Retail sales dropped nearly 80 percent in April, compared to the same month last year, as New Zealanders were in lockdown or level 3 Covid-19 restrictions.
Retail NZ chief executive Greg Harford warns a wave of redundancies could hit the sector if the government doesn’t step in and do more once the wage subsidy runs out.
A survey of retailers revealed overall sales were well down, though in the first week of level 3 online sales went up 350 percent.
Harford said online trading was not enough for the sector to recover from the “economic carnage” of the lockdown.
He said the survival of some businesses was on a knife-edge.
Harford said the wage subsidy was keeping businesses propped up for now, but many would not survive unless they received more help.
“The last seven weeks or so have led to a total evaporation of any profitability that there might have been in the sector.
Retailers operate on very tight margins – the net margin across the sector is just 3.6 percent.
“We are expecting that retailers will need to go through a period of retrenchment … as [the wage subsidy] runs out we’ll be expecting a wave of redundancies.”
Harford said while some stores were able to operate using delivery and click and collect methods, broadly level 3 was not all that different to level 4.
“We’re not expecting [data] to change until well after stores are allowed to reopen.”
He said retailers were becoming frustrated about keeping the doors shut.
“We’ve seen great work by the likes of supermarkets over the level 4 lockdown where people have been able to come into the store and shop safely and if other stores are able to put in similar measures there’s no reason why they shouldn’t be able to open their physical shops as well.”
He said the impacts would be felt for months and the government could, and should, do more.
“We’d be supportive of an extension to the wage subsidy, particularly for the retail sector. There’s little to no revenue coming through the door, and that’s unlikely to change for the foreseeable future, so it’s going to be very difficult to retain people.”
“Relatively small loans are not necessarily the answer because they’re not going to help retailers – which operate on very low margins – dig themselves out of the hole that’s been created by Covid-19.”
He said Retail NZ was still lobbying for rent relief, or rent assistance in some way.
“The government has said it’s looking into the issue and we’re hopeful there will be some positive news out of that shortly.”
There are 27,000 retail businesses in New Zealand employing around 219,000 people.
This article was originally published on RNZ and re-published with permission.