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BusinessMarch 5, 2020

The stores are stocked, for now: How Covid-19 is influencing NZ retail

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The Covid-19 coronavirus continues to tax New Zealand’s economy with crippled exports and stagnant manufactures choking supply chains. But what’s the reality at the front line of New Zealand retail – the malls?

Take a stroll through any Westfield mall and you’re not likely to find grim scenes of desolate stores with bare shelves. Despite global coronavirus fears and the Ministry of Health confirming a second case in New Zealand today, it appears to be business as usual at most retail centres with the typical number of customers devotedly participating in the national pastime of shopping.

While the shelves at Kmart may still be filled, things might not be so rosy in the stock room out back and some products could soon run out if supply from China doesn’t resume soon.

Westfield and Dressmart declined to comment to queries from The Spinoff about coronavirus-related effects to sales and foot traffic in their malls, yet leading retailers have already started grumbling about imminent stock shortages which will invariably impact sales revenue. On Tuesday The Warehouse Group warned that it was facing an eight-week delay in some of its products while Noel Leeming said it predicted delays until April.

According to the director of one of New Zealand’s largest electronics distributors – which also supplies The Warehouse Group – overseas supply is definitely an issue, with a massive backlog of orders lodged with China, the worlds leading manufacturer of electronics.

“February was OK, I predict March to be down. We’re taking measures just to try and wait it out. What we see is we’re still getting lots and lots of orders but we just can’t fulfil it,” he told The Spinoff.

He said there was no cause for panic and there hadn’t been any obvious impact on sales or orders from New Zealand retailers which showed that coronavirus fears were not deterring consumers from shopping for electronics goods. A product manager of another electronics distributor agreed that there was no changes in consumer demand for electronic goods, and that any issues were down to supply.

“There’s some component shortages right now and there are going to be shortages getting stock into New Zealand, some of these delays may happen all the way up to May or June,” he said.

“We’ve got inventory here and we also had inventory in transit so it’s not too bad, but I feel that there is going to be a crunch time in the next six-to-eight weeks when our reserves have completely gone.”

The produce aisle in an ‘Unwrapped’ Countdown store (Photo: Supplied)

The medical world is also echoing the same predictions, with many products manufactured in Wuhan, the epicentre of the coronavirus outbreak. Jackson Allison Medical, the company that supplies personal protective equipment to New Zealand district health boards, said it had only nine weeks of stock left although it hoped that Chinese production would resume next week.

Oliver Hunt, the founder of Medsalv – a startup which reprocesses and sells single-use medical devices to hospitals – said the company was well placed to supply products in the case of coronavirus-related shortages, but hospitals and their distributors still seemed sufficiently stocked for the time being.

While supermarkets have seen cases of panic buying, especially of items like hand sanitiser, the shelves at Countdown are well stocked and grocery suppliers are confident that the industry would be able to maintain a steady supply throughout

There are also some truly unfortunate businesses which simultaneously rely on exports of raw material to China and imports of the finished product back to New Zealand, and may therefore be susceptible to a particularly bruising double whammy. Outdoor clothing brand Kathmandu sells Chinese manufactured-New Zealand merino products. Again however, nothing seems amiss on the customer side of the counter at the St Lukes store with the shelves and racks sagging under the weight of jumpers in preparation for an autumn sale this week.

It could have been terrible for Auckland-based Frankco & Simon Furniture, which sells New Zealand pine furniture that is made in China. However it found itself in an advantageous position to weather the storm because a container of product had already landed in New Zealand in late January before the coronavirus measures fully came into effect.

“We haven’t had any issue with that because our last container arrived end of January so we pretty much now are well stocked,” a spokesperson told The Spinoff, although she said some competitors weren’t so fortunate.

“We heard from our customers that they cannot get [some products] from other supplier and asked if we can help them.

“So we hope it should be enough for two or three months. We’re just lucky.”

Luck is certainly not favouring export businesses however, which continue to struggle under the weight of coronavirus measures. Earlier this week Stats NZ released experimental data suggesting that around $300m had been knocked off the value of New Zealand exports over the past four weeks. The total value of exports for the period was recorded at $1.1b compared with a projected figure of $1.4b under normal virus-free circumstances.

Seafood was the hardest hit industry with exports down from $70m to $30m. The government announced yesterday it will allow fishing companies to carry forward 10 per cent of unused catch entitlement – under the quota management system – to next year. However the Rock Lobster Industry Council told RNZ that it won’t go far enough and a full roll over of catch entitlement is needed.

While dairy has resisted any severe drops in revenue, mainly due to higher prices, the meat sector has suffered with exports down from $280m last year to $170m this year. Forestry was also hurting with export values down $70m to $180m from the same period last year and reports of 300 Gisborne workers and their families being affected.

Kiwibank chief economist Jarrod Kerr told RNZ’s Morning Report this week that the government should offer struggling operations assistance in the form of money or tax breaks to prevent employee layoffs and businesses collapsing. He said this should be extended to the agriculture, tourism and education sectors, which are also hobbling under the travel ban.

The government has launched two initiatives that cabinet approved this week, one of which was an extra $4m to help businesses around the country with payroll issues and tax payments with Inland Revenue. The second is the establishment of up to 16 rapid response Ministry of Social Development teams to assist with moving workers into other employment. The measures are in addition to $11million allocated to the tourism businesses to help them adapt to the severe drop in Chinese tourist numbers and revenue since the travel ban came into affect, especially in places like Rotorua and Queenstown.

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