Shops and sheds

Lockdowns, successive alert level restrictions, and the inability to travel sent New Zealanders into a clicking frenzy – shopping online more frequently, and spending more online than ever before.

NZ Post says that Q4 2021 was the biggest online spending quarter since it began monitoring online spend four years ago, with all consumer retail sectors experiencing growth.

Kiwis spent $2.5 billion online in that period – 45 percent more than the same quarter in 2020 and up 71 percent on two years ago.

In 2021, physical instore retail spending was up 1 percent ($654 million) on the 2020 full year and that’s encouraging given that our largest population base – Auckland – had very restricted movement for much of that year.

Shopping in-store is still the main way Kiwis shop, says Chris Beasleigh, Bayleys national director retail sales and leasing.

“While around half of New Zealand’s adult population now shops online, when alert levels/traffic light settings were relaxed, foot-traffic returned to physical stores,” he says.

“However, most stores have had to cement a resilient omnichannel presence in the market to optimise business and that’s been tricky for some.

“Large format retail stores have really thrived during the pandemic with solid backing enabling them to pivot quickly when required, and there’s less than 1-percent vacancy in the Auckland big-box market.

“It will take time for people to confidently shop in person on the ‘high street’ again regularly, but the personal elements of instore shopping can’t easily be replicated through a screen – despite the friendliest of chatbots.”

As fuel hikes and inflation start to bite at consumer wallets, shoppers will be ultra-discerning about where they spend their money so the sector needs to rationalise and look at where resources are best invested.

“Alongside the challenge of getting shoppers back instore are the additional property demands business owners face when working across multiple commerce channels,” says Beasleigh.

“Retailers have to manage inventory levels across physical and e-commerce platforms, they have to separate retail storefront from online fulfilment operations, and storage of stock is a big issue – along with on-going supply chain and workforce disruptions.”

Scott Campbell, Bayleys national director industrial and logistics says there’s huge demand for warehousing on the back of the growth in e-commerce, with retailers competing with the broader industrial market for suitable space.

“There’s not enough warehouse footprint to go around as it is – let alone for the ever-growing e-commerce market, so some clever thinking is required,” he says.

“Internationally, there is rising demand for co-warehousing – along the lines of co-working office space without the limitations of long-term leases.

“This gives on-demand storage options for those retailers that can’t afford or don’t need a whole warehouse, but need flexibility around logistics capability and inventory capacity.”

Campbell says additionally, baseline delivery expectations are shifting and global experience shows that the younger the demographic, the more likely the customer is to want (and be willing to pay for) the convenience of same day delivery.

“Hence, the pressure to find last-mile delivery solutions that allow speedy fulfilment and partnering with delivery providers to facilitate this.”

In the UK, Bayleys’ global partner Knight Frank reports all-time-low vacancy rates and rising rents for urban logistics space to service online retail.

It says around 23.5 percent of warehousing space is now allocated to “spoke” facilities servicing last-mile deliveries, with the surge in demand not only being driven by the growth in e-commerce but also by the need for supply chain resilience and operational efficiencies.

It signals the rise in automation in warehouses as inevitable given workforce challenges and the need to streamline operations.

Subscribe to receive the latest commercial news and insights from Bayleys Workplace