KBA Newsletter September 2018: Market View

How is K' Road faring?

June quarterly update of consumer activity

Spending on K' Road was up across April to June in comparison to last year, according to Marketview, and the numbers of tourists spending money on the street has also increased. These are positive trends. However, the value of the spending has decreased. This is possibly because of a downward trend in spend and transactions across the accommodation sector within K' Road and across the city.

KBA manager Michael Richardson says K' Road is tracking quite well in most areas but is influenced negatively by lighter trading in the accommodation area.

“The hospitality sector is strong and K' Road businesses are resilient to external market or seasonal changes in trade due to their agility, size and innovation. Our general trade is increasing by the rate of inflation with some areas doing better than others."

Here is a look at the latest statistics on consumer spending in the June quarter between 2017-2018 from Marketview.

Transactions and Spend
June was a good month for K' Road. Spending increased by 3.1% compared to last June. However over April and May spending was down -3.0% and that pulled the quarterly average down to -7.2%. Nationally spending was up 2.2%. The volume of transactions in K' Road was up 4.5% over the April to June quarter, higher than the national volume of transactions (up 3.2%).

This is partly because 'Other Store types' has had an effect on our yearly spend and transactions. This includes Accommodation which is down overall across the city. If we remove 'Other Store types' (Including the accommodation sector), then spending and transactions are up 2.5% and 1.7%.

Nationally spending growth peaked in the middle of the quarter, up 3.0% in May. April was a relatively quiet month in comparison, up just 1.1% on the same month last year, despite including Easter Monday and the school holidays.

Key Competitors
Each quarter Marketview compares K' Road to key competitors CBD, Grey Lynn and Ponsonby. Over the April – June quarter, K' Road had more transactions (4.5%) than Ponsonby (-.9%), CBD (-2.8%) and Grey Lynn (.4%).

However, Grey Lynn and Ponsonby had higher spending rates than K' Road, while the CBD was about the same. The average amount spent on a transaction on K' Road for the June quarter was $35.55 while for Ponsonby it was $51.09 and Grey Lynn was $46.59. We get more volume but it is of lesser value.

Where are K' Road customers coming from?
Unsurprisingly, most of K' Road customers come from Auckland Central (47.8%), followed by Auckland North (13.5%), Auckland South (9.9%) and Auckland West (7.6%). Locals spent a little more than other visitors to the street.

Wellington and Christchurch visitors made up 2.5% and 2.6% of the remaining customers along K' Road.

Overseas Visitors
The tourist market is one that offers a lot of potential for K' Road and the spending on K' Road by tourists has increased by 4.8% compared to the same quarter in 2017 with the majority of our tourist customers from Australia (24.8%). The next four biggest categories were America, Europe, United Kingdom and China.

The biggest spenders were the broad category of 'the rest of the Americas', while the French, UK and Japanese tourists spent the least.

Overall the type of merchants operating on K' Road has changed little over the past year.

Michael says K' Road businesses are tracking comfortably with transactions, according to Market View indications, but there is room to increase individual transaction values.
“A strategy to add value to the bottom line of businesses might be to look at methods to increase individual transaction values without negatively affecting transaction numbers," says KBA precinct manager Michael Richardson.

Here is the full Marketview June Quarterly report for K' Road.

National consumer trends to consider for K' Road

Changing trends in shopping habits are starting to impact on K' Road, particularly with shopping malls expanding further into hospitality. Offering retail and hospitality that is unique, friendly, and smart is the key to holding onto K' Road's unique character, says Michael Richardson, KBA precinct manager. We summarise a recent national Marketview report (LINK IN HERE IF WE CAN?) on national consumer trends.

Eating out
Nationally Kiwis are eating out more than ever before. New Zealanders spending at takeaways, cafes, and restaurants increased 10.1% from 2013, peaking at $7.6B in the 12 months ending June 2018. This is well above the CPI and population growth during the same time period.

As takeaways become more 'gourmet', their popularity is likely to continue increasing with successful operators enjoying the strong trend in consumer demand for high quality food with increased convenience.

Cities favoured for food
Kiwis still favour eating and drinking in the city. Over the past 12 months, spending growth in central city bars, cafes and restaurants (6.3%) and takeaways (10.1%) have exceeded the equivalent businesses in malls (3.0% and 7.2% respectively).

Malls enhancing hospitality offerings
However hospitality providers in New Zealand malls are starting to enhance their offerings. Since June last year, hospitality providers in malls have seen an increase in higher value customers - transactions valued $50-$99 increased 10.7% and customers spending $100-$199 per transaction have increased 5.4%. This indicates Kiwis are starting to buy more meals at malls, rather than only snacks or treats.

Shopping mall owners are obviously optimistic about their future. A number are making multi-million dollar investments, eg Newmarket, Commercial Bay and Sylvia Park. It is no coincidence that big international retailers such as Zara and H&M have chosen to set up in our biggest malls, rather than on high streets.

National GDP Statistics
A solid but unspectacular level of growth is how Marketview described the GDP for the quarter ending 31 March 2018 (up $270b, 0.5% above the last quarter). New Zealand's annual growth was 2.7%, down a percent on the growth of last year and lower than the 3.2% growth that NZ has experienced on average in the past five years.

If the current slow-down in economic growth continues it could likely mean less discretionary spending ringing through retailer's tills. But it could have some upside for retailers, as it will likely have a deflationary effect on the economy, reducing some cost pressures. In the last quarter retail and accommodation, although slow, performed in-line relative to the rest of the economy. However, over the past two years, it has been a strong performer and major contributor to overall growth of the economy.

*Marketview considered the main centres of Auckland, Hamilton, Wellington, Christchurch, Queenstown and Dunedin as “CBD's" in this report.

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