Are Kiwi Retailers Turning a Corner or Stuck in Slow Trading? New Zealand Retail Insights July 2025

Are Kiwi Retailers Turning a Corner or Stuck in Slow Trading? New Zealand Retail Insights July 2025

July 2025 has offered a mixed bag for retailers across New Zealand. On one hand, spending is nudging upwards and hospitality is seeing a faint recovery. On the other, transaction counts are slipping and many businesses continue to fall short of sales expectations. Consumers are keeping a tighter grip on their wallets, and that restraint is reshaping how the retail economy looks.

The latest data shows consumer spending inching up in value, yet transaction volumes are edging down, meaning inflation not confidence is driving growth. Essentials like groceries continue to lift turnover, hospitality finds small gains, and international visitors add momentum, but overall retail still struggles with weak demand, rising costs, and only tentative signs of recovery.

Key Takeaways

  • Consumer spending rose 1.1 percent in July compared with last year, yet the number of transactions fell 0.2 percent, signalling that price rises rather than stronger demand are lifting totals.
  • Spending on groceries and liquor jumped nearly 6 percent year-on-year, showing the strain of higher costs in essential goods categories.
  • Hospitality experienced modest growth, up 1.3 percent, with cafés, bars, and restaurants seeing some lift even as urban centres lag behind smaller towns and regions.
  • International visitor spending spiked 17.2 percent, while transaction counts jumped 26.0 percent, reflecting a higher number of smaller, regular purchases.
  • Seasonally adjusted core retail spending improved slightly from June, with consumables leading the way, though volumes remain subdued.
  • Retail confidence has risen to 69 percent expecting their business to survive in the next 12 months, but 62 percent still missed sales targets last quarter.
  • Total retail sales volumes grew 0.8 percent from the first to second quarter, yet are still trailing 2023 benchmarks, underlining the sluggish nature of the recovery.
  • Retail wages are climbing, averaging $30.64 per hour, an increase of 3 percent from last year, reflecting ongoing cost pressures for employers.
  • Industry voices stress that rate cuts may provide relief, but subdued consumer confidence continues to weigh heavily on trading conditions.

Table of Contents

Consumer Spending and Transactions

Retail activity in July shows the tension between value and volume. Spending totals climbed slightly, but the number of times shoppers reached for their cards edged lower. Inflation kept dollar figures higher while actual demand showed little spark. The picture is uneven, with some categories carrying more weight than others.

Inflation Impact on Spending

The clearest driver of the rise in retail spending is inflation. As Westpac noted, spending values are being pushed up by higher prices across key categories rather than stronger household confidence. A 1.1 percent year-on-year increase in spend looks positive at first glance, yet once price pressures are stripped away the volume of goods and services purchased is flat. The ANZ-Roy Morgan survey also reflects this reality, with households showing lower willingness to commit to major purchases (ANZ PDF).

Groceries provide the clearest example. A near 6 percent increase in spending on food and liquor cannot be explained by a sudden surge in consumption. Rising costs in the supply chain, from freight to wages, are being passed on to consumers who are forced to pay more for the same basket. The same trend flows through to other essentials where substitution is limited, leaving households squeezed and discretionary categories under pressure.

The consumer response is cautious. Families are budgeting more tightly, delaying upgrades, and cutting back on discretionary trips to stores. Businesses on platforms like Shopify that sell across categories have noticed this pattern in their sales funnels, with essentials holding up better than lifestyle products. Online channels continue to provide reach, yet they are not immune to the same price-driven dynamics shaping bricks-and-mortar activity.

Transaction Volumes in Decline

While values are up, transaction counts tell a different story. Card data from Marketview shows a 0.2 percent drop in the number of transactions in July compared with the previous year. This means fewer shopping trips are taking place, with each one costing more. The decline highlights consumer restraint at a time when pay packets are being stretched across rent, food, and utilities.

International comparison provides more colour. Reuters reported that New Zealand households face rising inflation expectations, which in turn erodes confidence and discourages non-essential spending. This sentiment is visible in the lower frequency of shopping trips and smaller basket sizes, reinforcing the sense of a population under pressure.

There is also evidence of polarisation. International visitors contributed strongly to the July numbers, lifting transaction counts by more than a quarter. Tourists are more active in making smaller purchases across hospitality and retail, even as local households scale back. The combined picture is one of subdued domestic demand offset by external inflows, leaving retailers reliant on seasonal and tourist traffic for incremental gains.

