Large Format Retail in NZ during the pandemic and now
Given the similarities of our economies, culture, governments, retail sectors, and environments, many of the experiences in the New Zealand Large Format Retail market are not dissimilar to those in Australia.
In fact, many of the LFRA members have a presence in the New Zealand market.
12 months on from NZ COVID lockdown, most Large Format Retailers continue to trade strongly, reporting significant growth in both online sales and in their bricks and mortar stores.
Like their Australian neighbours, Kiwis went on a spending spree at the beginning of the pandemic lockdown. They prepared for the lockdown with electronics, appliances, home improvement, home office, automotive, fitness and lifestyle, pets, and baby products.
Vacancy is at an all-time low
Shopper confidence in Large Format Retail centres remains high.
This is due to the nature of the layout and environment of the centres. They are easy to get to, with large open air car parks, and customers feel very comfortable shopping in stores with a larger footprint to allow social distancing.
There are several new centres planned for Auckland. Other locations where new Large Format Retail developments are planned or underway include: Queenstown Central, Christchurch, Timaru, Nelson, Palmerston North Hawkes Bay, and Tauranga.
Retailers are changing things up
Several centres across New Zealand are going through a partial redeveloped entry with some remixing occurring.
It is not easy to find a well located 500 – 2,000 sqm Large Format Retail tenancy in New Zealand. In many locations, it just does not exist.
Retailers are also relooking at their store formats.
Several are exploring the possibility of decreasing their store footprint, and whether they can drive the same sales out of a smaller store with increased technology.
Others are looking at driving sales through store refurbishments and alternative formats, taking an opportunity to relocate a store in the same catchment but into a smaller more efficient premises.
Increased confidence with new Large Format Retailers entering the market
The team at Colliers International New Zealand are in confidential discussions with a number of brands looking to enter the local market.
Costco will be opening their Auckland store next year and are not stopping there. They are already looking for other opportunities around the country.
And Baby Bunting are expected to open in New Zealand in 2022.
Growth of Large Format Retail in New Zealand
The increase in retail spend has been largely a result of the lockdowns and ongoing inability to leave the country.
The lack of overseas travel has seen consumers divert that spend into spending on themselves and their homes.
In 2020, the hardware and furnishings sectors saw modest growth of 4.8% and 1.9% respectively[1].
Lockdowns forced businesses to adapt and implement working from home practices. As a result, the demand for electronic goods grew 14.8% for the year. Sales grew strongly in the Sep-20 (24.1%) and Dec-20 (19.5%) quarters, with consumer discretionary spend on luxury electronics further driving growth, increasing sector spending to $4.4 billion versus $3.9 billion on trend[2].
Existing Australian Large Format Retail brands in New Zealand are continuing to grow, with Chemist Warehouse in particular aggressively expanding across the country.
Despite a seven week lockdown, the Briscoe Rebel Group traded very strongly. Profit was up 17%, and revenue up 7.5%.
Members who attended the LFRA New Zealand Study Tour in February 2020 explored the sites of New Zealand’s largest Large Format Retail group, The Warehouse Group (TWG). Its brands include The Warehouse, Warehouse Stationery, Noel Leeming, Torpedo7, and TheMarket.
Results published by TWG showed a 1.5% increase in sales to August 2020. This was despite only being able to open their bricks and mortar stores for 45 weeks, compared to the same 52-week trading period the previous year.
By the end of 2020, online sales increased by more than 55% across TWG[3]. TWG also witnessed a 96% growth in The Warehouse app sales, and a massive 103.2% growth in Click & Collect sales[4], with many shoppers purchasing online for the first time.
And now with COVID-19 under control in New Zealand, TWG recorded 2.2 million average customer store visits per week in FY21 H1[5].
Australian – New Zealand travel bubble
The temporary opening of a travel bubble between the two nations was a positive for the Large Format Retail community.
With COVID-19, many Aussie Large Format Retailers have not been able to travel across the ditch.
Since the announcement was made in April 2021, Colliers International New Zealand welcomed Large Format Retail representatives, assisted them in reviewing site options, and continued discussions that were stalled over the course of 2020.
Although the creation of a bubble and implementation of a national vaccination program is fantastic for the wider economy, there is some nervousness in terms of what this means for retail spend moving forward.
Most retailers are not expecting to see the same results in FY21 as FY20.
It may take some time for the environment to normalise, but as a result of the experiences and lessons learnt in 2020, most are generally positive about the future.
[1] McGrath Nicol (2020) In Retail (New Zealand) 2020 Edition https://www.mcgrathnicol.com/app/uploads/McGrathNicol_Report-In-Retail-NZ-2020-Edition_V05.pdf
[2] McGrath Nicol (2020) In Retail (New Zealand) 2020 Edition https://www.mcgrathnicol.com/app/uploads/McGrathNicol_Report-In-Retail-NZ-2020-Edition_V05.pdf
[3] The Warehouse Group (2020) Integrated Annual Report 2020 https://www.thewarehousegroup.co.nz/application/files/2216/0272/3905/The-Warehouse-Group-Annual-Report-2020.pdf
[4] The Warehouse Group (2020) Integrated Annual Report 2020 https://www.thewarehousegroup.co.nz/application/files/2216/0272/3905/The-Warehouse-Group-Annual-Report-2020.pdf
[5] The Warehouse Group (March 2021) FY21 Interim Results http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/WHS/369678/343023.pdf
Leroy Wolland, National Director – Retail Leasing, Colliers International, New Zealand
