New Zealand Online Retail Sales Monthly Update for June 2016 and a look at the initial ‘Brexit’ effect 1 August 2016  Online retail sales at local sites in June turned in double digit growth again - up 10% on June last year. This is slightly stronger than the 7% growth in sales at physical stores*, which also had a solid month. o Food, Computers, Hardware and Department stores were strong performers (annual growth >20%). o Online clothing purchases from local retailers were up 14% on June last year.  Growth in online purchases by Kiwi’s from offshore sites remains strong (up 9% on June last year), but the growth rate has been softening in recent months. After a slow start to the month, spending picked up in the second half of June. Purchases from the UK were particularly strong following the ‘Brexit’ result, and we explore this overleaf. o Increased spending at Computer and Clothing stores was responsible for around two-thirds of the increase in spending at offshore sites since June last year. o Entertainment Media and Pharmacy/Cosmetic stores also had a strong month.  Total online sales were up 10% on last June. * Based on Statistics NZ figures for electronic card transactions for core retail excluding hospitality Growth in NZ online sales by retailer location Index of NZ Online Retail Sales, by retailer location Monthly spending compared to the same month in prior year January 2010 = 100 500 40% 35% International 400 International 30% 25% 300 20% 200 15% 10% Domestic 100 5% Domestic 0% Jun-12 Jun-13 Jun-14 Jun-15 0 Jun-12 Jun-16 Jun-13 Jun-14 Jun-15 Jun-16 Online purchases from domestic NZ retailers Online purchases from domestic NZ retailers Online purchases by NZer's from international merchants Online purchases by NZer's from international merchants Source: BNZ and Marketview. Source: BNZ and Marketview Index of Total NZ Online Retail Sales NZ Domestic Online vs SNZ Electronic Card Transactions January 2010 = 100 Monthly spending compared to same month in prior year ^ 30% 400 2015 350 25% 2014 300 2016 20% 2013 250 2012 2011 15% 200 150 2010 10% 5% 100 50 0% Jun-12 0 Jan Feb Mar Apr May Jun Jul Aug Sep Jun-14 Jun-15 Jun-16 ^ Source: BNZ and Marketview "SNZ" refers to official figures released by Statistics New Zealand. The SNZ ECT data used in our calculations is for core retail excluding hospitality. Online data is from BNZ & Marketview. Growth Rates Month ended >>> Jun-13 Growth in value of online purchases from domestic retailers Total sending at domestic retailers, using Electronic Cards (SNZ)^ Oct Nov Dec Total Online Index Domestic Online Purchases International Online Purchases Apr-16 May-16 Jun-16 Apr-16 May-16 Jun-16 Apr-16 May-16 Jun-16 Monthly spending vs Same month prior year 16% 14% 10% 14% 15% 10% 19% 13% 9% 3-monthly average vs Same period prior year 14% 14% 13% 11% 13% 13% 17% 15% 14% Data notes: Online sales data is produced by Marketview. Traditional retail sales data is from Statistics New Zealand quarterly releases. For both data sets, the figures we use correspond to Statistics New Zealand’s ANZSIC Division G (Retail Trade) excluding fuel, motor vehicles and parts, and marine. The annual value of official retail sales in the categories we monitor is approximately $44 billion. Categories included in the BNZ Online Retail Index are: supermarket and grocery stores; specialised food and liquor; furniture, floor coverings, houseware and textile goods; electrical and electronic goods; hardware, building and garden supplies; recreational goods; clothing, footwear and personal accessories; department stores; pharmaceutical and other store-based retailing; non-store retailing; and retail commission-based buying and/or selling. Bank of New Zealand P a g e 1 New Zealand Online Retail Sales 1 August 2016 The ‘Brexit’ effect…  Online spending by Kiwis at UK sites surged in the week immediately following the ‘Brexit’ referendum held on 23 June (UK time). It was up 47% compared to the same week a year earlier.  If we look at Kiwi’s online spending in terms of UK pounds rather than NZ dollars, spending at UK sites in the last week of June was up 78% - a considerable increase on the same week last year.  Higher spending was widespread across retail categories. Key categories which saw particularly large rises were: o o o o o Clothing Cosmetics and pharmacy Computers and accessories Sport and camping equipment Department and variety stores  Movements in the exchange rate were clearly a key factor. o Just prior to the ‘Brexit’ vote the exchange rate was 0.49 UK pounds per New Zealand dollar. The NZ dollar was 12% stronger against the pound compared to where it was 12 months earlier. o The pound weakened immediately on the ‘Brexit’ results. The exchange rate ended June at 0.54 UK pounds per New Zealand dollar, which meant the NZ dollar was 24% stronger against the pound than it was at the end of June last year. o On the one hand, the stronger Kiwi dollar lowers the spending level in NZ$ terms, because the same goods now cost less NZ$. But on the other hand the lower NZ$ prices can drive Kiwi’s to purchase higher quantities of goods, which pushes up the spending level. Clearly this second effect has dominated.  To check that the late-June spending surge was a UK phenomenon we also looked at Kiwis’ online purchases from the rest of the world. In the last week in June this was up 14% on the same period in 2015 (in NZ$ terms), which is well shy of the 47% increase experienced at UK sites. It will be interesting to see the extent to which the upsurge in UK purchases persists. In this respect, Marketview will be releasing a report in coming weeks which will look at the trend over July. P a g e 2 New Zealand Online Retail Sales 1 August 2016 Reports can be downloaded here: www.bnz.co.nz/onlineretailindex and www.marketview.co.nz/our-reports/ For technical notes, please refer to one of our earlier “Quarterly update” reports. For details on how our measure compares with other studies of online sales in New Zealand please refer to the “Quarterly update” report released in February 2014 and the report on May 2014 online sales released on 2 July 2014. For more information, contact: Gary Baker Stephen Bridle Director, Institutional Research, BNZ Managing Director, Marketview +64 9 924 9353 +64 4 472 1991 +64 21 436 763 +64 274 740 141 Disclaimer The information in this document (Information) is provided for general information purposes only. The Information does not constitute, in any jurisdiction, any advice, recommendation, opinion, guidance, offer, inducement or solicitation with respect to the purchase or sale or any financial product or the engaging (or refraining to engage) in any transaction. The Information is governed by, and is to be construed in accordance with, the laws of New Zealand and any dispute or claim arising from, or in connection with, the Information is subject to the non-exclusive jurisdiction of the courts of New Zealand. To the extent that any Information could constitute financial advice, it does not take into account any person’s particular financial situation or goals. 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