Variety Stores in New Zealand

2020 IMPACT

Demand for value-for-money products helps to sustain variety stores

Variety stores in New Zealand have traditionally relied on brick-and-mortar outlets due to the nature of the products sold, smaller unit prices and value per transaction. Therefore, players in the category have placed less focus on the e-commerce channel.

Operating costs a hurdle for variety stores with tighter margins

New Zealand consumers have been attracted to variety stores based on interest in the discount model that variety stores have, allowing access to cheaper products with a fairly acceptable quality. Overall, popularity in the category has been sustained due to a spectrum of decorative products available for cheaper prices.

Emerging online competition and lower foot traffic add to challenges

The rapid growth of e-commerce, accelerated by the pandemic, has been a great driver of change in the retail landscape. This has caused store-based retailing to suffer tremendously, as consumer preferences have been shifting.

RECOVERY AND OPPORTUNITIES

Growing concerns about sustainability set to negatively impact variety stores moving forwards

Lower prices continue to be what draws consumers into variety stores, but sustainability issues pose a growing concern for evolving consumer values. Although consumers in New Zealand have felt the impact of economic and financial challenges translating to restricted spending and looking out for bargain purchases, sustainability concerns are growing amongst consumers following the effects of the pandemic.

Operating costs remain a key challenge for variety stores in the quest to stay profitable

Variety stores tend to offer value to consumers, with products at affordable prices for consumers. However, in terms of the operating model, these stores function on tight margins in order to be able to offer competitive prices.

Competition from other retail channels places further downwards pressure on variety stores

Value sales for variety stores were already in negative figures over the recent review period and the event of COVID-19 in 2020 placed additional pressure on the category. Whilst 2021-2022 is expected to see a slight uptick in sales, minimal growth is expected over the forecast period.