Last year, retailing took a real beating in New Zealand and around the world – but what lies ahead? Crossmark New Zealand managing director Grant Leach shares his predictions for 2012.

Over the next 12 months, we can expect things to remain much the same, with a five to six percent dollar growth, of which one to two percent will be volume growth.

We will see greater pressure on increasing promotional activity, which will put pressure on investment returns.

The FMCG channel has fought back by growing through volume and consumer price promotions, designed to promote spending and influence shopper decisions in the last six feet of sale. Coinciding with this, the percentage of products sold on promotion in New Zealand is now the highest in the world. Astoundingly, close to 60 per cent of products sold in the country are sold on consumer promotion.

It's no secret that shoppers in New Zealand are increasingly focused on the rising weekly household food bill. It's the shoppers’ concerns about the cost of food and groceries that make product promotions so valuable and successful. Similarly, we have seen an increase in the release of value packs, which offer consumers more for their dollar – and in a retail environment where ingredient prices are continually rising. 

Another successful innovation are shopper discount rewards on the cost of gas that give shoppers a per litre discount at the pump. Gas prices have long been a major part of the family budget and are monitored closely by consumers. Thanks to the ever increasing price of gas, these discounts are becoming increasingly popular and are showing no signs of slowing. A popular offer is led by Countdown supermarkets, which offers shoppers a 20 cent per litre saving when they spend $200 or more in store.

Retailer investments in innovation will continue to rise, as large retailers strive to enhance the shopper experience and add value. But how can these retailers recover?

Whether they can recover is yet to be seen. The good news is, some FMCG retailers are getting it right and making the best of the circumstances.

The retailers at the front of the pack have shown that innovation needs to be demonstrated on more than just value. Leading retailers, again like Countdown’s One Card are committed to communicating well, while enhancing the experience to suit the customer.

Another company that has done this well, is popular US coffee franchise Sheetz Bros, which allows shoppers to place their order via a touch screen.

In order to be in the best possible position to succeed, we need to be armed with current market intelligence beyond sell through data and traditional market research, which can inform the decisions of how and when to initiate innovation.

Many large retailers are now using shopper insights to develop innovative retail solutions that create more category value. In doing this, retailers have reintroduced in-store theatre to engage with previously disengaged shoppers in stores.

As part of this, sophisticated customer profiling and neuro-marketing is being more widely used in traditional bricks and mortar and online retail environments to up-sell and increase total spend. For example, Amazon use unprompted recommended book lists to guide and influence shopper decisions. These lists are targeted to the shopper using customer or similar customer profile information based on shopper behaviours, previous purchases and the known psychographics of the shopper.

Recently, we have seen social consciousness and social responsibility gaining traction in New Zealand with the shopper embracing fair trade products, such as coffee, bananas and olive oil. If there is not significant price premium we can expect to see a rise in the consumption of these products as consumers are becoming more conscious of their social and environmental responsibilities.

New trends for 2012

Here are my predictions of trends that we can expect to see during 2012.

• The foodie explosion has taken the world by storm. In New Zealand there has been a huge boom in production and sales of all things food. Last year in the US cook book sales rose by 10 percent. This is a significant achievement in an environment where total book sales are in decline. Food related websites are now achieving more than 65 million unique visits per week and Food Network viewers are watching one hour of food programming on average each day. We have seen similar patterns in New Zealand. Again this will continue as New Zealanders prefer to cook at home for budget reasons and because their repertoire of culinary tastes is increasing.

• Low cost retailers, like the Pak'nSave supermarket chain in New Zealand will continue to be successful around the world. As the market seems ripe, one must wonder when discount retailer ALDI or Costco will arrive on New Zealand's shores. Watch this space!

• Retailers will continue to encourage suppliers to review their supply chain logistics to identify and act on opportunities for further savings that can be passed on to the customer as they battle it out for growth and market share.

• We can expect to see more pop-up retailers appearing in the market and seizing opportunities when they are presented. This is fast becoming a popular option for dynamic retailers that are willing to lease a space for short periods of time and take advantage of opportunities and seasonal job lots. This is often seen in malls around Christmas time.

• We will see a greater expansion of destination stores to enhance the total brand experience across the breadth of product offers to ‘interrupt’ and re-educate the consumer. A good example of this was the Sony Style store. The Apple i-stores have also gained good exposure and sales. However, Apple products can be purchased at any mass merchant. 

We can also expect to see improved consumer confidence . . . but this may not translate to the tills as we continue to reduce debt and increase our savings. This is a real turnaround for Kiwis – going from spend all to spend thrift! 

As a result, we will see little increase in the volume of products and service sold, while manufacturers will come into harder times, as they strive for growth in the face of increased expectations from the retailer.