the definitions.
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New Zealand Retailers Association – May 2013 19

Staff Numbers by Store Type – February 2012

Share of
Outlet
Numbers
%
Staff
Numbers
000’s
Share Of
Staff
Numbers
%
Average/
Store
(Employee
Count)
Supermarket/Grocery Stores 10.1 53.6 27.6 16.2
Fresh Meat, Fish, Poultry 2.0 2.8 1.4 4.2
Fruit & Vegetable Retailing 1.5 2.0 1.0 4.1
Liquor Retailing 2.9 3.2 1.6 3.4
Other Specialised Food
Retailing
2.9 2.6 1.3 2.7
Department Stores 0.9 17.3 8.9 60.9
Clothing Retailing 11.9 15.7 8.1 4.0
Footwear Retailing 1.8 3.3 1.7 5.5
Other Personal Accessory
Retailing
0.6 0.7 0.4 3.8
Manchester and Other Textile
Good Retailing
1.5 2.1 1.1 4.2
Furniture Retailing 2.2 2.4 1.2 3.3
Floor Covering Retailing 1.4 1.9 1.0 3.9
Houseware Retailing 0.8 1.1 0.6 3.9
Electrical/Electronic & Gas
Appliance Retailing
3.5 6.5 3.3 5.7
Computer & Computer
Peripheral Retailing
1.2 1.1 0.6 2.7
Other Electrical & Electrical
Goods Retailing
0.6 0.5 0.3 2.3
Sports & Camping Equipment
Retailing
3.6 4.6 2.4 3.9
Toy & Game Retailing 0.7 0.4 0.2 1.8
Newspaper & Book Retailing 1.9 3.1 1.6 4.8
Stationery Goods Retailing 1.1 2.0 1.0 5.5
Entertainment Media Retailing 0.4 0.5 0.3 4.2
Marine Equipment Retailing 0.9 0.7 0.4 2.4
Pharmaceutical, Cosmetic,
Toiletries Retailing
3.9 9.6 4.9 7.6
Antique & Used Goods Retailing 2.7 1.4 0.7 1.5
Hardware & Builders Supplies 4.4 15.9 8.2 11.0
Garden Centre Retailing 1.3 1.8 0.9 4.1
Flower Retailing 1.4 0.7 0.4 1.5
Watch & Jewellery Retailing 1.8 2.5 1.3 4.3
Car Retailing 5.0 9.0 4.6 5.5
Motor Cycle Retailing 0.8 1.3 0.7 5.0
Trailer & Caravan Retailing 0.3 0.1 0.1 1.0
Motor Vehicle Parts Retailing 1.0 1.4 0.7 4.1
Fuel Retailing 3.6 8.5 4.4 7.2
Tyre Retailing 2.0 2.6 1.3 4.0
Non-store Retailing 4.5 2.4 1.2 1.6
Commission-Based – Buying
and / or Selling
0.8 * * *
Other Store Brand Retailing,
n.e.c.
12.1 8.6 4.4 2.2
Total Number 100 194.2 100 5.9

Note: * = less than 0.5%

Comments:

• Over a quarter of all staff who work in the retail sector do so in the supermarket/grocery
store type which numerically accounts for less than 10% of all outlets. The average per
The Retail Market in New Zealand - An Analysis

20 New Zealand Retailers Association – May 2013
store in this store type, at 17.4, is low due to the impact of dairies and small grocery
stores.

• Department stores account for nearly9% of all staff but less than 1% of store numbers.

So… what can all of this data tell us? How can we paint a picture of a sector of the market
with these numbers?

Set out below is a statistical portrait of the clothing retail sector. In reviewing this it needs to
be realised that we are not considering all sales of clothing but rather sales through clothing
stores. This does not account for clothing sales through outlets such as department stores,
sports stores etc.

2.6 Clothing Stores in New Zealand – A Case Study(2012 Version)
It is realised that this same case study has been run for the last few years in this
document. We have decided to stay with it as it clearly demonstrates how publicly
available data can be used to paint a picture of a market. A similar analysis could be
done for any other sector.

2.6.1 Numbers of stores / growth

Year Ending
Feb
Number of Clothing
Stores
% Change Year on
Year
2012 3,910 n/c
2011 3,910 +0.9
2010 3,874 -1.6
2009 3,938 +0.5
2008 3,901 +5.7
2007 3,690 +4.9
2006 3,518 +5.4
2005 3,338 +8.2
2004 3,086 +9.8
2003 2,811 +5.3
2002 2,669 +4.3
2001 2,558 -0.5
2000 2,570 N/A

From the turn of the century (2000) the number of specialist clothing stores in New
Zealand increased from 2,570 to 3,910 – an overall increase of 52%. Over this same
period total retail outlets (based on the new ANZSIC 2006 classifications) increased
from 30,076 to 32,978 – an increase of only 10%. (and it should be noted that this is
only specialty clothing stores – it does not take account of stores selling clothing as part
( less than 50%) of their overall range.)

2.6.2 Number of Stores / Location

We have seen really significant growth in this store type over the past twelve years. Has
this growth been uniform across the country or has there been regional concentration?

