The COVID-19 outbreak has seen countries collapse under the strain of supporting patients with millions of cases around the world and hundreds of thousands of fatalities.
While New Zealand has avoided the worst in terms of number of cases, we have done so by closing the borders and by clamping down hard on the early outbreaks, including moving swiftly to Level 4 and a total shut down of our people’s ability to move about the country. The outcome of this is the early and severe impact on the retail sector, with tourism obviously the hardest hit.
However, when we look at the retail sector itself, it’s a tale of two halves. The core retail group consists of shops (with EFTPOS terminals of course) as opposed to other EFTPOS users such as charities, local council offices, doctor’s clinics and so forth, and largely core retail has managed to do quite well during COVID, despite the hard stop during Level 4.
This time last year the core retail group was growing at around 5.5% year on year. That increased somewhat to 7% in the March quarter (aided no doubt by people rushing to stock up prior to lockdown) and in the June quarter (with Level 4 lockdown bringing much in-store retail to a standstill) fell back by only a small amount – around 2%. In June itself, the core retail group was growing again at more than 10% year on last year.
This seems remarkable and while Paymark can’t assess why people shop, only how, another trend may provide the answer – the value of each transaction has risen sharply. Twelve months ago, the average spend amongst these shops was $47 per transaction. In June, the average was $51 per transaction.
That increase in per transaction spend has helped offset fewer transactions and has boosted underlying spending growth to smooth out retail’s overall result during lockdown.
The hospitality sector, by way of contrast, is a different story. While growth was a little ahead of Core Retail this time last year, by June Hospitality was in massive decline – down 47.9% on the year before. While hospitality certainly got a lot of headlines when the doors were flung open after lockdown, the sector has still not quite fully recovered – down around 5% for June 2020 as opposed to June 2019.
The average spend in terms of hospitality is also fairly static – hovering around the mid $20s per transaction – which suggests we’re not quite ready to go out and have too good a time of it in public yet.
The good news is that while other countries failed to shut down quickly and have suffered huge economic losses as a result, we have avoided the worst of the health impacts and been able to relax our social distancing rules, open up our retail and hospitality sectors and get the economy rolling again.