Apr 07 2020
The COVID-19 pandemic has significantly disrupted the operations of almost all industries across the New Zealand economy. The New Zealand Government (Te Kawanatanga o Aotearoa) has enforced some of the most aggressive measures to combat COVID-19, including a country-wide lock down of all non-essential services. Under the Level 4 quarantine measures, only businesses that provide essential goods and services can remain open and must register their activities with the New Zealand Government. However, amid the enforcement of social distancing and quarantine measures, a handful of fortunate industries are anticipated to outperform in these grim economic conditions.
Data Processing and Web Hosting
The Data Processing and Web Hosting Services industry is expected to benefit significantly from the rapid shift to work-from-home across the New Zealand business sector. As workers have been instructed to stay at home, the ability to work remotely has become critical for firms to maintain normal operations. IBISWorld expects revenue in this industry to rise at an annualised 3.4% over the five years through 2019-20, to total $448.1 million. Revenue is expected to increase by 8.7% over the current year, due to a surge in demand from businesses disrupted by COVID-19.
Major players in the industry such as IBM New Zealand, Datacom Group, and Spark New Zealand are likely to outperform during the COVID-19 pandemic due to an increase in demand for their services. However, firms in this industry may be limited in their ability to invest in new data centres during the pandemic, as the inputs required to develop these new centres are primarily sourced from overseas manufacturers.
The Postal and Courier Pick-up and Delivery Services industry is expected to post a strong performance in 2019-20, as government-mandated social distancing leads to a surge in demand for postal and courier services. Courier services have been deemed an essential service by the New Zealand Government, as they assist in preventing the unnecessary movement of people outside their homes. In recognition of the rapid rise in demand for courier services, the Ministry of Business, Innovation, and Employment (Hikina Whakatutuki) has also directed retailers to only use courier services for essential deliveries, such as products that keep people warm, key household appliances or medical goods. The surge in demand for postal services is likely to provide some much needed support to this industry, which has experienced declining revenue over the past five years due to lower demand. According to NZ Post, the volume of letters delivered in New Zealand has fallen by approximately 60 million per year over the past five years.
The COVID-19 pandemic is expected to hinder the retail sector in New Zealand due to weakened consumer sentiment and lower household discretionary incomes. However, households across New Zealand are expected to continue purchasing essential items such as warm clothing for winter, household appliances and groceries. Online shopping is expected to be a beneficiary of quarantine measures, which have prevented the in-store operation of most retail businesses. Households are expected to transition to online retail channels, driving revenue in the Online Shopping industry. Many households are expected to be introduced to online shopping for the first time, potentially supporting the uptake of online shopping over the long term.
The degree to which businesses can transition to online retail during the lock-down period in New Zealand is limited. Regulations only enable businesses that operate essential services to remain open, and businesses must register their retail activities with the government. However, the definition of ‘essential’ has been ambiguous, with a variety of firms such as high-end fashion retailers and online coffee stores continuing to operate online. Overall, industry revenue is expected to grow at an annualised 5.5% over the five years through 2019-20, to total $5.0 billion, including growth of 4.6% in 2019-20.
Online food ordering, which is included in the Online Shopping industry, is expected to perform poorly. Unlike Australia, New Zealand has banned the delivery of takeaway meals through platform such as Uber Eats.
Health insurance providers may benefit from the COVID-19 pandemic in the short term. The cancellation of elective surgeries to free up capacity in the health care system is expected to lead to lower costs for health insurance providers, while revenue remains fairly steady from policy holders. This trend is likely to lead to an increase in profitability in 2019-20. However, the back log of elective surgeries is likely to weigh on health insurance firms after the COVID-19 pandemic passes, potentially leading to a decline in profit margins. Overall, IBISWorld expects revenue in the Health Insurance industry to grow at an annualised 3.7% over the five years through 2019-20, to $1.7 billion. This trend includes anticipated revenue growth of 3.3% in the current year.
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IBISWorld reports used to develop this release:
- Data Processing and Web Hosting Services
- Postal and Courier Pick-up and Delivery Services
- Online Shopping
- Health Insurance
For more information, to obtain industry reports or to arrange an interview with an analyst, please contact:
Strategic Media Advisor – IBISWorld Pty Ltd
Tel: 03 9906 3647