Sector focus: Retail

BDO Business Wellbeing Index

Tough economic conditions create concern for retailers

The retail sector has rebounded from its high business performance scores seen in the period immediately following the 2023 General Election, with our March 2024 survey showing leaders now have a similar outlook to what they did in March 2023. However, wellbeing scores have improved now and looking to the future, suggesting that while operating conditions might be tough, retail leaders are taking the right steps to protect their mental health. 

View journalist Paddy Gower's conversation with Justin Martin, BDO Not-for-Profit Sector Leader, plus insights from Oderings Garden Centres CEO Angela Thompson. 

Retail business leaders are feeling considerably less positive about their current business performance than they were in October 2023. Our March 2024 survey shows just 43% of retail leaders are feeling positive about their overall business performance all or most of the time in the past two weeks, compared to 62% in October last year. This is reflected in future business performance sentiment, where 54% of leaders say they expect to feel positive in six months’ time – a sharp decline from 81% in October 2023. 

While these results show a drop in business performance sentiment from October, the latest results are in line with previous survey waves. This suggests that retail leaders were perhaps temporarily buoyed in the weeks following the election – with the new Government focusing on pro-business initiatives – but have continued to be impacted by New Zealand’s tough economic conditions.  

Indeed, the business performance attributes retail leaders are currently feeling least positive about are economic impacts, cash flow, and political factors. Cost of living increases are dampening consumer demand, which has a significant impact on retailers. And with retail sales volumes falling for the eighth consecutive quarter in the December 2023 quarter, it is unsurprising that retail leaders have a less than positive business performance outlook.

Wellbeing remains steady but is impacted by financial concerns

Although retail business performance is clearly struggling under tough market conditions, wellbeing has improved slightly since our October 2023 survey. Retail business leaders have scored 65 out of 100 on the WHO-5 Index - the World Health Organisation’s internationally recognised wellbeing measure. This is an increase from 61 in October 2023 and is the highest WHO-5 score for retailers since our first survey in May 2022. 

Future wellbeing sentiment has also improved from October 2023, with 60% of retail business leaders expecting to feel satisfied with life all or most of the time in six months’ time - a 3% improvement from our last survey.  

While these wellbeing measures are encouraging, business finances are a major driver of negative wellbeing for retailers both now and into the future, with 64% of retail leaders saying they expect business financial concerns to drive negative wellbeing in their lives in six months’ time. As New Zealand’s high cost of living continues to bite and consumers further tighten their purse strings, retail leaders may need to revisit their business plans to help navigate the months ahead. 

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Tips for retail business leaders

  • Look at what products you can offer as alternatives to customers who are still looking to shop with you but may be looking for more cost-effective alternatives. Similarly, loyalty programmes can help you to stay front-of-mind for customers.
  • Have a business plan and scale it to the size of your business. Understand your strategy, core proposition, and where you want to be in the coming months, then frame your actions around this.
  • Have a three-way forecast: a profit and loss, balance sheet, and cash flow statement all linked together. This will help with the financial part of your business plan.
  • Customer experience is key. Whether this is the in-store experience or using AI for virtual fittings and demonstration of products, customer experience is a key piece for retailers to be across.
  • Control costs and look to get efficiency from your existing staff. That includes looking closely at staff management, rostering, and holiday pay.
  • Inventory management is critical when times are tough, as inventory ties up a big chunk of cashflow. Think about the core brands you’ll support and how you can still have a range of products to entice customers.

Further support:

Expert thoughts

“The economic pressures we’re seeing in other sectors are especially prevalent for retailers, who see first-hand the impacts of falling consumer demand and tightening budgets. While retail leaders may not be able to influence the economic pressures at play, there are levers they can pull to focus on their business performance now and into the future. A robust business plan and integrated three-way forecast can help retailers to feel more prepared for the future, while decisions around stock levels – what to carry to entice customers in and encourage them to come back – should be carefully considered.”
“It’s great to see retail leaders’ wellbeing remains positive, despite challenging operating conditions across the country. In times like these, it’s important for retailers to stay connected with their customers, their business support networks, and their advisers. Reach out for support and focus on the measures you can control.”