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New Zealand Retailers Association – May 2013 21

Clothing Outlets By Region

%
Population
2012 Est

2012

2000
% Growth
2012 v 2000
No of
Stores
% Total No of
stores
% Total
Northland 3.6 94 2.4 78 3.0 20.5
Auckland 34.0 1,501 38.4 906 35.2 65.7
Waikato 9.4 349 8.9 222 8.6 57.2
BOP 6.3 237 6.1 163 6.3 45.4
Gisborne 1.1 30 0.8 15 0.6 100.0
Hawkes Bay 3.5 120 3.1 99 3.9 21.2
Taranaki 2.5 89 2.3 57 2.2 56.5
Manawatu/Wanganui 5.2 149 3.8 116 4.5 28.4
Wellington 11.1 430 11.0 277 10.8 55.2

Total North Island 76.6 2,999 76.7 1,933 75.1 55.2

West Coast 0.7 19 0.5 20 0.8 (-5.0)
Nelson 1.1 60 1.5 31 1.2 93.5
Tasman 1.1 30 0.8 24 0.9 25.0
Malborough 1.0 23 0.6 18 0.7 27.7
Canterbury 12.6 470 12.0 347 13.6 35.4
Otago 4.8 242 6.2 142 5.5 70.4
Southland 2.1 67 1.7 56 2.2 19.6

Total South Island 23.4 911 23.3 638 24.9 42.8

Total New Zealand 100 3,910 100 2,571 100 52.1

• In terms of percentage growth in the number of clothing stores, Auckland leads the
way with an increase in store numbers of over 65% over the period ( except for the
smallish areas of Gisborne and Nelson). In a region that accounts for 34% of the
population, the number of clothing stores has increased from 906 to 1,501.

The only area to show negative growth in store numbers was the West Coast, which
lost a net one store over the period - from 20 down to 19.

2.6.3 Clothing Stores – Retail Sales

In considering the performance of the clothing sector over recent years we have
compared it with what we earlier termed ‘regular retail’, that is, the retail sector
excluding the hospitality and vehicle elements.

So how has the clothing sector performed?

Note: Under the new classifications, clothing stores are included with footwear and accessory
stores. However, as clothing would account for 85% of the category, the movement
shown will reflect what is happening with clothing.
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22 New Zealand Retailers Association – May 2013
Clothing Stores – Retail Sales

Category – Clothing/Footwear/Accessories

12 Months Ending: Clothing/Footwear/
Accessories $m
Regular Retail *
$m
December 2012 3,545.0 43,699.0
December 2000 1,967.7 25,429.0
% Increase 80% 72%

(*Total retail excluding accommodation, hospitality, vehicles and vehicle parts and fuel.)

The clothing sector has grown a little faster than the total market. When one includes
the assumed increase in share of clothing held by department stores etc. clothing, in
total, has been a strong performer. With the growth in store numbers over the same
period being 52%, the available market per store has improved.

2.6.4 Clothing Stores – Staffing

In the year ending February 2012 there were 15,700 staff employed in the specialty
clothing sector of the New Zealand retail market. These people accounted for 8.1% of
all staff employed in retail (compared with store numbers at 11.9% of the total).

2.6.5 Clothing Stores – Benchmarks (2011)

Obviously this is a very competitive market, so what are the key indicators showing?
What type of performance is the norm in this sector and how does that compare with
the total retail sales?

a) Sales: Closing Stock – The clothing retail sector ratio was 5.2 – essentially this
is a crude measure of annual stock turn. This compared with the footwear sector
at 5.0 and watch and jewellery retailing at 2.8. Across the whole of the retail
sector (including accommodation) the sales: closing stock ratio was 10.4.

b) Salaries/Wages % to Sales – In years past we used to consider a staff cost to
sales ratio of 10% was appropriate (before the owners’ drawings).

In the 2011 Annual Enterprise Survey clothing stores showed a proportion of
sales being spent on wages of 16.7%. This was relatively high compared with the
overall retail sector of around 13%.

c) Gross Margin – At 48.9% the gross margin achieved by these stores was very
good compared with many other store type categories.

d) Profitability – However, in spite of this relatively strong gross margin, the higher
staff costs (and higher staff numbers) saw the gross income and surplus per
employee fall below market averages. This was reflected further in the net profit
to sales achieved.

Clothing Stores All Retail
$000 $000
Income per RME* $156.7 $208.0
Surplus per RME $5.3 $6.2
(*RME = Rolling Monthly Employee Count)

At the net profit to sales level the clothing store sector managed a result of 3.4%
This was an improvement on the previous year of 1.9%.
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New Zealand Retailers Association – May 2013 23

Section 3 – The Consumer

3.1 Introduction - The Two Perspectives

We can look at the consumer from two different perspectives:

1 Who they are, where they live, what they do, the shape of their family, how much
they earn etc?
All these kinds of details are available from the 2006 Census of Population
(Statistics New Zealand). The census will be updated this year (it was originally
scheduled for 2011 but was delayed for two years due to the Christchurch
earthquake). Some details have been projected forward by Stats NZ and these
are used in the analysis below.

2 The second perspective is their shopping habits – what they buy, how many buy
it and how often do they buy?
This data is available from the Household Economic Survey conducted every
three years by Statistics New Zealand.

