Variety Stores in New Zealand

PROSPECTS

Strong competition from other retail channels

Value sales continued to decline for variety stores in 2019, and are expected to continue to do so over the forecast period. This is expected to be attributable to growing competition from other channels within retail, such as mass merchandisers, as well as e-commerce.

Challenging operating conditions

In addition to the overall decline in consumer demand for variety stores, operators within the channel are expected to be faced with rising operating costs. With the channel heavily segmented, most variety stores are independently owned and operated, and when faced with rising minimum wage, rent, insurance and other associated costs, the viability of many of these outlets over the forecast period is expected to be called into question.

Changing nature of retail

Variety stores have traditionally competed purely on price, however the retail dynamics have changed considerably in New Zealand since the late-1990s heyday of variety stores. New Zealanders are increasingly price conscious and retailers have responded by being more aggressive with their discount pricing strategies, which has drawn consumers away from variety stores, and is expected to continue to do so over the forecast period.

COMPETITIVE LANDSCAPE

Variety stores remains heavily segmented

While 2n'5 remained the leading player in variety stores in 2019, its value share remained in the single digits. As such, the channel remained highly segmented, with the majority of stores independent and owner operated.

Increasing competition from e-commerce

The rise of online sites such as Alibaba and to a lesser extent, Trade Me, has meant that consumers can buy direct from the manufacturer, many products which have become staples of variety stores. As such, this has resulted in declining consumer demand and increased competition for variety stores.

Competition from store-based retailing

Retailers in variety stores typically appeal to consumers through offering a wide range of inexpensive household items and snacks. However, with brands from other retail channels, such as mass merchandisers, becoming increasingly price-competitive, more and more consumers prefer to shop at these channels.

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