Ghost towns, closed stores and the online shopping boom: how retail has changed since the start of the pandemic

The streets were almost apocalyptic as retailers closed their open stores on March 25, 2020.

And the sector hasn’t been the same since.

Leaving work at 7.30pm on the day of the first Covid-19 lockdown, Heart of the City chief executive Viv Beck recalls Auckland’s Queen Street being eerily deserted.

“Almost apocalyptic,” she says.

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Auckland’s retailers, which thrive on inner-city workers and tourists, were already in the midst of a spending slump when Covid-19 hit.

“You could literally see the life draining from downtown as events were canceled and people went to work from home,” says Beck.

Since that day two years ago, the way New Zealanders shop has completely changed, she says.

Thousands of retailers closed their doors permanently, while others moved online, opted for click and collect or downgraded their physical stores.

Auckland’s department store, Smith & Caughey, has been forced to close several times over the past two years as the region grapples with numerous lockdowns.

Managing Director Edward Caughey says the Queen Street store has been through tough conditions.

But the biggest challenge has been rebalancing the business to match the “explosive growth” it has experienced with its online store.

“The growth has been exceptional,” he says.

Retail NZ chief executive Greg Harford said there was real desperation among retailers when the first lockdown was announced. Several lockdowns later, online spending is keeping many retailers afloat.

“The pandemic has brought massive changes to retail,” says Harford.

We buy a lot more online, with online sales volume doubling in the past two years, it’s now tied to consumer behavior, he says.

While customers are expected to return to stores, “we have seen a systemic shift towards more online shopping. This means retailers will have to streamline their store networks to accommodate the way customers shop now,” he says.

KPMG partner Ian Williamson says the increase in online shopping has created higher experience expectations among shoppers.

This was driven by the need to move online, and consumers became familiar with navigating online shopping, Williamson says.

Online credit card spending figures show that older, rural consumers who were effectively forced to shop online out of necessity are now actively choosing to purchase goods online, he says.

This is a trend that looks set to continue.

“With consumers’ growing familiarity with the online shopping environment, expectations for e-commerce are high, which means retailers continue to invest in this area, often at the expense of new physical stores,” says Williamson.

“They know online is here to stay.”

The growth of online shopping caused a parcel boom for New Zealand Post late last year, with more than 20 million parcels sent during the Christmas season.

NZ Post’s Ecommerce Spotlight report on online shopping rose by $1.35 billion last year, due to a permanent shift in shopping habits.

Online spending reached $7.67 billion in 2021, 52% more than before the pandemic.

Overall, online and in-store retail spending increased by $2 billion in 2021.

“With growth of $1.35 billion, online shopping accounted for two-thirds of that growth, highlighting the rapid evolution of how Kiwis shop and reinforcing the key role that Kiwis online shopping has played a part in sustaining our economy in 2021,” the report said.

Jules Lloyd-Jones, chief marketing officer of Miter 10, says the way customers choose to shop at the home improvement chain has changed rapidly since Covid hit.

“We have seen significant and sustained growth in online shopping, and we are continually developing and improving our digital offering.”

It expanded the range of products available on its website and developed services such as an online paint color selector, allowing customers to choose from thousands of colors.

As “two shots for summer” played out at the end of the year and in-store shoppers returned for the silly season, retailers thought they could have been clear.

But the Omicron outbreak dashed those hopes and put even more pressure on the already struggling industry.

Government Director at Dot Loves Data, Justin Lester​ says despite Eftpos NZ’s Auckland transactions up 11% in March, compared to the same month last year, most other regions are in trouble.

Spending in Wellington fell by 15%, Tauranga by 10%, Hamilton by 9%, Christchurch by 8% and Queenstown by 5%.

“New Zealanders are maintaining social distancing, working from home and avoiding confined public spaces,” says Lester.

This is having a significant impact on CBD businesses, which are seeing the biggest drop in spending during the pandemic outside of shutdowns, he says.

New Plymouth home and lifestyle store Arthaus has put all of its stock up for sale to generate cash flow, owner Lisa England said.

“We don’t normally sell at all, in fact this is only the third we’ve had in 17 years.”

When the store reopened after the initial lockdown, sales were crazy because people wanted to support the locals and redecorating the house became the substitute for overseas travel.

But since the Covid traffic light system and the switch to red light setting was announced, the town has been deserted, England says.

“We are doing our best to continue to trade normally, we have not reduced our opening hours yet. We just hope to keep going until it’s over, and we can all get back to normal, whatever?”