FocusEconomics notes that consumer confidence dipped again in July, underscoring why transaction volumes are not keeping pace with population growth. Fewer swipes at the till illustrate that underlying demand remains weak, even if nominal spend appears to improve.

Essentials Sector Performance

Household essentials continue to dominate spending patterns in July. Food prices are lifting turnover, but the volume of items purchased is barely shifting. Liquor sales add to the category’s growth, showing how staples anchor overall retail even in slow months.

Supermarkets and Liquor

Supermarkets remain the biggest contributor to higher spending. Stats NZ confirmed a 5 percent rise in food prices in the year to July 2025, with increases spread across dairy, meat, and produce. Families are paying more for basics like milk, bread, and fresh vegetables, not buying significantly more of them.

The NZ Herald highlighted item-level detail that illustrates the squeeze. Butter, cheese, and beef mince all saw sharp jumps compared to the previous year. Liquor also featured in the spend uplift, a reminder that households are willing to shift spending patterns to maintain some lifestyle elements, even as costs rise. This mix shows the resilience of staples in driving total spend figures, even when other areas struggle.

The structure of grocery costs makes substitution difficult. If beef rises, families may buy more poultry, but they cannot avoid higher dairy prices. This rigidity means supermarkets capture a disproportionate share of spending growth. That reflects both the essential nature of their goods and the intensity of inflation hitting the sector.

Household Spending Shifts

Consumers are adjusting their approach to staples. The Foodstuffs grocery basket index shows variation, with some items rising sharply while others hold steady. Supply chain resilience and global market dynamics are shaping what ends up in the trolley. This uneven pattern creates difficult choices, as families decide where to absorb higher costs and where to trade down.

The impact is visible in transaction data. People are still making regular supermarket trips, but the average basket size is smaller and tilted towards private label or promotional items. Liquor spending has proved more resistant, reflecting social habits that endure even in tougher times. Discretionary household items, from cleaning products to ready meals, show patchier growth. These subtle shifts matter for retailers, who need to anticipate where substitution will occur and adjust their stock strategies.

Smaller towns and regional centres are seeing different patterns compared to major urban hubs. With lower average household incomes, spending decisions are more finely balanced. Essentials take up a larger share of weekly outgoings, so price increases bite harder. In contrast, higher-income households in city centres maintain some discretionary spend, but the gap between essentials and non-essentials is still widening.

Price Pressures on Consumables

Inflation in consumables has become a defining issue. The Infometrics supplier cost index showed underlying supplier prices continuing to rise through July, feeding directly into supermarket pricing. From packaging to logistics, every link in the chain adds incremental cost. Retailers cannot absorb these indefinitely, so the consumer ends up bearing the load.

Broader inflationary signals support this. Interest.co.nz noted that food price movements are pushing inflation forecasts higher, with expectations for CPI to lift above 3 percent later in the year. That outlook shapes consumer sentiment and depresses discretionary demand, because households expect essentials to keep rising.

Retailers are also rethinking channel strategies to cope. Businesses on platforms like Shopify are experimenting with unified commerce models, blending online and in-store to maintain loyalty. Price pressures are unavoidable, but a smoother customer journey across channels can help secure repeat spending. This approach matters most for consumables, where frequency and convenience play a critical role.

Hospitality is edging into positive territory after a long period of soft trading. July numbers show modest growth, supported by international arrivals and local spending patterns that prioritise social experiences. The gains are small, but they provide important signals about where momentum might return.

Urban Centres vs Smaller Towns

Major cities are still struggling to recover pre-pandemic vibrancy. Hospitality outlets in Auckland and Wellington report lower foot traffic, as work-from-home habits reduce weekday demand. Evenings and weekends are not filling the gap in the same way. The Horwath HTL review of hotel performance showed occupancy levels climbing, but the revenue per available room remains below peak levels. That indicates pressure across urban hospitality, from cafés to late-night bars.

Smaller towns and regional centres tell a different story. Spending is holding up better in communities where tourism and local events drive activity. The return of domestic travel patterns, combined with seasonal holidaymakers, has stabilised regional hospitality. Retailers in these areas often see stronger resilience, partly because the connection between community and commerce remains tight. This divergence highlights the importance of place in shaping spending outcomes.

Regional operators are learning to adapt more quickly. With leaner staffing and sharper cost controls, they are able to sustain service levels at lower volumes. Larger metropolitan businesses, carrying higher fixed costs, have found it harder to pivot. This has widened the gap between city-based venues and their regional peers.

