Amid the cost-of-living crisis seeing more Kiwis keeping their wallets closed, abandoning brand loyalty and shopping around, marketers must double down to keep their brands relevant.
It’s been a rough start to the year for New Zealand’s retail sector. Vacuum retailer Godfreys recently went into voluntary administration, while The Warehouse sold struggling outdoor brand Torpedo7 to an investment group for $1. Earnings season has been a mixed bag; some like jeweller Michael Hill saw their earnings drop, whereas others like Briscoe Group held up well, despite the tough economic conditions.
New Statistics New Zealand figures show why many retailers are feeling the pinch. Due to rising costs for necessities, Kiwis’ spending patterns have changed since before the Covid pandemic. Between the years ended June 2019 and June 2023, average household spending rose significantly in six categories:
- Food – up 28.1 percent Housing and household utilities – up 15.5 percent
- Health – up 18.5 percent
- Transport – up 16.5 percent
- Miscellaneous goods and services (including insurance and personal care) – up 21.6 percent
- Other expenditure (including payments) – up 31.4 percent.
Combined, these six groups accounted for 82.2 percent of total household spending in the year ended June 2023. Many Kiwi families have had to cut back on non-essentials, with the proportion spent on recreation and culture dropping from 9.6 percent to 8.3 percent over that four-year period.
Sticking with Stickman
Few local brands are more closely associated with shopping on a budget than Foodstuffs-owned supermarket chain PAK’nSAVE and its spokesman ‘Stickman’. NZ Marketing spoke to the team at creative agency FCB Aotearoa – Managing Director Jane Wardlaw, Co-Chief Creative Officers Leisa Wall and Peter Vegas, and Chief Strategy Officer Matt Kingston – about their work with PAK’nSAVE and how the economic climate factors into their creative process.
Recent campaigns have featured plenty of the brand’s trademark humour, including one leading into Christmas, in which Stickman ‘borrowed’ TV ads and posters from other ‘yellow’ brands such as Mercury. FCB also teamed up with media agency PHD Aotearoa on a Stickman ‘internship’ at TVNZ, where he co-hosted the weather bulletin on Breakfast and got to meet the hosts of Seven Sharp.
Vegas says regardless of the economic gloom many consumers are feeling, retail brands still need to make people happy. “You’ve got to make people like you. Your retail brand’s on TV, we interrupt people’s lives. People get a whole night of ads, and you hope that they have a little bit of a smile, and remember and feel good about
your brand.”
Stickman becoming a cult figure has been “hard won”, says Kingston, but with that comes a familiarity that can be a challenge of its own. He says having “a ruthlessly clear positioning and sense of yourself” is vital to the creativity shown in PAK’nSAVE’s campaigns. “When you’re so clear that everything we do is to save Kiwis money, it actually liberates you to look in all kinds of directions for how you might demonstrate that.”
Shopping around
Wardlaw says it’s “awful” to suggest the cost-of-living crisis is good for a brand, but what has been good for PAK’nSAVE is that many people in New Zealand are willing to switch between supermarkets. “We’re seeing more switches come into the brand, probably not out of necessity but of trying to find ways to keep more money in their back pocket.”
“I think the other side of the coin is that with the cost- of-living crisis and pricing becoming more important, we have other competitors coming into our lane,” adds Vegas. “We’ve had this territory to ourselves, and we’ve been able to bang that drum. Now, there’s much more attention on it, so we need to be sharper about our messages and what we’re saying.”
Wall notes that many consumers no longer shop at a single supermarket, instead choosing different options for different needs. “I don’t think I’ve ever gone to so many places to buy fruit and veg, meat, grocery. I shop at most of the supermarkets, obviously favouring PAK’nSAVE and New World… but I do food boxes and all sorts. I think the average shopper these days is quite promiscuous.”
Kingston says there are several different, occasionally conflicting trends at play in the supermarket sector besides just cost. “You could also say that globally, there’s a shift to smaller, more convenient shopping. You could also say there’s a shift to quality and people being more enthusiastic about home cooking. I think from a single brand point of view, you’ve got to be focused about what you’re tapping into and not try to cater to everything at once.”
Price is top of mind
For more than 40 years, The Warehouse has been “where everyone gets a bargain”, and its Chief Customer & Sales Officer, Jonathan Waecker, says low prices are a huge factor for shoppers. “Many Kiwis are doing it tough, so people are really looking for ways to save money without compromising on enjoyment. Quality is important, but I think price is leading the way when it comes to how people are spending their money.”
