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Joyful Christmas for New Zealand Retailers

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by Matthew Barry
Dec 17 2020

The retail sector is set for a strong rebound over the 2020 Christmas season, as a recovery in consumer sentiment fuels household consumption expenditure. Overall, retail sales are expected to reach $27.7 billion in the December 2020 quarter, a 2.5% increase relative to the prior year. Festive foods, liquor sales and hardware tools are likely to show strong growth in sales, while the accommodation and hospitality sectors continue to suffer from a lack of foreign tourists.

‘Despite a slight fall in discretionary income in 2020-21, the growing use of Buy Now Pay Later services is projected to boost Christmas sales this year. However, above-trend unemployment may weigh on discretionary expenditure for some households,’ said IBISWorld Senior Industry Analyst Matthew Barry.

As most consumers are unable to travel this holiday period, a larger share of consumer saving is expected to be spent on consumer goods. The popularity of Black Friday, Cyber Monday and Boxing day sales is also anticipated to boost retail sales this year.

Electronics on the rise

Sales of electronic goods are expected to support the Domestic Appliance Retailing industry, with retail sales anticipated to rise by 13.9% relative to last year, to $1.3 billion. 

‘Electronic goods are likely to be one of the best performers this Christmas, as New Zealanders spend on televisions, smartphones and home entertainment systems. The inability to travel overseas has given many households the ability to buy items that would otherwise be too expensive. Cyber Monday sales and the release of next generation gaming consoles are expected to underpin growth in the December 2020 quarter,’ said Mr Barry.

Food retailers are having a feast

Food and liquor retailing industries are anticipated to grow strongly this holiday period, as consumers increase expenditure on festive feasts and alcohol. The Specialised Grocery Retailing industry, which provides luxury food items including red meat, cakes and confectionary, is expected to benefit the most from this trend, reaching $499.2 million in revenue in the December 2020 quarter. This growth represents an increase of 8.5% relative to the same period last year.

‘As more consumers celebrate the holidays domestically this year, families are likely to have large Christmas feasts. This is expected to drive demand for turkey, glazed ham and other festive food and drinks,’ said Mr Barry.

Similarly, the Liquor Retailing industry is expected to benefit from alcohol consumption at Christmas gatherings this holiday period. Liquor sales are anticipated to reach $558.3 million in the December 2020 quarter, an increase of 5.4% relative to the same period last year. Many consumers are also likely to purchase liquor as a gift for the holidays, supporting overall sales.

‘New Zealanders have increasingly opted for wines and spirits over the past five years, instead of beer. Liquor retailers are likely to make up some of the lost demand earlier in the year through stronger sales during the Christmas period,’ said Mr Barry.

The grass is greener this Christmas

The Hardware, Building and Garden Supplies Retailing subdivision is expected to perform strongly in the December 2020 quarter, after a 44.0% increase in sales revenue during the September quarter. This V-shape recovery stems from the relaxation of restrictions and improvements in construction activity, which have boosted demand for the Hardware and Building Supplies Retailing industry. Hardware, building and garden supplies sales are anticipated to reach $2.7 billion this December quarter, an increase of 11.1% relative to the December 2019 quarter.

‘Many New Zealanders have taken up DIY projects over the course of 2020, spurring strong demand for tools and equipment. The move towards remote working and learning has also supported greater consumer interest in gardening and home improvements. Tools and equipment are likely to be a highly popular gift category this Christmas,’ said Mr Barry.

Tourism weighs on accommodation and hospitality

Although domestic retail is likely to have a strong Christmas, the outlook for accommodation, tourism and international travel is bleak. Accommodation sales are expected to fall to $977.0 million this December 2020 quarter, a 17.4% decline from last year’s December quarter.

‘Domestic demand for accommodation has improved over the past few months, as COVID-19 restrictions have been lifted. The Hotels and Resorts industry is expected to offer aggressive discounts to attract New Zealanders to a local getaway this holiday period,’ said Mr Barry.

A lack of international tourists this holiday season is also expected to impact the Food and Beverage Services subdivision. International tourists typically eat-out, providing a strong source of demand during the holiday period. The Food and Beverage Services subdivision sales are expected to fall to $3.2 billion in the December 2020 quarter, representing a 4.5% decline relative to last year. However, the potential rollout of a COVID vaccine may soon enable international travel to resume, and a travel bubble with Australia is likely to launch in early 2021.

‘Prospects of a vaccine being distributed by early 2021 are anticipated to drive a recovery in tourism by next Christmas. The recently announced reopening of international travel with Australia in early 2021 is likely to provide much needed support to New Zealand’s Tourism industry. IBISWorld projects that the Hotels and Resorts industry to rebound by 24.7% in 2021-22, to reach $9.0 billion,’ concluded Mr Barry.

-ENDS-

IBISWorld reports used to develop this release:

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