Retail NZ chief executive Greg Harford thinks next few months will be 'pretty difficult' for retailers


The current economic climate continues to be tough - with the rising cost of wages and freight, staff shortages and lack of foot traffic having a significant impact on retailers.

Figures from Retail NZ show more than a third of business owners are not confident they will survive the next 12 months.

Retail NZ chief executive Greg Harford said more than half of retailers failed to hit their targets for the second quarter of 2022, while 46 percent met or exceeded them but margins remained tight across the sector.

"The cost of operating a retail store has significantly increased, in particular, freight and shipping related costs, as well as the cost of labour and low foot traffic has created significant pressure."

He said many retailers were not able to absorb the new costs and instead were passing them on to the consumer through price increases.

"Many retailers have been working very hard to avoid putting the prices up. Many have purchased goods in advance. Many have got hedging arrangements around foreign exchange but as those things start to come off, we will start to see more and more movement in prices and particularly with the price of fuel impacting freight it is going to be pretty difficult over the next few months."

Consumer spending remained depressed in the second quarter of the year, particularly in central Auckland and Wellington where people were still working from home.

Harford said many retailers had worked hard to keep their businesses afloat in the past two years, with some remortgaging their homes in order to keep staff employed throughout the pandemic.

In the last quarter, 71 percent of retailers increased prices at an average of 6 percent, with 81 percent expected to increase their prices again in the next quarter at an average of 6 percent.

"We're at a point where something does need to give and it could be that we see reductions in employment. It could be that we see reductions in hours in order to try and reduce those operational costs - but unfortunately there are likely to be some businesses that just don't survive as well."

Harford said people should do what they could to support small businesses which would help them survive the coming months.