A key question on businesses’ lips is
“how will this current lockdown impact my business, and our local economy, when we come out of it?”
Lessons from last time
New Zealanders went on a spending spree after we emerged from the Level 4 and Level 3 lockdowns last year – in fact much of the spending started while we were still at home.
Unexpectedly, Gross Domestic Product surged 14% in the second quarter of last year, as we experienced a V-shaped economic rebound, ie. a sharp rise back to a previous peak, after a sharp decline.
As with last year, tourism and hospitality are the hardest hit this time around, with borders essentially closed and people having to stay home.
Retail may fare somewhat better, with the ability for many to move business online. A clear outcome of the lockdowns last year was the increase in the number of New Zealanders shopping online (up 9.2%), more often (up 8.6%) and spending more each time (up 7%). The New Zealand eCommerce Review (2021) also says that 52% of shoppers who spent more last year have said their online shopping habits have changed permanently.
Spending predictions for the rest of the year
A couple of months ago, in collaboration with Publik Agency, we undertook research* into how Nelson Tasman people intended to spend for the rest of this year.
We surveyed a cross section of Nelson Tasman people and at a high level found that, on average 42%, or 32,980 people (over 20), in the Nelson Tasman regions will actively spend in the areas of personal spending, home alterations, major household items, vehicles, and domestic tourism this year. Big spend areas include home alterations, with half the population looking to spend on their home, and a third spending on major household items. A great many are also looking to spend more this year than last year.
Our survey was taken before this current lockdown, but we suggest that these spending intentions will remain. Given what we saw after the 2020 lockdowns, and what was reported in the last quarter’s quarter’s eftpos data, we are likely to see a similar pattern of spending. This is supported by Reserve Bank assistant governor Christian Hawkesby who said last week that it is more a matter of timing of spending, rather than losing spending and losing economic activity.
Our regional consumer spending survey had similar results to Dynata’s Global Consumer Trends: New Lives in a New World survey (2021), which found more discretionary spend for big-ticket items due to less international travel, setting up for working and learning from home, higher demand for more home entertainment devices, and, of course, more home time fuelling Kiwi home improvement desires.
As happened last year, people are likely to continue to support local. Our survey confirmed that supporting local business was the stand-out reason for why people spend locally, with 92% of respondents stating this. Interestingly, when buying locally, people also said they weren’t just looking for low cost products, they were equally buying local because of reduced environmental impact, product availability, affordability, and personal service.
What is different from last year
While positive consumer spending intent is predicted, nothing is guaranteed, and there are some differences this year from last.
Price increases across most categories have been well reported, as have delivery time pressures due to international freight issues and lack of capacity for some businesses to process orders.
Meanwhile, the Reserve Bank may have held the official cash rate recently, but it made it clear the rate would have gone up if we hadn’t gone into lockdown. The Bank is now looking at the impacts of the supply side of the economy before making a decision later in the year.
The money available to spend on discretionary expenses – those things your customers could live without – could also decline, with the expected rise in expenditure on food, health and housing, transport and clothing in 2021-22 (IBISWorld, 2021).
There are also likely to be some businesses in the hard hit sectors who managed to survive last time, but who unfortunately might not make it after this lockdown, especially if they needed to take on debt last year to get through.
With demand increasing for most, what’s next
Generally, lessons from last time, and our survey results, indicate similar spending behaviour to last year – people will likely keep spending for the rest of the year, in most categories.
Over the last week, our clients in the home alteration and personal spending categories, in particular, are experiencing increased demand, on an already high base, as consumers use their time at home to make enquiries and place orders. Others are gearing up for the dollar to come their way in Level 2.
These businesses are deciding how to meet demand. They want to continue to deliver great customer service to create customer loyalty, while also keeping their staff (and themselves) happy and healthy and not overworked. It is time for many to rationalise, or consider diversification, introduce new systems and technology to increase productivity, improve their online presence, or hire more staff – the latter not easy in a region with 3.2% unemployment (March 2021). Cashflow is of course key, regardless of the business decisions to be made.
For those with capacity for growth, or a need for more revenue, such as hospitality and tourism, it is survival or pivot mode, again. They are reviewing their point of difference, refining their offering and their marketing to win the consumers’ dollar over their competitors.
*500 telephone and online survey respondents, providing a 95% confidence level that views are reflective of the region’s population.
Want to know more?
Our Nelson Tasman Consumer Spending Sentiment Survey report provides our detailed findings broken down into key product categories, so you can learn more about your business category, in the context of national and international research we have included.
The report also offers business and marketing considerations for you to think about, to make the most of the ongoing demand for products and services locally. Even in the categories that don’t show strong spending intentions, there are opportunities to rationalise, adjust your business model, or market cleverly to win the dollar.
Order the detailed report, and meet with us to talk through what is relevant to you $495 +GST