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Retail Lessons For 2016 And Beyond
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Retail Lessons For 2016 And Beyond

New Zealand is changing. As consumers, we’re getting smarter. We’re more connected to information than ever before: the average time spent on the Internet from home and work increased by 23 minutes a week in the past year alone. As a population, we’re getting older. The amount of over 50s is set to grow by 5 per cent in the next ten years. As shoppers, we’re getting savvier. We know what we want, and we’re not afraid to vote with our feet. Here are the areas to consider when looking ahead to retail in 2016:

We’re Growing
While the digital era continues to flourish and spur retailers to lean towards the online stage, bricks and mortar supermarket growth is on the rise. Supermarket growth for the year 2015 was up 2.9% in value and up 2.2% in volume (units sold). Net immigration helped drive volume growth as inflation remained low. We believe these dynamics will remain for most of 2016.

Innovate Don’t Perpetuate
The percentage of sales on promotion in New Zealand came in at 55% for 2015. We know that training consumers to purchase products on promotion will only reinforce price-sensitive behaviours and will steer trade spend away from Research and Development of true product innovation. This is very detrimental to long term growth amongst both manufacturers and private label producers, and we’re already seeing this in 2015’s innovation results.

There were a total of 13,984 branded products that were new to market in 2015. Of these, only 64 (0.4%) achieved sales of over $1,000,000. In addition to this, only 7 (10%) products could be considered as true innovation, with the rest being line extensions. The industry needs more genuine innovation if it wants to grow and step outside the promotional maelstrom.

We would encourage the industry to take the focus off strong price promotion to create space for investment into more unique New Product Development. This is an important opportunity for growth for smaller manufacturers in particular who are able to develop and test new products much quicker than larger manufacturers.

Smarter Range, Not More Choice
Giving shoppers more choice in-store doesn’t necessarily lead to better outcomes for retailers. From a consumer’s perspective, more choice can often lead to confusion in the shopping aisle.
At a store level, more choice can lead to growth restrictions as multiple products are cannibalising the sales of one another on the shelves.

If we look at branded products in the canned fish aisle, we know that 20%% of all the products sold in the last year (week ending 24.01.2016) contributed to 80% of the total value in the category.
For wine, less than 8% of the stock-keeping units (SKU) on the shelf contributed 80% of the value to the total wine category. Focusing on having the right product range in-store helps to de-clutter the offer for the consumer, making shopping easier, as well as maximising the value growth opportunities by category.

Get Ready For The ‘New’ New Zealand
Between 2015 and 2025, the percentage of people aged over 50 years old in New Zealand is expected grow from 38% to 43% of the total population. With that said, it has also been assumed that the percentage of online shoppers over the age of 18 will inflate from 58% to 80%.

Auckland’s population is projected to grow from 1.2 million to 1.5 million people, also encompassing a growth in ethnic population (specifically Chinese, Indian, Korean South African, Other Asian and Pacific Island). These indicative trends require both manufacturers and retailers to have strategies in place to cater for the “new” New Zealand. Knowing the consumer, and projected growth categories for these consumers, is a huge benefit to retailers and manufacturers, not only in New Zealand – but on a global scale.

2015 revealed that the baby boomer generation accounts for 50% of FMCG sales in New Zealand, 80% of leisure spending and 41% of all new car purchases. In addition to this, millennials – 18-36 year olds (as large as the baby boomer generation) have a higher tendency to delay marriage, spend more of their income, and be more technologically connected than any other generation.

The rise of connected consumers has seen 3.1 million New Zealanders (aged 15 and over) spending an average of 14 hours online each week. Thus, providing retailers with the opportunity to tap in to this growing digital behaviour to inform and excite.

2016 – How To Win
The good news is the retail industry is growing, but there is always room for more. The bad news is that there isn’t enough innovation, and ranging is crowding the shopper experience. Add to this a digital revolution, and you’ve got new ways for consumers to interact with you and a hunger for more information than ever. Nielsen’s 2015 retail research shows the industry needs to cultivate more opportunities to offer shoppers what they want if it wants to continue to grow. In order to know what they want, it is important to listen and understand who it is you are hoping to win, how best to reach them and how best to please them.