We will have a brief look at both of these data sets so that readers gain an
understanding of what is available. Both data sets are too big and too comprehensive
to enable any detailed analysis here.

3.2 The 2006 Census

The official Census of Population and Dwellings is conducted by Statistics New Zealand
every five years.

The most recent data relates to the 2006 census. (Note - 2011 census was postponed
because of the Christchurch earthquakes. It will now be held this year)

The Census is a complete count of population and dwellings and includes such
variables as:

Age and sex
Ethnicity
Marital status
Education
Work
Income
Families and households
Access to telephones, internet, fax
Access to motor vehicles

All of this data is available by region – Regional Council area or down to Territorial
Authority Area.

This data is tremendously valuable for identifying the make up of an area. - Who are
my catchment area customers and what do they look like?

If the target market for a particular store can be clearly stated it is possible to identify
how many of these people would live within a reasonable distance from the store
location. How much would each of these people need to spend to make the store
viable? Do we need to get 80% of the available customers spending 80% of their
expenditure on the category? Unlikely - the statistics will give us a test of
reasonableness for our business objectives.

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24 New Zealand Retailers Association – May 2013
The Association is happy to work with members on the analysis of census data (visit
www.stats.govt.nz).

In between the census years Statistics New Zealand produce estimates and projections
which are valuable for forward planning. There are a series of assumptions and
conditions under which these projections are calculated – we don’t propose to go into
the detail here but they are available for those who are interested.

We have set out below a few thoughts based on the latest projections. If any member
wants to go into more detail we are more than happy to give what guidance we can.

3.3 Population Projections:

Over the 20 year period from 2011 to 2031 the total population of New Zealand is
expected to increase from 4,405,200 to 5,194,600. This is an increase of nearly
800,000 people or 18%. Considering the time period this is not huge growth. Therefore,
it is important that we look at the data by the other variables available.

How will the numbers change by age group?

Age Group 2011 2031 % Change

0 -14 years 894,500 934,800 +4.5%
15-39 years 1,499,000 1,669,200 +11.3%
40-64 years 1,424,700 1,483,800 +4.1%
65 years and over 587,100 1,106,700 +88.5%

This is a dramatic shift in the population composition. If we look at it another way the
shift becomes even more apparent:

Age Group 2011 % 2031 %

0 - 14years 20.3 18.0
15 -39 years 34.0 32.1
40–64 years 32.3 28.6
65 years and over 13.4 21.3
Total 100% 100%

These movements are really significant – the much talked about aging population is a
reality. By 2031 over one person in five will be 65 or older. What will this do to our
target market? Where are these people located now and where are they projected to
be in 20 years’ time? The table below considers this question:

% Population 65 years+ 2011 % 2031%

Northland 16.3 27.7
Auckland 10.6 16.9
Waikato 13.7 22.2
Bay of Plenty 16.2 25.4
Gisborne 12.6 23.0
Hawke’s Bay 15.3 25.6
Taranaki 16.0 26.2
Manawatu-Wanganui 15.5 25.1
Wellington 12.5 20.2
Tasman 16.0 29.1
Nelson 15.6 26.4
Marlborough 18.8 31.6
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New Zealand Retailers Association – May 2013 25

West Coast 15.8 28.8
Canterbury 15.1 24.5
Otago 14.5 22.5
Southland 15.2 25.4
Total New Zealand 13.3 21.3

Across the whole country the 65 and over group accounts for 13.3% of the population
currently and in 20 years’ time this group will represent 21.3% of the population. While
this is quite dramatic in itself some areas will see an even more pronounced impact –
Marlborough will have nearly a third of its population in the 65+ group whereas in
Auckland it will only be half this level. This has a significant impact on planning – where
do we need what outlets in 10… 20… years’ time?

While these numbers reflect the proportion of each areas population that will be in this
senior age group what about the absolute numbers?

Area % of 65+ age group
2011 2013
% %
Northland 4.4 4.3
Auckland 26.8 30.1
Waikato 9.7 9.5
Bay of Plenty 7.6 7.3
Gisborne 1.0 1.0
Hawke’s Bay 4.0 3.7
Taranaki 3.0 2.6
Manawatu – Wanganui 6.1 5.4
Wellington 10.4 9.9
Tasman 1.3 1.4
Nelson 1.2 1.2
Marlborough 1.5 1.4
West Coast 0.9 0.9
Canterbury 14.4 14.5
Otago 5.2 4.6
Southland 2.5 2.2

Total 100% 100%

When we view the analysis this way we see another impact at play – the shift in total
population. While Auckland only has 16.9% of its population in the 65+age bracket in
2031, this city still accounts for over 30% of the total group. This simply reflects that
Auckland overall is growing at a faster rate than the rest of the country. We need to
look at these figures closely and determine what exactly these changes will mean for
our business. There is no “one size fits all” analysis of population – we need to
understand our target population and look closely at what is happening to them within
our catchment area. Population change will have more impact on a retail business than
any other economic variable.

When the results from the 2013 Census are published we will be able to get down to
much greater detail – not only will we be able to look at age by area by population but
we will also be able to consider family structure, income, ethnicity etc.