Waecker says customers care about other factors, such as sustainability, but cost is top of mind. “When we can put options in front of customers, like: ‘We’ll help you save money and make a sustainable choice’, they love that, but the key is that we have to help them save money first. It can’t be: ‘Here’s a sustainable choice that costs you more’. It has to be: ‘Here’s a sustainable option that costs you the same or less’.”
The Warehouse has been moving into the grocery space, amid controversy over supermarket pricing. Waecker says shoppers are also looking for a fun in-store experience, including cheap or free ways to entertain their kids. For The Warehouse, this means things like recent in-store tastings, and the annual Easter Red Rabbit scavenger hunt.
“Since Covid, people’s expectations of a fun shopping experience have increased,” says Waecker.
“Before, people were willing to go shopping for more practical reasons, but now they want to have a good time while they’re shopping, so we’re thinking a lot about how we make our stores more inviting.”
Family is also an important theme in The Warehouse’s recent campaigns, including last year’s ‘A Christmas Spent Together’, created with DDB Aotearoa, which was the country’s number-one Christmas TV ad, according to TRA.
Waecker says, “The inspiration for ‘A Christmas Spent Together’ was around spreading joy, creating memories and tapping into that truism for all New Zealanders who are looking for affordable ways to celebrate Christmas together. It’s something that The Warehouse does really well, because we can be that one-stop shop.”
Squeezing the middle
Managing Director of Auckland-based ecommerce integration firm Convergence, Mark Presnell, says contrary to predictions that the days of small retailers are numbered, emerging technology and shopper values suggest small retailers are well-positioned to thrive in the coming years – unlike the retail middle, which he predicts will do it tough.
He says the recent challenges faced by medium-sized retailers like Godfreys and Michael Hill highlight the pressure on the retail middle ground. “They often lack the scale of mega-stores and the customer focus of smaller businesses, leaving them vulnerable to changing consumer behaviour and rising overheads.”
The demise of the “impersonal middle ground”, says Presnell, stems from a failure to adapt to the online landscape. He believes many brick-and-mortar stores prioritise their physical presence at the expense of their online operations, resulting in outdated product listings, inaccurate pricing, stock discrepancies and poor customer communication.
“This inconsistency breeds frustration for shoppers who want a seamless experience, ultimately driving them back to the convenience and reliability of larger online platforms, or the more tailored service of smaller retailers. Big-box stores can afford to dedicate significant resources to online operations, which medium businesses often struggle to match. Smaller businesses can now expand beyond Invercargill, for example, and go national, if not global. They have lower overheads and offer a more intimate experience.”
The other ‘C’ word
Although ‘cheap’ features prominently in the lexicon of consumers in 2024, ‘convenience’ isn’t far behind for time-poor families. According to Diane Clark, Head of Marketing & CX for another Foodstuffs chain, Four Square, the quest for convenience has seen small-format supermarkets “exploding” in popularity internationally.
Clark was a finalist for Marketer of the Year at the 2023 TVNZ-NZ Marketing Awards for her role in reinventing the iconic brand, a process that was already underway when she joined the team in 2021. Prior to the reset, Four Square was seen as “more akin to a dairy than a supermarket” and despite brand nostalgia it was not receiving rave reviews from Kiwis, she says.
“We had insulting prices, and we didn’t have the right range for their needs. The good news was that we had a large store network, so really good reach across the country, and we had latent brand love because everyone, even though they were saying these horrible things about us, still loves Four Square.”
Clark says Four Square’s transformation over the past few years has been about marketing, and about revitalising its product range, sharpening its pricing and adjusting the store layout so shoppers can get in and out quickly.
“So that all kicked off and then this little thing called Covid came along, which actually helped us. We were already planning the journey, but that helped people rediscover, ‘Actually, I’ve got this local store close by’.”
Four Square’s messaging has focused on its competitive advantage, location, but Clark says the ads wouldn’t have been as successful without the voice of “great New Zealand icon”, actor and comedian Mark Hadlow.
“He just adds a lot of humour. I think for us, in the scheme of things, we do have a very small marketing budget, so adding the humour helps cut-through.”
Loving local
While Four Square has been refreshing its brand, 2023 marked the first-ever brand campaign for FreshChoice, owned by rival supermarket chain Woolworths New Zealand. ‘That’s Shopping Different’, developed with agency Multiplied, follows store owner ‘Gav’ on his morning walk to work, encountering various locals along the way.
