New Zealand’s retail habits could see a return to more in-store purchases as overseas online retailers start charging for returns, a consumer commentator has suggested.
It comes after major chains, like ASOS and Amazon, announced customers would be charged for returns – unless a significant chunk of the order is kept.
Speaking to Breakfast this morning, First Retail Group managing director Chris Wilkinson said processing returns had become an “increasing challenge” for retailers.
“It’s a very complex procedure to go through, and there is a lot of infrastructure behind returns,” he said.
He said the challenge had become exacerbated by the general trend worldwide of consumers increasingly returning products.
“In the US, around 16% of all online purchases are returned, and this has actually created an industry in itself.
“So, factories that handle those returns put them back into the system, or even in some cases, they have to go to landfill.”
Wilkinson said the decision to charge for refunds would “really start forcing” consumers to “think twice about those online purchases” and to blend them with those made in-store.
In New Zealand, Wilkinson said, “we are seeing a return to shops” with new retailers opening across the country.
He also said retail was becoming “much more experiential now”, which was encouraging a new generation of retailers to enter the market.
He called it a “very good thing”.
“We’ve just been working in the UK recently and seen the trend of people coming back into retail, it’s very encouraging.”
On Thursday, Auckland Airport’s new $200-million-plus shopping centre, Mānawa Bay, is set to open.
In New Zealand’s retail market, Wilkinson said there were “definitely green shoots out there”.
“We’ve seen in the last month or so a stabilisation of footfall, where it has been declining, and those average sale values have been declining.
“That’s started to stabilise, so that’s an encouraging sign for retail.”
The cost of living
It’s been a tough few months for the retail sector, as the high cost of living forces many Kiwis to keep their wallets shut.
According to numbers released by Stats NZ in August, the total volume of retail sales dropped 1.2%, around $379 million, in the June 2024 quarter after adjusting for price inflation and seasonal effects.
It said 11 of the 15 retail industries had lower sales volumes in the June 2024 quarter than in the March 2024 quarter.
The most significant contributors to the slump were electrical and electronic goods retailing (down 6%), motor vehicle and parts retailing (down 2.7%), food and beverage services (down 1.9%), and clothing, footwear, and personal accessories (down 4.1%). Supermarket spending was up by 3.8%.
Earlier in August, Auckland department store Smith and Caughey’s announced it would remain open in a “new, reduced format” after a proposal to close its Auckland and Newmarket stores was put to staff.
It decided to keep its Queen Street location open with a “new reduced format beyond January 2025”. The Newmarket store is expected to close later this year.
The Warehouse was another big name struggling with the current downturn. Chief executive Nick Grayston left earlier this year, and the company is bracing for a drop in earnings. Jobs are also on the line at its head office.
In July, Forsyth Barr retail analyst Paul Koraua said part of the problem was the power of overseas retailers.
“The likes of Temu and Shein have positioned themselves in a place where they are low price, and consumers are finding that to be quite an attractive value proposition,” he said.
“You know what you’re getting as a consumer; you’re not surprised to the downside when the product comes, and it maybe doesn’t live up to their expectations because you’ve paid less for it.”