We are more than happy to assist with detailed analysis of specific areas.

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26 New Zealand Retailers Association – May 2013
3.4 Household Economic Survey (June 2010)

In addition to the census, Statistics NZ also conducts a survey every three years which
looks at the expenditure habits of New Zealand households. The most recent
Household Economic Survey was conducted in 2009/10. The 2012/13 survey is
currently in the field and results from the expenditure side will be available in November
this year. (Field work started in July 2012 and will be completed by June 2013).

This is a significant base of information as it tells us, on average, how many customers
we are likely to have. For example, there might be 20,000 people (say 8,000
households) in our area. The Household Economic Survey will tell us the proportion of
these likely to be buying in our category each week.

Example: Area = 8,000 homes
% buying each week = 20% = 1,602 homes
Average weekly
expenditure on category = $40

? ?? ? Our maximum market is $(1,600 x 40) per week
= $64,000 per week

What proportion of this would we need to make our business viable?

Some examples of categories are as follows:
% Homes
Reporting
Expenditure
Average Weekly
Household
Expenditure
% $
Fruit & Vegetables 92 20.30
Grocery – food 99 77.50
Total all food 99 177.70

Beer 31 7.00
Clothing 50 25.20
Newspapers/magazines 42 3.20
Books 18 3.40
Electricity 97 37.30
Plants, flowers & garden supplies 28 5.50
Pharmaceutical products 45 6.00
Cleaning products & other household supplies 74 6.30

These are just a few examples of the data types available. While some individual categories
have relatively high sampling error, the data does give some indication of market size.

To project to total market values we calculate as follows:

e.g. Fresh Fruit & Vegetables

Total Homes 1.5 million

% Homes Buying In An 92% = 1.380 million
Average Week

Average Weekly $20.30
Expenditure

Total Weekly Expenditure ($20.30 x 1.338m) = $28.0m/week

Further details are available on request or go to www.stats.govt.nz/people/work-
income/household-economic-survey.
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New Zealand Retailers Association – May 2013 27

Section 4 – Key Retail Chains by Sector

Who Is Who In New Zealand Retail?

Set out below is a listing of the key companies in each on the major sectors of retail. It is not
exhaustive but we believe it covers the major players:

Supermarkets Farro Fresh Food
Foodstuffs (Auckland)
Foodstuffs (Wellington) New World, PAK‘n’SAVE, 4 Square
Foodstuffs (South Island)
Fruit World
Moore Wilson Ltd
Nosh Foodmarket
Progressive Enterprises Ltd } Countdown, Supervalue

Department Stores Arthur Barnett
Ballantynes
Farmers
H & J Smith
Kirkcaldie and Stains
Smith and Caughey

Clothing Retailers
3 Wise Men Kimberleys
Amazon Kookai
Annah Stretton Kooky Fashion
Baby City Lippy
Baby Factory Louis Vuitton
Ballentynes Fashion Central Marcs
Barkers Merric
Bendon Max Fashions
Billabong Meccano Menswear
Bras ‘N’ Things Millers Retail
Calvin Klein Jeans Munns Menswear
Caroline Eve Nicholas Jerymn
Charlie & Me North Beach
City Chic Pagani Clothing
Cotton On Group Paris Texas
Country Road Peter Alexander
Cue International Portmans
David Lawrence Postie Plus
Decjuba Pumpkin Patch
Dotti Ricochet
Esprit Rip Curl
Ezibuy Rodd & Gunn
Forever New Ruby
Glassons Shanton
Gregory Staxs
Hallensteins Supré
Hartleys Suzanne Grae
Identity T & T Childrenswear
J K Kids Gear Tarocash
Jacqui E Temt
Jay Jays The Department Store
Jean Jones Untouched World
Jeans West Valley Girl
Just Jeans Veronika Maine
K & K Fashions Vincent
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28 New Zealand Retailers Association – May 2013
Karen Walker Witchery
Kate Sylvester Working Style
Kathmandu Zambesi
Keith Matheson Zebrano

General Merchandise Briscoes
Farmers
K Mart
The Warehouse

Footwear Retailers
Andrea Biani Mi Piaci
Athlete’s Foot Number One Shoes
Banks Group Overland
Dowsons Rubi Shoes
Ecco Scarpa
Footlocker Shoe Clinic
Footloose Shoe Connection
Hannahs Smiths Sports Shoes
Hush Puppies Wildpair
Novo Shoes Ziera

Furniture Retailing
Bedpost Harvey Norman
Beds R Us Hazelwoods
Big Save Norman Ross
Danske Mobler McKenzie and Willis
Early Settler North & South Group
Freedom Furniture Smith City
Furniture City Target
Furniture Court

Floor Covering Retailing
Carpet Court Flooring Xtra
Harrisons Carpert One Forhomes
Flooring First The Design Store

Domestic Hardware and Housewear

Acquisitions Mico
BM Pacific Mitre 10
Briscoes Nood
Bunnings Placemakers
Carters Plumbing Plus
Colourplus Plumbing World
Guthrie Bowron Redcurrent
HomePlus Resene Paints
ITM Stevens Homewares
Lighting Direct Storage Box
Lighting Plus Tile Warehouse
Living and Giving Toolshed
Mastertrade