Head of Marketing at FreshChoice, Travis Tompsett, says the campaign focused on the brand’s key strengths.
“When I landed at the brand, the first thing I did was a piece of research to understand what we’re good at FreshChoice. The overwhelming sentiment was the fact that customers perceive FreshChoice as being convenient, being local and caring about their team. We took this as proof points we could build into a device that differentiated FreshChoice from the rest of the supermarket set.”
FreshChoice currently has 74 stores nationwide, including SuperValue. The goal is to have 200 stores throughout New Zealand by 2032, and for all the current SuperValue stores to be converted to FreshChoice, says Tompsett.
“Obviously, we’ve got really good awareness and a lot of brand advocates in the South Island, so for us, it’s about how we start growing visibility in the North Island.”
FreshChoice and Multiplied built on ‘That’s Shopping Different’ with sports-inspired campaign ‘Team Fresh’, which introduced FreshChoice’s very own team of bakers, butchers, and deli and produce specialists, led by a local store owner as their captain.
FreshChoice stuck to the sports theme when it created a pop-up ‘aid aisle’ in the bush (with dentsu New Zealand) for competitors in the Kepler Challenge, the premier ultra-marathon that took place near Te Anau in December.
Creative Partner at Multiplied, Aaron Taylor, says FreshChoice is already a well-liked brand.
“Consideration was relatively low, but we knew that once people shopped at FreshChoice, they came back, so there was an inherent likability about the brand and the service. There’s a real sense that people genuinely know your name and are part of that community. It has a unique story to tell and a great proposition to bring to the market.”
Other things to consider
The cost-of-living crisis is not the only factor giving retailers sleepless nights. Managing Director of strategic consultancy RX, Juanita Neville-Te Rito, says, “The sector remains in a state of flux, with consumer habits continually evolving, technological advancements accelerating and the economic landscape fluctuating. Cash strapped shoppers, unpredictable weather, political jostling and international turmoil – [it’s] a cauldron of instability.”
Neville-Te Rito shared with us eight key trends and predictions for retail in 2024:
- Embracing hyper-creativity for growth. You can’t just keep “cutting” your way to success, she says. “Retailers need to innovate, and they’re not renowned in this space as it requires being comfortable with ambiguity.”
- The rise of seamless retail. “The continuation of embedding and nailing the fusion of the digital and physical to make a customer journey seamless.”
- The evolution of returns model. “The way retailers handle returns is undergoing notable change. Some retailers are already implementing stricter return policies, requiring items to be returned within a week of delivery.”
- The expanding role of AI. In addition to delivering tailored experiences such as personalised rewards and recommendations based on past purchases, AI can deliver faster and more precise decision-making in the sector, says Neville-Te Rito. “Swiftly analysing vast amounts of data in real time can lead to increased efficiency, a reduction in human error and the automation of routine tasks.”
- Recommerce resurgence. The practice of selling used or refurbished goods is set to continue to be a significant trend in 2024, she predicts. “With sustainability becoming a priority for consumers, coupled with them being cash-strapped, recommerce is well positioned to resurge.”
- Enhanced retail experiences. “Remember, customers don’t have to go to a store, you need a customer to want to go to a store, so it’s critical to create an environment that people want to visit. Discovery, inspiration and interaction are what get shoppers off the couch and into your store.”
- The growing experience economy. Customers want an experience and favour brands that present clear solutions to everyday challenges or that simply bring them joy, says Neville-Te Rito. “This opportunity for retailers specifically comes to life in the provision of service (‘Yes, thank you, Countdown, please put that shopping in my boot’) to services (‘Thank you for grooming my dog/doing my nails/servicing my car’).”
- Going back to basics. “The past 12 months have seen businesses cut, cut, cut, following an intense period of doing more with less. This requires a reset of getting back to basics; getting the processes and systems reviewed – not overcomplicated – and right-sized for the business, perhaps with a helping hand from AI?”
It also means ensuring your resources and talent are focused where they’ll make the most impact, she says.
“It sounds boring, but it is essential. The framework of systems and process within a business enable flow. Flow delivers execution and only then can we layer in innovation. You need to start by ensuring you do what you say you do, and do it better than or different to the competition.”
This was first published in our March/April 2024 issue.
