Growth surge continues for retail and hospitality sector

21st June, 2016

Off the back of a bumper 2015, the retail and hospitality industry continues to exceed national average SME growth. More than 40 percent of SME business operators in the sector reported revenue increases in the past 12 months, and even more expected further growth in the year ahead.

According to the latest MYOB Business Monitor, a survey of more than 1000 SMEs nationwide, 44 percent of SMEs in the retail and hospitality sector have reported an increase in revenue in the year to March 2016, compared to the national average of 37 percent.

MYOB New Zealand General Manager James Scollay says the retail and hospitality sector has come off the back of a great year, and looks to be gearing up for further growth.

“Following several very challenging years, the sector has continued to grow and consolidate its gains, establishing itself as one of the leading lights in New Zealand’s economy,” Mr Scollay says.

“Optimism is crucial and there is confidence that the positive trends will continue well into the future.”

In the next 12 months, nearly half (46 percent) of retailers and hospitality business owners are expecting to see further increases in revenue, again significantly ahead of the SME average (36 percent) and figures from the September business monitor (37 percent).

Businesses in the sector are also seeing higher sales, with 37 percent reporting more activity in the current quarter than was standard for this time of year.

Pay rises on the horizon

More than a third of the retail and hospitality sector plan to increase their employees’ wages and salaries within the next 12 months, with 36 percent indicating a pay rise – well above the national average of 21 percent and an improvement over the last survey period (29 percent).

The number of businesses increasing their full-time staff is also above average (10 percent), with 11 percent planning on hiring more full-time employees in the next year and 16 percent looking to buffer their part-time employee numbers (compared to the national SME average of 12 percent).

Over a third are also expecting to increase the products and services they offer (41 percent) and 36 percent are looking to boost their online sales.

Mr Scollay says not only is a strong year good for business owners in the sector but also for the broader economy.

“We’re seeing some really positive signs of growth, which in turn supports local jobs throughout the country,” he says.

Highly connected industry

The ability to increase online sales is likely due to the fact that SMEs in the retail and hospitality industry are one of the most connected when it comes to digital engagement.

Sixty-eight percent of the sector has an online presence, compared to the national average of 56 percent. Of those in the retail and hospitality sector who are online, more than a third (36 percent), have both a social media and business website.

Mr Scollay says the strong use of online technology is an important factor for any business, with the ability to increase revenue and bolster customer engagement, while also attracting new customers and aiding communication.

“The retail and hospitality sector is particularly good at using technology in such a way that it benefits their business,” he says.

“In the face of stiff competition, both locally and internationally, it is great to see the industry ramping up their online presence.”

Highly competitive industry

Competitive activity remains the greatest concern for operators in the retail and hospitality industry, with 34 percent reporting that it has created extreme pressure – up from 28 percent in September.

This is followed closely by the ability to attract new customers (29 percent, a five percentage point increase since September) and those expecting pressure on price margins and profitability (27 percent). Cash flow however, is not as prominent for the sector, with cash flow-related pressures decreasing from 23 percent in September to 21 percent.

“Interestingly the pressures we are seeing in this sector are also those closely associated with improved performance,” Mr Scollay says.

“Once again, we’re looking at pressure generated from greater competition and some of the other associated flow-on effects of growth, which in themselves are not terrible problems to have – provided business owners and managers are supported by good, solid systems.

“At any rate, the continued success of the retail and hospitality sector in New Zealand requires careful management and constant control of things such as costs, coupled with a detailed understanding of the market and advertising nous. That the industry has continued to do so well is testament to the incredibly hard work the businesses are putting in, and have put in over a period of years.”


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