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New Zealand Retailers Association – May 2013 29

Fabrics/ Softgoods
Arthur Toye Fabrics Household Linens
Bed Bath and Beyond Knit World
Bed Bath and Table Lewis’s
Curtain Studio Spotlight
Harvey Furnishings The Linen Cupboard

Domestic Appliances/Electronics/Phones

2 Degrees Jaycar Electronics
Appliance Connexion Leading Edge Communications
Appliance Network Newbolds
Dick Smith Electronics Noel Leeming Group
EB Games Norman Ross
Godfreys Smiths City
Harvey Norman Telecom Retail Stores
J B Hi Fi The Good Guys
L.V. Martin & Sons Vodafone

Sport and Camping Equipment

Avanti Plus Hunting and Fishing
Bike Barn Macpac
Bivouac Outdoors NZ Pro Fishing and Shooting
Canoe & Kayak Rebel Sport
Champions of the World Sportspower
Cheapskates Ltd Sportsworld
Dwights Stirling Sports
FCO The Golf Warehouse
Hamills NZ

Toy and Game Retailing Educational Experience Stores

Toyworld

Newspaper, Books and Stationery Retailing

Kikki K Smiggle
NZ Post Take Note
Office Max Typo
Office Products Depot Warehouse Stationery
Paper Plus Whitcoulls Group

Photographic Stores
Camera House Photo Warehouse
Kodak Express

Pharmaceutical, Cosmetic and Toiletry Retailing

Amcal Life Pharmacy
Care Chemists Lush
Hardy’s Pharmacy Brands
Health 2000 Radius
Healtheries The Body Shop
L’Occitane Unichem
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30 New Zealand Retailers Association – May 2013
Watch & Jewellery Retailing

Christies Jewellers Stewart Dawsons
Michael Hill Jewellers Silvermoon
Nationwide Jewellers Showcase Jewellers
Pascoes Walker & Hall
Partridge Jewellers

Flower Retailing
Interflora Teleflora

Automotive Fuel
BP Mobil
Caltex Z Energy
Gull

Tyre Retailing
Beaurepairs Goodyear
Bridgestone Tony’s Tyre Service
Firestone

Other Food Retailers
Burger King Restaurant Brands
Carl Jr Retail Food Group
Dominos Robert Harris
Foodco NZ Subway
Hollywood Bakery The Mad Butcher
McDonalds Restaurants Wendys
Pita pit

Liquor Retailing
Glengarrys Liquorland
Lion Nathan Super Liquor
Liquor King The Mill Liquor Save

Vehicle Parts
Repco Mag &Turbo Warehouse
Super Cheap Auto

Optical
OPSM Visique
Specsavers

Rural
Combined Rural Traders
PGG Wrightson
RD1

Costume Jewellery
Bling Equip
Diva Lovisa
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New Zealand Retailers Association – May 2013 31

Accessories
Strand Bags Sunglass Style
Sunglass Hut

Pets
Animates Four Seasons
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The Retail Market in New Zealand - An Analysis

32 New Zealand Retailers Association – May 2013
Section 5 – Global Powers of Retailing Top 250 Highlights

Source: Deloitte’s publication: Global Powers Of Retailing 2013

Retail industry rebounds in 2011/12

Despite difficult economic conditions, the global retail industry continued to grow, building on
the rebound in growth that started in 2010.Sales-weighted,currency-adjusted,retail revenue
rose 5.1% to US$4.271 trillion for the world’s Top 250 retailers in fiscal 2011, building on the
previous year’s 5.3% growth.

More than 80% of the Top 250 retailers (204 companies) posted an increase in retail revenue.
Most of the companies experiencing declining sales were in that position due to sale of the
business or restructuring rather than a deterioration of their core business.

The Top 250 maintained a healthy 3.8% composite net profit margin in 2011, matching the
industry’s 2010 result. Nearly all of the companies who disclosed their bottom line results (181
/194 reporting companies) operated at a profit in 2011. However, fewer companies saw an
increase in net profit margin in 2011 following 2010’s improvement in profitability. Composite
return on assets was up slightly to 5.9% from 5.8% in 2010. The average size of the Top 250
in 2011, as measured by retail revenue, topped US$17B. The threshold to join the Top 250 in
2011 was US$3.7 billion.

From a global perspective, in the past year we have seen the economies of United States,
China, Japan, India, and Brazil slow down as the impact of the European crisis has reached
across the globe. There continues to be considerable uncertainty in these economies as we
head into 2013.

