Online shopping in New Zealand reached record transaction levels in 2024, while in-store spending dropped 2.5 percent year-on-year. That gap captures the pressure facing physical retail right now. But the story is more complicated than headlines about a retail apocalypse might suggest. Total retail sales actually grew 3 percent to NZD68,271 million in 2025, according to Euromonitor, driven largely by supermarkets and value-driven formats. The question is not whether people are still spending — they are — but where that spending is happening and what it means for businesses that rely on foot traffic.
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This article is general information only and does not constitute professional advice. For your specific situation, consult a qualified professional.
The market is polarising. Consumers are prioritising affordability, and international entrants like IKEA and Victoria’s Secret have raised the bar for omnichannel execution. Meanwhile, platforms like Temu and Shein are siphoning spend away from local high streets. Retailers who assume physical stores are finished, or that nothing needs to change, are both missing the real picture. Here’s what you actually need to know about adapting to changing consumer habits in New Zealand’s retail landscape.
What the Shift to Online Really Means for Physical Stores
One term you will hear constantly in discussions about retail adaptation is omnichannel retailing. It simply means integrating every sales channel — physical store, website, mobile app, social media — so that the customer experience is seamless across all of them. A shopper might browse on a phone, try in-store, and order online for home delivery. That is the new normal, not a premium feature.
What I tend to notice is that the retailers who are struggling most are the ones treating online as a side project. A standalone website with no connection to store inventory, pricing, or loyalty programs creates confusion, not convenience. The businesses that survive this shift are the ones that erase the line between digital and physical entirely.
The Financial Consequences of Ignoring the Trend
The cost of getting this wrong is not abstract. Retail property demand has softened across New Zealand, and landlords face higher tenant failure risk. Vacancy periods of 6 to 12 months are becoming common, and many landlords are having to offer rent-free periods or refurbish spaces to attract new tenants. Capital values have not rebounded to 2021 levels, even with interest rate cuts.
For a retailer running a physical store, the math is brutal. Rising rents, wages, and utilities eat into margins that are already under pressure from online competitors with lower overheads. Meanwhile, work-from-home trends have reduced lunchtime and after-work spending in city centres, compounding the drop in foot traffic. The retailers that fare best are those that have consolidated into high-foot-traffic hubs like major malls, while standalone strip shops in secondary locations are bearing the brunt of the decline.
Appliances and electronics are one sector that has bucked the trend, with innovation and delayed replacement cycles driving demand. But for most categories, the pressure is real. The 2.5 percent decline in in-store spending in 2024 is not a blip — it is the continuation of a structural shift that building a brand that resonates with Kiwi consumers now demands a digital-first mindset, even for physical stores.
Common Missteps in Adapting to Modern Retail
Treating e-commerce as a separate business
Too many retailers run their online store on a different platform, with different pricing and separate inventory. Customers notice when a product is available online but not in-store, or when the price differs. The disconnect creates distrust and lost sales. A unified system where inventory, pricing, and promotions are shared across channels is the only way to deliver the seamless experience shoppers now expect.
Ignoring the cost of online returns
Online returns in New Zealand can run as high as 30 percent for clothing and footwear. Free returns policies that seemed like a competitive edge are now a margin killer for many small retailers. The fix is not to stop offering returns — that kills conversion — but to build return costs into the pricing model from the start and to use in-store returns as a way to drive additional foot traffic.
Assuming foot traffic will come back
Some retailers are waiting for the post-COVID recovery to restore their old customer numbers. But the data shows that the shift to online is permanent, not cyclical. In-store spending declined 2.5 percent in 2024 even as total retail spending grew. The customers who moved online during lockdowns are not coming back in large numbers. Waiting for a return to pre-2019 patterns is a losing strategy.
