Over the past couple of weeks there have been a large number of media reports about the high levels of consumer spending during the Christmas period.
Is this high level of spending, in a heavily discounted sale period, good for retailers or does it prove that shoppers remain value driven?
According to Paymark, total spending for the month of December was up 7.5% compared with December 2012. This increase is a positive sign for our economy. Although the spending was in a peak sale period, consumers still spent more this festive season compared to last year. The higher spend is due to consumers feeling more confident about their future outlook, financial stability and job security.
Paymark also stated that spending on Boxing Day was record-breaking.
Boxing Day is the country’s largest individual sale day. Retailers promote and advertise aggressively and have heavy discounts on a range of products. So the fact that this was a “record-breaking” day in terms of spending may not be such a positive sign for New Zealand retailers. It proves that the retail environment remains competitive and retailers have to entice consumers on price, not product.
International competition and the transition to online has caused New Zealand retailers to have to consider themselves as global players competing on a global stage. Consumers now have far greater choice. If a product does not provide a point of difference, then it will inevitably have to compete on price.
Christmas sales figures for many of our retailers will most likely be in line with, or above, expectations. However deep discounting will cause many to feel pressure on profit margins.
So unless our retailers can provide a point of difference to consumers, and hence not have to resort to price competition, we can expect shoppers to continue to spend heavily in sale periods.
This is not the preferred option for our retailers.