Top 250 quick stats, 2011

$4.271 trillion – aggregate sales of Top 250
$17.085 billion – average Top 250 retailers
$3.721 billion – minimum sales required to be on Top 250 list in 2010
5.1% - composite year-over-year retail sales growth
5.4% - 2006-2011 composite compound annual growth rate in retail sales
3.8% - composite net profit margin
5.9% - composite return on assets
23.8% - percent of Top 250 retail sales from foreign operations

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New Zealand Retailers Association – May 2013 33

Economic Concentration of Top 10 Retailers 2010

Top
250
rank
Company
County of
Origin
2011 retail
sales
(US $m)
2011 retail
sales
growth
2011 net
profit
margin
2011
return on
assets
No. of
Countries
1 Wal-Mart US 446,950 6.0% 3.7% 8.5% 28
2 Carrefour France 113,297 -9.8% 0.5% 0.8% 33
3 Tesco UK 101,574 5.8% 4.4% 5.5% 13
4 Metro Germany 92,905 -0.8% 1.1% 2.2% 33
5 Kroger US 90,374 10.0% 0.7% 2.5% 1
6 Costco US 88,915 14.1% 1.7% 5.8% 9
7 Schwarz Germany 87,841 5.8% n/a n/a 26
8 Aldi Germany 73,375 3.7% n/a n/a 17
9 Walgreen Co US 72,184 7.1% 3.8% 9.9% 2
10 Home Depot US 70,395 3.5% 5.5% 9.6% 5
Top 10* 1,237,719 4.4% 2.9% 6.2% 16.7
Top 250* 4,271,171 5.1% 3.8% 5.9% 9

Top 10 share of total 29%

• Walmart now has more than 10% of the total revenue of the Top 250.

• Carrefour managed to hold onto the No 2 slot in spite of a decline in sales.

• Similarly, Metro held No 4 spot in spite of a sales decline. Costco moved into position 6
and Aldi took position 8.

• The Top 10 now account for 29% of the revenue of the Top 250.
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34 New Zealand Retailers Association – May 2013

2012 Global Retail Industry Trends

1) We are in the middle of a consumer revolution. The collision of the physical and
virtual worlds is fundamentally changing consumers’ purchasing behaviour.
Consumers are seeking an integrated shopping experience across all channels.
Failure to deliver puts the retailer at risk of becoming irrelevant. Mobile devices
(phones and tablets) are the game changers.

2) The retail paradigm has shifted from a single, physical connection point to a multi-
pronged approach that crosses both physical and digital channels.

3) To stay competitive in this ever-evolving landscape it is imperative for retailers to
deliver a seamless customer experience across all channels and provide the right
service and product at the same time. Specifically, a retailer must develop an
integrated strategy that aligns talent, physical space, processes, marketing and
merchandising to meet consumer demands.

4) A robust strategy must include…

a) A strong vision of the experience the customer desires across all
channels.
b) A nimble operating model that can adapt as the retail environment
changes.
c) A deep understanding of how to support the vision through inventive
digital solutions and retail technologies such as playbooks to
operationalize the omni-channel strategy.

5) Mobile commerce is an important tool for many retailers. It must be extended beyond
being an online sales tool to a tool that drives meaningful connections between the
brand and the consumer.

6) Retailers must align the business with the customer and not the technology –
flexibility is key.

7) If retailers are to innovate they should start with three key areas……….

a) New Talent Strategies…..position talent as brand ambassadors, equip them with
smart phones and teach them to be technology savvy, empower them to use
Facebook, Twitter, or text messaging to connect with customers.

b) Change The Physical Space….. evolve the physical space from being the primary
point of contact to one of many points of contact, embrace the virtual environment
as a connection point to the brand from anywhere at any time, transform the
physical space to a compelling customer experience instead of a place to
transact, and evaluate the real estate strategy as the need for large physical
space may be minimised by the influence of virtual.

c) Emerging Solutions…… embrace technology and be an early adopter, embrace
the customer experience and support sales associates in delivering desired
service models, use retail time data to provide relevant, real-time promotion to
further personalise the shopping experience.

8) Continually evaluate all of the above and be prepare to change to meet the changing
consumer.

The consumer has become a pre-purchase researcher and a post-purchase commentator.
The consumer and the market will continue to evolve.

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New Zealand Retailers Association – May 2013 35

Section 6 – The Tourism Market

Summary results - 2012 (Stats NZ)

Tourism plays a significant role in the New Zealand economy in terms of the production of
goods and services and the creation of employment opportunities. Tourism expenditure
includes spending by all travellers, whether they are international, resident householders, or
business and government travellers. International tourism expenditure includes spending by
foreign students studying in New Zealand for less than 12 months.

Key results for the year ended March 2012 are:
• Total tourism expenditure was $23.4 billion, an increase of 2.4 percent from the previous
year.
• International tourism expenditure increased 1.6 percent ($149 million) to $9.6 billion and
contributed 15.4 percent to New Zealand’s total exports of goods and services.
• Domestic tourism expenditure increased 3.0 percent ($397 million) to $13.8 billion.
• Tourism generated a direct contribution to GDP of $6.2 billion, or 3.3 percent of GDP.
• The indirect value added of industries supporting tourism generated an additional $9.7
billion for tourism, or 5.2 percent of GDP.
• The tourism industry directly employed 119,800 full-time equivalents (FTEs) (or 6.2
percent of total employment in New Zealand), a decrease of 0.7 percent from the
previous year.
• Tourists generated $1.3 billion in goods and services tax (GST) revenue.
• Overseas visitor arrivals to New Zealand increased 4.4 percent in the year ended March
2012, driven largely by visitors to the 2011 Rugby World Cup.

