Published on the 02/04/2020 | Written by Heather Wright

It’s not a level playing field – it’s El Capitan…

New Zealand’s government has fallen into the trap of trying to decide what its citizens need, product-wise, rather than keeping the focus on safety when it comes to business and Covid-19. It’s a focus which is costing Kiwi business dearly – while enabling overseas online retailers to capitalise.

That’s the stark warning from Retail New Zealand chief executive Greg Harford, who says foreign retailers are being allowed to sell into New Zealand and are actively marketing promotions here, while the domestic retailer is prevented from doing so.

The government is picking winners in terms of the products they think people need, and who is able to provide them.

“The government has fallen into the trap of trying to decide what people need, which is not necessarily right. If businesses are able to trade online safely we don’t see why government would be trying to restrict that,” Harford says.

“The government is kind of picking winners not only in terms of the products they think people need, but also who is able to provide the products.”

Under the month-long Covid-19 level four lockdown, which New Zealand entered on March 26, only ‘essential’ products and services are able to be sold. Initially, ‘essential’ was essentially product from supermarkets and pharmacies. That’s since been extended to include products for communication, work from home and study from home, and a range of necessities such as heaters, which can be sold online via a limited range of retailers.

But the whole question of essential and non-essential offerings is mired in confusion – and frustration for many retailers. While supermarkets and pharmacies are free to sell skincare and makeup, specialist providers are not. (Interesting aside: Gartner retail supply chain analyst Thomas O’Connor, told iStart this week that hand creams are currently a hot purchase in many markets as the side affects of constant hand washing become apparent and people seek to soothe sore hands.)

“The thing government needs to be looking at is the safety issues involved not necessarily trying to decide what is an essential good versus a non-essential good,” Harford told iStart.

A new Covid-19 commerce insight tracker shows the stark differences between the New Zealand ecommerce market, where retailers’ online sales revenues have plunged 20 percent year on year in the past seven days, and Australia  where revenue has jumped 54 percent. It’s a similar story for pure-ecommerce players: In NZ they’ve logged a 16 percent decline in revenue, while in Australia revenue has jumped 49 percent.

Pureplay e-commerce revenues in the US are up around 70 percent across the country, while the UK has logged a 44 percent increase.

The tracker, from customer engagement platform Emarsys and data analytics provider GoodData, shows a similar story with order numbers, with New Zealand retail online orders  down 28 percent (and 36 percent for pureplay e-com providers) and Australia up 59 percent (34 percent for ecom businesses).

At issue, according to the government, is the health and safety aspects of fulfilling orders from warehouses, and also a concern over maintaining the transport supply chain.

The transport supply chain, however, has seen a substantial drop in volume – and is still delivering products coming into New Zealand from international e-commerce providers.

“That’s a really tough message for little Kiwi businesses who are doing their best to do what the government wants,” Harford says.

“If the issue is that courier networks need to be kept free for essential services, then so-called non-essential goods shouldn’t be coming into the country and being delivered.

“On the other hand, one way the government can deal with that issue is to allow some of the so-called non-essential goods to be sold online again.”

While no one is advocating for the abandonment of safety protocols, including the two metre distancing measures currently in place, the ability of a number of players to pack and dispatch product for contactless delivery without compromising safety shows it can be done.

“One of the things that will help the economy is allowing businesses – especially those small businesses that might be operating from home – to carry on selling their products, assuming there is consumer demand for them,” Harford says.

“We have seen a near total collapse in consumer spending on pretty much everything except grocery items and now a just few other things that have come back onstream.

“For those businesses that, for whatever reason, haven’t met one of the criteria and been able to open, those issues are huge and they are serious. There are going to be a lot of businesses that don’t survive this.”

The global picture

Gartner’s O’Connor says that in markets where the online market is still fully functional, such as in Australia, but brands are closing stores, online is picking up some sales, ‘but it’s nothing that can materially compensate for closure of physical stores’.

For the supply chain, particularly for those on the necessity side, portfolio management is increasingly crucial, he says.

“If 20 percent of the SKUs drive 80 percent of the sales, they’re really prioritising those 80 percent and looking at what from the long tail of the product range they can cut in terms of manufacturing.”

He cites the hand cream situation as an example. While beauty sales in general aren’t doing great at the moment, hand cream is. “We’re starting to see beauty retailers here and in other markets we have clearly seen the early movers in this space in supply chain rethinking manufacturing capabilities to maybe bring forward some new product introductions for the hand cream space and delaying for other products.”

Consumers’ price sensitivities are also seeing an increased emphasis on price, particularly on products being created or sold from the manufacturing side, he says.

IRI global data comparison data for mid-March showed dietary supplements for immunity and cold and flu were the top growing subcategories in New Zealand, up 389 percent and 213 percent respectively. Rice rounded out the top three, up 208 percent. Stats for Australia aren’t included in the IRI reports.

Looking to the future, O’Connor says “There’s a very strong belief in grocery that this will materially accelerate online grocery globally, No real surprise there: The more people try it the more they understand how it works even if some of their experiences in the near term might not be perfect.