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Dip in overseas sales causes soft month for online retail spending

A 12 per cent drop in spending at offshore sites in January 2020, excluding GST, has caused a decline in total online retail spending for the month.

Gary Baker, director of institutional research at Bank of New Zealand, said January was a soft month for New Zealand’s online retail, with total spending down 1 per cent on the previous corresponding period.

“The decline is driven by a large year-on-year drop in spending at offshore sites, which was down 12 per cent on last January, excluding GST,” Baker stated.

The recent dip is slightly larger than the 9 per cent year-on-year decline seen for overseas sites in December, which followed the widening of GST charges on December 1.

“If we add back GST, the international spending would be close to what it was a year ago,” Baker said. “This, very crudely, suggests that consumers are spending a similar amount to last year at overseas sites, but less is going to offshore retailers (most likely because of lower purchase volumes) and more is going to IRD.”

BNZ data shows growth in spending at local online sites was up 7 per cent in January compared to the previous corresponding period. Purchases of electrical and electronic goods featured strongly.

“Local retailers win from a more level playing field for pricing and would hope to see an improvement in volumes over time, at the expense of the offshore competitors,” Baker said. “We might not see all the gains for local retailers show up in the online shopping space. For example, a customer may pick up a book from their local physical bookstore that they might overwise have purchased from an offshore online site.”

Looking at offshore spending by store type, a lot of categories saw spending fall by an amount similar to the increase in GST. Notable exceptions were newspaper and book retailing, which was down more than 25 per cent on January last year, and department stores, which saw spending up nearly 20 per cent compared to a year earlier.

Annual online spending across the retail categories covered is running at $4.8 billion (excluding GST).

“This is equivalent to 8 per cent of total retail sales reported in Statistics NZ’s Retail Trade Series (RTS), comparing like-for-like categories,” Baker said.

“Excluding the food and liquor sectors from both the RTS and our Index, annual online spending is equivalent to 11 per cent of retail sales.”

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