Key events that influenced tourism activity in the year ended March 2012 included the hosting
of the 2011 Rugby World Cup, the impact of the devastating February 2011 earthquake in
Christchurch, ash from the Chilean volcano disrupting air travel, and the ongoing effects of
the global financial crisis.

Tourism Satellite Account: 2012 does not separately identify the impact on tourism
expenditure at both a domestic and international level for these events.

Tourism Satellite Account: 2012 incorporates the new industry classification, Australian and
New Zealand Standard Industrial Classification 2006 (ANZSIC06), which better represents
the current economy. This has resulted in a change in the composition of tourism industries
and commodities, and has led to revisions to expenditure and employment measures
throughout the official time series back to 1999.

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36 New Zealand Retailers Association – May 2013
Tourism Expenditure by Type of Product:

In the year ending March 2012 total tourism expenditure reached $23.4b which was an
increase of just under 3% compared with the previous year. The composition of the
expenditure was as follows:

2012
$m
2011
$m
Accommodation Services 2,064 2,053
Food and Beverage Serving Services 2,900 2,813
Air Passenger Transport 4,165 4,033
Other Passenger Transport 2,400 2,422
Retail Sales – fuel and other automotive products 2,744 2,571
Retail Sales – other 5,119 5,020
Education Services 662 645
Other Tourism Products 2,039 2,002
GST Paid On Purchases By Tourists 1,302 1,290
Total Tourism Expenditure 23,394 22,848

If we combine fuel, automotive and other retail sales together we reach a total of $7.9b or just
over a third of the expenditure by tourists (both domestic and overseas tourists). It is really
important that everyone in the retail sector understands the role played by retailers in the
tourism market – it is not just about the jet boats and bungy jumping activities – shopping is
still a critical part of the tourists’ activities.

The retailer’s strategy needs to incorporate the domestic and overseas tourist – both groups
offer long term opportunities. Obviously, the domestic tourist is “close by” but we shouldn’t
overlook the long term possibilities of the overseas tourist. If we “get it right” here there are
future prospects from our website after the tourist returns home. These people now offer the
potential for repeat business.

A supplementary report will be published later in the year highlighting the specific categories
of retail that contribute most to these retail figures.

As a strategic initiative it makes total sense for retailers and other providers of tourism goods
and services to work together. When one thinks of the American theme park that has a real
focus on merchandise – why can’t we do that here via business co-operation?

The Retail Market in New Zealand - An Analysis

New Zealand Retailers Association – May 2013 37

Section 7 – Top Retail Trends 2012

From a variety of sources we have identified a number of trends that retailers need to
consider as part of their planning. This is not an exhaustive list but it does highlight a number
of issues that keep recurring across a range of material.

1 The Consumer Has Changed… and, we believe, changed forever.

1.1 The consumer has lost his/her appetite for debt and is now living much more
within their means. There has been a reduction in credit card debt and hire
purchase debt (and fewer finance companies to borrow from).

1.2 The consumers have been enticed to improve their savings activity – KiwiSaver.

1.3 The consumer is a little unsure of the future and where everything is heading.
Will I need some cover for a rainy day?

All of this has resulted in a much more risk averse consumer with better managed
spending and savings habits.

They have re-balanced their household balance sheet and in the foreseeable future we
will have a more restrained consumer.

2 Price vs Value

There appears to be a move from straight price offers to price offers linked to brands.
That is, the offer is becoming more about value and less about cheap.

We expect this to continue. Retailers will need to give real thought to the brands they
offer.

Brands will need to match the aspirations of the store’s target market.

Exclusivity of brands will give the retailer a point of difference and will limit the
consumer’s opportunity to undertake price comparisons across competing stores and
channels.

3 Technology – smart phones, tablets, and whatever comes next

We are seeing significant changes in consumer behaviour, linked to developments in
mobile technology in particular. In the coming years we will see this trend accelerate.

Already we have a whole range of applications available… (not necessarily in New
Zealand).

e.g a) Price comparisons – it is now possible to read the bar code on a product
and see what prices are being charged for that product by a range of
outlets in the local vicinity.

b) Credit/debit card ‘on the phone’ - trials are already underway using ‘near
field’ communication to process contactless transactions ‘on the phone’
rather than a contactless card.

c) Using either bar codes or QR codes we can now assemble an order (as a
consumer) send it to a retailer, pay for it on-line and wait for the order to be
delivered.

d) Peer Review – we can now try on clothes at the retail store, take 360?
photographs, send them via phone to a friend and get a second opinion.

The Retail Market in New Zealand - An Analysis

38 New Zealand Retailers Association – May 2013
These are some of the future technology applications.

But…what of the on-line channel itself? What is likely to eventuate?

Currently the on-line market accounts for around 5% of retail sales in New Zealand. This
compares with nearly 6% in Australia, nearly 8% in the US and over 9% in the UK. It is easy
to be dismissive of this on the basis that if only 5% is on-line, 95% must still be with the
traditional bricks and mortar channel. The key statistic is that nearly half of New Zealand
adults made at least one on-line purchase in the last year and, on average, they purchased
through this channel three times.

