NEW ZEALAND MARKET SNAPSHOT
The New Zealand economy has been gradually slowing as key economic tailwinds and headwinds duke it out, and it's still not entirely clear which will be on top by year-end. The development of the economy in the first half of 2019 has been marked by a moderate pace, as a jump in construction activity and stronger growth in manufacturing offset a cooling services sector.
It is widely-expected the economy will reach the forecasted 2.5% growth by the year-end, supported by migration-led population increase, government spending and an accommodative monetary policy, which will boost investment activity. Whereas the international outlook shows weak performances in Australia and China, posing downside risks, the decision to scrap the capital gains tax for New Zealanders could improve the business climate, which is especially vital when domestic demand looks to be cooling.
New Zealand consumers remain optimistic, with consumer confidence sitting slightly above the 100 points baseline. However, the index declined to 101 points in the second quarter of 2019, down from 106 in the first quarter, driven by a decrease in consumer perceptions of job prospects and the state of personal finances, which contributed most to the decline.
Alongside softening consumer confidence the FMCG market has experienced slower growth, up 1.7% in Q2 2019 (compared to 2.0% in Q1) and 2.4% (vs 1.4% in Q1) in value. Value growth was propped up, in part, by the chilled foods, non-alcoholic beverages, frozen foods and pet supplies categories.
Last year was marked by new fuel taxes and rising rental prices and it’s no surprise New Zealanders prefer saving over spending — according to the latest Global Consumer Confidence Survey, 46% of New Zealanders are channeling their spare cash into savings, and a large proportion report to have reduced their spending on a range of categories over the past five years, in particular clothing (37%), dining out (35%) and entertainment/leisure activities (33%).
When it comes to brand loyalty, consumers in New Zealand are among the world’s most faithful. Only one in four New Zealanders say they are on the lookout for new brands and products in-store compared to 42% globally. 65% say they sometimes buy new brands or products, but usually stick to their favourites and need a solid, concrete reason to try anything new. When asked about these reasons, 41% say that a proposal from a trusted, well-known brand would push them to a novelty purchase, while 45% say value for money is the most important factor and 43% said they'd be influenced by price reductions.
Conservatism matters in e-commerce as well, but winning the e-commerce race means winning consumer trust. According to Nielsen’s connected commerce report, if a retailer promised in an ad to return money for products that didn't match what was ordered online, it would encourage 37% of consumers to shop online. "Same day product replacement" would convince 28% to make purchases online, meanwhile. Retailers investing in brand equity have a better chance of leaving their competitors behind while giving chase to established brands because online channels require a higher level of loyalty from consumers: they need confidence that the products will be delivered in a timely manner, in good condition and that the purchasing process is adequately secure.