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Wave Of Suppressed Demand Emerges From Lockdown

Spending did lift significantly as New Zealand moved from COVID-19 Alert Level 4 to Level 3 and now to Level 2 but merchant experience is very mixed.

During Level 4, spending at retail merchants through Paymark, including supermarkets, had been run-ning around half the levels seen a year ago on average or, to focus in on where hurt was greatest, if we exclude supermarkets, liquor outlets and pharmacies, the remaining large subset saw spending of around 90% below the levels seen a year ago.

Spending for this same all-retail group during the week ending Sunday 17 May (a period which included Level 3 and Level 2 days), improved to be down by only 11% on the same week last year in total.

Again, if we exclude supermarkets, liquor outlets and pharmacies, the remainder of the retail sector was down 26% year on year last week, also an improvement on the previous week.

For a clearer picture of the Level 3 effect, spending had been down in the week ending Sunday 10 May, a full week of Level 3 trading, by 35% (total retail) and 66% (retail excluding supermarkets, liquor outlets and pharmacies).

Not surprisingly the situation has differed for different types of merchants and a breakout of the last four days shows this variation more clearly for Level 2.

Supermarkets and some superettes and dairies have experienced higher spending throughout Level 4 and this has continued into Levels 3 and 2. For them, lockdown has been busy. Petrol stations, on the other hand, have been down in all three levels. These two groups made up around 47% of pre-The remaining merchants split into three broad clusters: “those doing well during Level 3 and 2”, “those going from doing poorly to now doing well in Level 2” and “those still doing poorly”. The figures mentioned below pertain to the cluster in total and not to individual merchants. 

In the first cluster – those bouncing back strongly in Level 3 - are a group of merchants for whom spending was running at 0-50% below year-ago levels during Level 4. Spending for these merchants picked up to be 13% on average above last year during Level 3 and to be 27% above last year during the first four days of Level 2. This represents around 5% of pre-COVID spending amongst retail sector and includes the likes of pharmacies and fruit/vege shops.

A larger group that represents around 21% of pre-COVID retail spending saw very little spending at all during Level 4 but, as a group, Level 3 was better but still below last year at -21%. So far during Level 2 spending for this group was been strong, running at 30% above last year. Included in this group are Food Takeaways, Specialised Food shops, Liquor outlets, Garden centres and stores selling Electronics, Appliances, Hardware and Floor Coverings.

The remaining merchants – around 28% of the Paymark retail total – saw little business during Level 4 and the situation only marginally improved during Level 3 and the group is still doing poorly, now averaging 7% below last year in Level 2. These merchants come from a wide cross-section of the re-tail sector and include shops selling clothes/footwear, gifts, sporting equipment or books plus the hos- pitality sector of Restaurants and cafes, Takeaway food providers, Motels and hotels. There is still wide variation within this group. For example, clothing/footwear merchants range from up strongly on last year during Level 2 to still well down, while most hospitality merchants are experiencing spending well below a year ago.

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