How hard would it be to imagine this average of three purchases per year shifting to six (still
only once every two months)? This could take the share of market from 5% to 10%.

Are we at a tipping point?

We are of the view that the on-line channel is a critically important part of the future retail
market. All retailers must seriously consider this possibility as part of their strategic review.

One commentator identified the following eight critical trends:

1 Global competition will drive up service standards.

2 Companies must maintain service standards in the face of ‘the need for speed’.

3 Firms must learn to use the increased transparency brought by social media to their
advantage.

4 Companies must use new sources and types of data to rethink the way they track and
personalise their service.

5 Good employees will remain fundamental to good service but with technology as an
enabler.

6 More firms will outsource aspects of customer service to new kinds of specialists.

7 The rise of the mass affluent and other customer segments will force customers to find
new product or service niches.

8 Customers’ expectations, including the purpose of the store, are evolving with new
technology.

(Source: A BDO Global Report capturing the views of 479 Business Leaders worldwide).

No matter which trend theories you subscribe to there are a few facts that are inescapable:

- The customer has changed and is more risk averse.

- Technology is going to change consumer behaviour:
social media
phone applications
consumer connectivity
the on-line channel

- Significant points of difference that are valued by the customer will be
critical if you don’t want to be fixed in the ‘price’ end of the market.

- More than ever before you must know and understand your customers and
deliver what they want. It is their shop, not yours.

The Retail Market in New Zealand - An Analysis

New Zealand Retailers Association – May 2013 39

For those of you who are really observant you will have realised that these last couple
of pages are the same as those in last year’s publication. It is our view that the key
trends haven’t changed – the thing that has changed is the speed with which change
is occurring. The online market is now at closer to 6% (from 5%) and the rate of
growth of this channel is outstripping traditional retail.
We are waiting for a couple of new reports to be published and once this data is to
hand we will produce a report that has its focus on the online channel.

The Retail Market in New Zealand - An Analysis

40 New Zealand Retailers Association – May 2013
Appendix 1 - Industry Descriptions

ANZSIC06 Retail Classifications

An entity is included in an industry based on its predominant activity in terms of sales. For
example, a petrol station will sell petrol and diesel, but it may also sell car parts and grocery
items. The store will be classified to the fuel retailing industry if most of its sales come from
the sale of fuel. Data published for 15 industries, which are defined as follows:

ANZSIC06 industries, class codes, and descriptions for the Retail Trade Survey (RTS)
RTS industry and description used in published
tables
ANZSIC06 class and description
G1110 Motor vehicle and parts G391100 Car retailing
G391200 Motor cycle retailing

G391300 Trailer and other motor vehicle
retailing
G329100 Motor vehicle parts retailing
G392200 Tyre retailing
G1120 Fuel G400000 Fuel retailing
G1210 Supermarket an grocery stores G411000 Supermarkets and grocery stores
G1221 Specialised food
G412100 Fresh meat, fish and poultry
retailing
G412200 Fruit and vegetable retailing
G412900 Other specialised food retailing
G1222 Liquor G412300 Liquor retailing
G1311 Furniture, floor coverings, houseware, textiles G421100 Furniture retailing
G421200 Floor coverings retailing
G421300 Houseware retailing

G421400 Manchester and other textile goods
retailing
G1312 Electrical and electronic goods
G422100 Electrical, electronic, and gas
appliance retailing

G422200 Computer and computer peripheral
retailing

G422900 Other electrical and electronic
goods retailing
G1313 Hardware, building, and garden supplies
G423100 Hardware and building supplies
retailing
G423200 Garden supplies retailing
G1321 Recreational goods
G424100 Sport and camping equipment
retailing
G424200 Entertainment media retailing
G424300 Toy and game retailing
G424400 Newspaper and book retailing
G424500 Marine equipment retailing
G1322 Clothing, footwear, and accessories G425100 Clothing retailers
G425200 Footwear retailing
G425300 Watch and jewellery retailing
G425900 Other personal accessory retailing
G1330 Department stores G426000 Department stores
G1340 Pharmaceutical and other store-based retailing
G427100 Pharmaceutical, cosmetic, and
toiletry retailing
G427200 Stationery goods retailing
G427300 Antique and used goods retailing
G427400 Flower retailing
G427900 Other store-based retailing nec

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New Zealand Retailers Association – May 2013 41

G1350 Non-store and commission-based retailing G431000 Non-store retailing
G432000 Retail commission-based
buying/selling
H2110 Accommodation H440000 Accommodation
H2120 Food and beverage services H451100 Cafes and restaurants
H451200 Takeaway food services
H451300 Catering services
H452000 Pubs, taverns, and bars
H453000 Clubs (hospitality)

Note: Nec = not elsewhere classified

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42 New Zealand Retailers Association – May 2013

Appendix 2 – ANZSIC 2006 vs ANZIC 1996 reconciliation

Categories in 1996 but not 2006

Bakeries & cake kitchens
Take-away food outlets
Automotive repairs
Household appliance repairs
Footwear repairs
Panel beaters
Milk vending

Categories not in 1996 but in 2006

Hardware stores Those previously classified as wholesalers are
now included as retailers.

Non-store retailing
Commission-based buying and/or selling

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