Cafés and Restaurants

Restaurants and cafés remain central to hospitality growth. Marketview reported a 1.3 percent lift in hospitality spending in July, a small but notable change after months of flat numbers. The growth is not evenly shared. Fast casual outlets and coffee shops see steadier patronage, while fine dining venues face more variability.

Consumer patterns are shaping this divide. Households are more willing to budget for café visits that provide daily comfort, while more expensive dining is reserved for special occasions. For many operators, repeat trade through small-ticket purchases offers a steadier base. The experience is as important as the product, helping sustain a level of loyalty even when spending power is constrained.

Restaurants are also experimenting with formats. Hybrid dine-in and takeaway offerings give flexibility, ensuring that customers who want affordable options are still captured. This agility provides a buffer in months where demand softens. For retail precincts anchored by food and beverage outlets, these adjustments are critical to maintaining vibrancy.

Tourism-Driven Boost

Tourism is increasingly critical to hospitality recovery. International visitor spending rose strongly in July, with transactions climbing faster than spend. This points to tourists making more frequent, smaller purchases, spread across cafés, pubs, and casual dining. The Infometrics regional tourism expenditure data confirms that regions with higher visitor flows captured significant lifts in hospitality turnover.

Government strategy also plays a role. The Tourism Growth Roadmap emphasises regional distribution of visitors and sustainable growth. That policy is beginning to show results, with smaller towns benefiting from marketing campaigns that push travellers beyond the main centres. This aligns with the Stats NZ tourism satellite account, which highlights tourism’s significant role in regional economies.

Tourist activity not only drives direct hospitality spend but also stimulates adjacent retail. Souvenir stores, local craft markets, and specialty food outlets gain when foot traffic increases. This interplay between tourism and retail underscores the importance of a healthy visitor economy for the broader sector.

Retailer Sentiment

Retailer sentiment is showing signs of improvement even as trading remains difficult. Confidence surveys point to more businesses believing they can survive the next year, yet the same data shows many failing to hit sales targets. The tension between optimism and performance captures the mood across the sector.

Confidence Indicators

The latest Retail NZ survey reported 69 percent of retailers are confident their business will still be operating in 12 months, up from 57 percent a year ago. Inside Retail echoed the same trend, noting that expectations of meeting short-term sales targets are also rising. This lift in confidence matters, as it signals a shift in mindset even when consumer demand is subdued.

The broader economy tells a similar story. The NZIER Quarterly Survey of Business Opinion found that a net 27 percent of firms expect conditions to improve, yet their own trading activity remains weak. Confidence may be up, but revenue realities are more restrained. This split reflects how expectations can rise ahead of actual performance, often driven by hopes of policy or seasonal changes.

Sales Targets and Misses

Despite stronger confidence, sales outcomes remain challenging. Retail NZ highlighted that 62 percent of businesses missed their sales targets last quarter, suggesting the uplift in sentiment has yet to be matched by revenue. This aligns with the Stats NZ retail trade survey, which recorded only a 0.5 percent rise in retail volumes from March to June 2025. In real terms, that represents a very shallow recovery.

The contrast is also visible in consumer-facing data. Reuters reported that consumer confidence fell in July, with inflation expectations climbing above 5 percent. Shoppers are reluctant to commit to major purchases, which holds back discretionary categories. Even as businesses express confidence, they are selling into a market where households are cautious and transaction volumes are declining.

The NZ Herald observed a similar dynamic at a macro level. Overall business confidence has improved, but sectors like retail and construction still report ongoing slumps. It shows how sentiment indicators can paint a rosier picture than the ground-level reality, leaving retailers to bridge the gap between expectation and actual demand.

Quarterly Sales Volumes

Retail volumes nudged higher in the June 2025 quarter, providing a faint sign of resilience in a difficult environment. The lift was modest, but it ran counter to expectations of another dip. Spending patterns continue to show the weight of inflation, yet volume gains offer some encouragement.

Quarter-on-Quarter Movement

Stats NZ reported a 0.5 percent increase in the volume of seasonally adjusted retail sales compared with the March quarter. The rise was echoed in their release highlighting activity, showing that sales reached $31 billion in nominal terms. Gains were uneven across categories, with groceries and electronics outperforming while fuel remained flat.

