Hope ahead: What's on the horizon for New Zealand’s retail sector?

Key insights and tips to help retail business leaders navigate the current conditions

New Zealand’s economy remains volatile, affecting both consumers and businesses. As one of the first sectors to feel the effects of economic headwinds, retail business leaders continue to face several challenges - but we’re now seeing some encouraging signs ahead. Here’s what’s happening in the retail sector currently and what business leaders can expect in the future: 

Economic headwinds continue 

New Zealand’s cost of living crunch is significantly affecting the retail sector, with many shoppers tightening their belts and reducing discretionary spending.  

June and September’s quarterly GDP growth rates were lower than what many expected, and while the Christmas rush provided a slight boost – with spending in retail industries increasing by 2% in December 2024 vs November – the figures are still down compared to December 2023. In addition, average transaction values dropped compared to the previous year, adding to ongoing profitability concerns for retailers nationwide. 

As inflation continues to hurt, we’ve also seen retailers express concerns about increasing insurance costs, with 53% of retailers in Retail NZ’s latest Retail Radar Report saying this is having a major impact on their business. Business leaders will also be keeping an eye on the geopolitical situation overseas, with any proposed U.S. tariff change likely to impact exporters.  

Positive signals at play 

While times are undoubtedly still tough in the retail sector, there are several reasons for business leaders to be optimistic. Inflation appears to have been brought under control and is now within the Reserve Bank’s target range, while cuts to the official cash rate may help to boost consumer confidence and increase discretionary spending.  

And although economic signals and forecasts are mixed, there is a sense among some retail leaders that the next 6-12 months will see an improvement. This is reflected in the latest Retail Radar Report, which shows increased confidence from retailers, with 70% feeling confident or very confident that their retail business will survive the next year - an improvement from 65% in the previous quarter.   

The Commerce Commission’s draft decision on interchange fee regulation may also be a source of optimism for retailers, potentially reducing and simplifying payment costs for New Zealand businesses. Meanwhile, the Government’s Going for Growth plan may also provide some positivity if it stimulates economic growth and improves consumer confidence. 

Tips for retail leaders looking to the future 

As retail sales have declined and profitability has dropped, savvy retailers are taking the opportunity to revisit and review key components of their business to be better prepared for when conditions improve. 

Retail leaders can take practical, strategic steps to maximise opportunities when the market improves: 

  • Take advantage of any downtime to look at what online and systems improvements you can make in your business. This might include expanding your digital presence or implementing new e-commerce platforms. We work closely with our BDO Digital team to help with digital systems advice and implementation. 

  • Keep a close eye on your cash flow (review it monthly!) and revisit your forecast in line with the current conditions. 

  • Review your stock levels regularly and make changes according to demand. Inventory is a key overhead for retailers and now is a good time to do a stocktake and potentially get rid of any old product that is not selling. 

  • Don’t put things off until the financial year-end. Review your business strategy and management accounts throughout the year and ask questions of your team, including your bank and strategic adviser. Being proactive about your situation will mean you can tackle problems – and take opportunities – head-on.  

While there is some positivity returning to the retail sector, economic challenges remain and it is vital that retail business leaders reach out for support. For assistance with your retail business, contact BDO’s specialist retail advisory team or read more of our retail insights here. To see more practical tips for business leaders, click here. 

Stay tuned for our May 2025 BDO Business Wellbeing Index, which will present a snapshot of how the country’s retail business leaders feel about their current and future business performance.