Over half of New Zealand retailers are not meeting their sales target due to inflationary pressures and with no signs of inflation slowing down, consumers are having to help bear the brunt of the costs.
Retail NZ's second-quarter report shows the dire consequences of inflation on our retailers as they struggle with rising operating costs due to inflation.
The report found 54 percent of retailers did not meet their target sales in the last quarter mainly due to rising costs such as wages and freight, as well as staff shortages and lack of foot traffic.
But it's not just shop owners being hit, Kiwi shoppers are also paying the price as the report found 71 percent of retailers increased their prices over the last quarter by an average increase of 6 percent.
"Inflation is having a significant impact and, as a result, consumers can expect further price increases on products," Retail NZ chief executive Greg Harford said.
"Looking ahead a greater cohort of 81 percent of retailers will be increasing prices in the next quarter – again at an average increase of 6 percent. This suggests that high inflation will likely continue through the rest of the year."
With the snowball effect of inflation showing no sign of slowing down, retailers can not absorb these new costs as the cost of operating a retail store has significantly increased and sales revenue has still not bounced back to pre-COVID levels.
"For many retailers, the reality is they are not able to absorb these new costs, instead passing them on to the consumer through price increases," Harford said.
The good news is many retailers have seen an increase in sales when compared to the same quarter last year.
The Retail NZ Sales Index has recorded a 16 percent increase in average daily sales per site compared to the same quarter last year. This is mainly due to the fact Auckland was recovering from a lockdown in the second quarter last year.
Looking ahead to the next quarter, the report found 59 percent of retailers don't expect to hit their targets and many have expressed their concern with the increasing cost of doing business, especially for small businesses.
The report found 32 percent of business owners are not sure or not confident their business will survive the next year.
While this number is a slight improvement compared to the previous quarter, it shows the impact economic uncertainty is having on New Zealand's retailers.