Interest.co.nz noted that the increase surprised forecasters, who had expected volumes to fall. This unexpected result has implications for monetary policy, as the Reserve Bank assesses demand conditions in setting interest rates. It indicates that consumer activity has not collapsed entirely, even with tighter household budgets.

Comparisons to Previous Years

On an annual basis, retail volumes are still behind. The NZ Herald pointed out that while the quarter’s result was better than feared, total volumes remain weaker than the same period in 2023. Recovery is taking shape but remains shallow, with the industry still grappling with subdued consumer confidence.

Trading Economics confirmed that the 0.5 percent quarterly lift came in above forecasts but emphasised that year-on-year comparisons paint a slower picture (Trading Economics). The gap between current activity and pre-slowdown levels underlines how fragile momentum remains. Seasonal surges will be critical in bridging this difference.

Seasonal Adjustments

Seasonal adjustment plays a key role in interpreting these numbers. Retail sales naturally rise in holiday periods, then ease off afterwards. Stats NZ adjusted the figures to strip out these effects, showing that the core improvement in June is not just a calendar quirk. Without adjustment, raw figures can give a misleading impression of stronger growth than actually occurred.

The Stats NZ business financial data added context by noting nominal retail and accommodation sales of $31 billion in the quarter, slightly higher than in March. Inflation accounts for much of the gain, but the fact that volumes also grew shows demand is holding together more firmly than anticipated. That combination has been enough to ease concerns of a deeper slump, even if the recovery is fragile.

Workforce and Wages

Retailers are carrying rising wage bills while sales volumes struggle to keep pace. The cost of employing staff has moved up steadily, creating a mismatch between payroll growth and revenue growth. For businesses with tight margins, this is a pressing challenge.

Rising Wage Levels

The Retail NZ wages guide showed the average hourly retail wage reached $30.64 in 2025, up 3 percent from last year. This increase keeps the sector above the living wage and well clear of minimum wage thresholds. HCMag confirmed the same trend, noting that larger employers are offering additional benefits to attract and retain staff. The lift provides workers with some relief against inflation but weighs heavily on business balance sheets.

Retail has traditionally paid lower rates than national averages, yet the gap is narrowing. This can improve career appeal but also forces smaller retailers to make difficult trade-offs between staffing levels and service quality. Pay is climbing in line with wider labour market conditions, where Stats NZ data showed the overall median hourly wage across all sectors reached $35.00, up 4.3 percent year-on-year.

Employment Pressure

Employment levels have shown signs of strain. Stats NZ employment indicators recorded a 1.4 percent fall in filled jobs for men and a 0.5 percent fall for women in July compared with a year earlier. Retail accounts for a sizeable share of those jobs, and with sales volumes growing slowly, the pressure to reduce staffing hours is real.

The ANZ labour market preview forecast wage growth of 3.8 percent across the private sector but expected that rate to slow as unemployment edges higher. Retail employers face a delicate balancing act. They must pay competitively to secure workers, while also watching costs in a flat trading environment. Many are opting for leaner rosters and more flexible scheduling, reducing predictability for employees.

Living Wage Context

The living wage benchmark continues to influence employer decisions. Retail wages are above that level, but not by a wide margin. Employers are conscious of the reputational and recruitment benefits of staying in step with the living wage, particularly in a sector where high turnover has long been a challenge. The Retail NZ full wages guide maps out benchmarks across frontline sales, logistics, management, and digital roles, showing how compensation structures vary.

For workers, wage rises are offset by rising household costs, especially in food and housing. While nominal pay packets look larger, the real value of income is not stretching as far. For businesses, higher pay is locking in cost structures that are difficult to unwind, even if trading conditions soften. This tension between maintaining fair wages and preserving commercial viability defines the current labour market for retail.

Outlook for Retail

The retail sector faces a complicated path ahead. Spending indicators show resilience in essentials, confidence among retailers is improving, yet consumer caution remains strong. The next year will test how businesses adapt to shifting demand and persistent cost pressures.

Short-Term Pressures

Slow trading continues to define the present. Retail NZ reported that many operators are still missing sales targets despite steady spending on groceries and hospitality. Rising costs in wages, utilities, and rent keep margins thin. For smaller businesses, cash flow strain is acute. Cautious households mean discretionary categories will likely stay muted through the remainder of the year.

Seasonality provides some hope. Spending typically climbs in the lead-up to summer and the holiday period, offering retailers a chance to recover ground. Yet with consumers prioritising essentials, the extent of seasonal uplift is uncertain. Retailers must prepare for volatility in demand even during peak months.

