Spend up large, your country needs you. That’s the message from a survey of small businesses, but it runs counter to most Kiwis’ conservative instinct to avoid ostentatious consumerism, writes Jonathan Milne.
Eddie Rodrigues is grateful for the way his local community has supported the butcher’s shop he and his aunt run. In the tough times this year, they’ve even had calls from locals offering to do delivery runs, for free, to elderly folk who couldn’t leave their homes.
Most of all, he is thankful for the way they have come back with their wallets open. Grey Lynn Butchers shop had to close during the first lockdown – but now they’re trading better than ever.
His message to the community: please keep spending. Your economy needs you.
That’s reflected in a survey of more than 500 small to medium businesses, commissioned by American Express – whose country manager admits that, of course, they, too, have an interest in seeing people pull our their credit cards again.
To coincide with a new BNZ partnership offering American Express to more merchants, the credit card company is also launching a $1.7 million public campaign to support small business.
The weighted survey of 506 businesses was conducted by Juice Research, while Auckland was in its second lockdown. It shows revenues are right down, especially those in tourism, hospitality or construction and trades. They are running out of cash reserves.
Eleven percent of the businesses are on the brink of closure; one said its revenue had dropped to nil.
But amid all the bad news, three out of five business operators did agree on one thing: that the community understood their predicament. Now, they are pleading for New Zealanders to keep spending.
That’s also been the message from the Government: go local, keep the economy ticking over.
“Some will spend more – watch the spend on home and recreation, takeaways and supermarkets. Luxury cars, etc, will probably do a good trade, with cheap financing and all those cancelled overseas holidays.” – Shamubeel Eaqub
Economist Shamubeel Eaqub, from Sense Partners, is expecting those in more secure financial positions to answer that plea in ostentatious style.
“Some will spend more – watch the spend on home and recreation, takeaways and supermarkets. Luxury cars, etc, will probably do a good trade, with cheap financing and all those cancelled overseas holidays.”
Spending on cards has been tracking about the same level as this time last year – a surprisingly strong outcome given New Zealand has lost nearly as many jobs in the past six months as it did in the entire Global Financial Crisis.
But he warned the spending would be necessarily uneven, varying by region and segments of society. Not everyone could afford to spend; not everybody would be wise to spend.
“Some regions like Queenstown will be hit hard, so asking those who are fearful of losing jobs, they will not spend freely … Saving and spending is a very personal decision, based on what you need, what you want and what you can afford.”
In the June survey of the labour market by Statistics NZ, 7 percent thought it was very likely they would lose their job or business, and a further 18 percent ascribed a medium chance. That is one in four workers whose situation is precarious, and should be careful with their spending.
“Realistically, I think we spend way too much on stuff we don’t need. It’s an aside, I guess, but this constant consumerism, even in the middle of a pandemic, is rather soul-destroying.”
Robert Bourne, the country manager for American Express, said its campaign was about supporting all businesses with spending, but he agreed that could not be indiscriminate. The primary focus should be small businesses, and local businesses.
Bourne lives on Auckland’s North Shore, and is looking forward to spending his own money in the neighbourhood. “I’ll probably grab a burger at Burger Burger in Takapuna, buy some produce at a good little wholesaler near us that I like to support, and if I get a chance I might pop down to The Patriot in Devonport to taste some of their beers.”
Even the buy local mantra has its problems, though. Economist Cameron Bagrie says the litmus test is when an imported product, online retailer, or bigger supermarket has something cheaper. People will need to watch their dollars and cents in tough times: “People will invariably shop based on value, which is not just about price, but it’s still a big part.”
He adds: “We saw a jump in savings after the GFC, and I think the jump this time around will be bigger.”
Back in Grey Lynn, Eddie Rodrigues says they’ve seen a lot of change over 15 years. When they opened, they used to sell lamb flaps and briskets and pork bones to their Pasifika and Māori community; now they sell lamb racks and Scotch fillet steaks to a far more affluent clientele.
He and his aunt want to return the favour to their community by dining at restaurants and cafes that buy their meat – but even they, as faces of the American Express Shop Small campaign, admit they will be restraining some of their spending until they are sure they are through the downturn.
For instance, their plans to spend $30,000-plus on new fridges have been shelved indefinitely.
And he knows that in less comfortable neighbourhoods, his fellow butchers and their customers are doing it far tougher.
“I think a lot of businesses that were doing well before the lockdown are back to normal sales,” he says.
“But I don’t think we will be back to normal as quickly as people expect. This thing will continue for a while and we will have to be a little bit cautious. After all, when the borders open, look at what happened in Australia!”