Underestimating the threat from low-cost global platforms
Temu and Shein have fundamentally changed price expectations for categories like clothing, homewares, and electronics. Their low prices, powered by supply chain efficiencies and aggressive advertising, have pulled spending away from physical retailers. Competing on price alone is not realistic for most local stores. The alternative is to compete on experience, curation, and service — things online-only platforms cannot replicate easily. A business VPN for secure remote operations can help retailers manage the digital side of the business more safely, but the bigger challenge is strategic.
Strategies That Keep Physical Retail Relevant
Building a genuine omnichannel operation
This means more than having a website and a store. It means real-time inventory visibility across channels, consistent pricing, unified loyalty programs, and options like click-and-collect and buy-online-return-in-store. The technology exists to do this, and platforms like Shopify for e-commerce and retail management are designed to handle it. The investment is not small, but the cost of not doing it is higher.
Turning the store into a destination
Experiential retail — in-store events, workshops, product trials, and services — gives people a reason to visit that online shopping cannot replace. Some retailers are turning part of their floor space into community areas, consultation rooms, or demonstration zones. The goal is to shift the store’s role from a point of transaction to a point of connection. This works best for categories where touch, try, or expertise matters — homewares, beauty, specialty food, outdoor gear.
Focusing on niche and local strengths
Competing with Temu on price is a race to the bottom. Competing on locally made, sustainable, or personalised products gives a physical store a reason to exist. Shoppers who value provenance, craftsmanship, and ethical production are willing to pay more and to travel to a store that offers it. This is where conscious consumerism and ethical practices become a competitive advantage rather than a marketing slogan.
Preparing for the next phase of regulation and competition
The retail environment is not static. International entrants are still arriving, and the regulatory landscape around e-commerce, consumer rights, and data privacy is tightening. Retailers who plan for these changes now — rather than reacting to them — will have a smoother path. The coming years are likely to see more pressure on returns policies, delivery standards, and environmental claims, all of which will affect how physical stores operate.
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| Approach | Operating Costs | Foot Traffic Dependency | Customer Reach | Adaptability |
|---|---|---|---|---|
| Traditional physical retail | High (rent, wages, utilities) | High | Local only | Low |
| E-commerce only | Lower (warehousing, shipping) | None | National or global | High |
| Hybrid / omnichannel | Moderate to high (both stores and digital) | Moderate | Local + national | High |
Frequently Asked Questions
Is it worth opening a new physical retail store in New Zealand right now? ▾
What types of physical retail are still growing in New Zealand? ▾
How long does it take to fill a vacant retail property in New Zealand? ▾
Do I need both a physical store and an online store to succeed? ▾
Are return rates higher for online purchases in New Zealand? ▾
How are Temu and Shein affecting New Zealand physical retailers? ▾
The Outlook for Bricks-and-Mortar in New Zealand
The most likely future is not the death of physical retail but its polarisation. The stores that survive will be those that have a clear reason to exist beyond being a place to pick something off a shelf. That reason might be expertise, community, experience, or convenience through omnichannel integration. The ones that fail will be those that waited for the old model to return.
International entrants will keep coming. Online platforms will keep growing. The 2.5 percent decline in in-store spending will not reverse on its own. Retailers that invest now in the systems, spaces, and skills that make physical retail genuinely different from digital will be the ones still trading in five years.
Remember: this article is general information only. For advice on your specific situation, speak to a qualified professional.
If this was useful, you might also want to read how to use New Zealand’s free trade agreements for business growth.
Sources and Further Reading
The Future of Retail in NZ: Adapting to Changing Consumer Habits — A closer look at how Kiwi retailers are responding to the same trends covered in this article.
Conscious Consumerism: How NZ Businesses Can Lead With Ethical Practices — Explores the niche and local advantage that physical retailers can leverage.
Euromonitor (2025). Retail in New Zealand. 🔗
Opteon Solutions (2024). New Zealand Retail Property: Navigating a Sector in Flux. 🔗
New Zealand Post (2024). Ecommerce Insights – Q4 Report. 🔗