Policy and Rate Impacts

Economic policy is set to play a decisive role. The Treasury’s July update noted inflationary risks and suggested the Reserve Bank may hold rates steady longer than expected. This stance limits relief for households carrying mortgages, which in turn dampens retail spending. Lower rates would free up disposable income, but that prospect appears delayed.

Confidence surveys such as the NZIER Quarterly Survey of Business Opinion show businesses are more optimistic, but still report weak trading activity. This misalignment illustrates how sentiment can improve on the expectation of future rate cuts even while the present remains difficult. For retailers, clarity on policy direction is vital to planning inventory, pricing, and labour strategies.

Structural Adjustments

Retailers are also investing in structural change to strengthen resilience. Platforms like Shopify are being adopted more widely, helping businesses integrate online and in-store activity. This omnichannel approach spreads risk and allows for more agile responses to shifts in demand. For many, technology adoption is less a choice than a necessity.

The long-term outlook hinges on adaptation. Essentials will keep anchoring spend, hospitality will rise and fall with tourism flows, and discretionary goods will continue to fluctuate with consumer confidence. Retailers who can streamline costs while maintaining engagement are more likely to withstand the next cycle. The road forward is not straightforward, but the tools to navigate it are becoming clearer.

FAQs

What happened to overall retail spending in July 2025?
According to Marketview, spending rose 1.1 percent compared with July last year, but the number of transactions fell slightly. Inflation drove the lift rather than stronger demand.

Why are groceries and liquor showing the strongest growth?
Stats NZ reported a 5 percent rise in food prices in the year to July, with staples like dairy and meat pushing up the average supermarket basket. Liquor purchases also added to the category’s increase.

How did hospitality perform during July?
Marketview data showed a 1.3 percent increase in hospitality spending. Smaller towns and regional centres captured stronger gains than major urban areas, where trading is still subdued.

What role did international visitors play in retail spending?
International visitor spend rose more than 17 percent in July, with transactions climbing faster than total value. Infometrics highlighted that regions reliant on tourism benefitted the most from this lift.

Has retailer confidence improved in 2025?
Yes. Retail NZ reported that 69 percent of retailers expect to be trading in a year’s time, up from 57 percent last year, although many are still missing sales targets.

How are quarterly sales volumes tracking?
Stats NZ confirmed a 0.5 percent rise in retail volumes in the June quarter compared with March. Interest.co.nz noted this outcome surprised forecasters who expected a fall.

Are retail wages keeping up with costs?
The Retail NZ wages guide showed average retail pay reached $30.64 per hour in 2025, a 3 percent rise. Stats NZ reported the national median wage climbed to $35.00, meaning retail remains just below the overall economy’s average.

What pressures are shaping employment in the sector?
Stats NZ data shows a decline in filled jobs compared with July 2024, with retailers trimming rosters to manage costs. Rising wage expectations make this balancing act more complex.

How are policy and interest rates affecting retailers?
The Treasury’s July update suggested inflation pressures remain, limiting the chance of early rate cuts. Higher borrowing costs keep households cautious, which reduces discretionary spending in retail.

What strategies are retailers using to adapt?
Many are investing in technology to unify sales channels. Shopify integration of point-of-sale and online stores helps manage inventory, streamline operations, and build customer loyalty in a slow market.

Conclusion

Retail in New Zealand during July 2025 has been defined by contrasts. Spending totals have inched higher, yet transaction volumes signal restraint. Essentials such as food and liquor anchor growth, while hospitality and tourism provide a modest lift. Retailer confidence is rising, but sales outcomes continue to fall short of expectations. Wages are moving upward, leaving employers with higher costs in an already thin-margin environment.

These patterns highlight the delicate balance between optimism and reality. Inflation underpins much of the spending increase, not stronger demand. Retailers are adapting with technology, structural adjustments, and sharper cost management, but progress remains fragile. Policymakers face the challenge of supporting recovery without fuelling further inflation, and businesses must navigate this landscape with agility.

The significance of these findings lies in how they capture a sector at a crossroads. Retail is neither collapsing nor flourishing. It is holding steady under pressure, evolving slowly, and showing resilience in pockets where confidence and innovation converge. The months ahead will decide if this resilience grows into momentum or fades back into stagnation. For retailers, policymakers, and consumers alike, the next choices made will shape the path of the entire sector.

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