Duty free: relief for NZ fashion

AUCKLAND: A fall in import duty rates couldn’t have come at a better time for New Zealand fashion retailers – with substantial tax cuts and low interest rates othewise failing to entice consumer spending.

Electronic card transaction figures from Statistics New Zealand indicated consumers spent $20 million less in June compared with May, the largest monthly decline in nearly two years.

This followed an already bleak period for fashion retailers, with spending in the department store sector plummeting by 5.1 per cent in February and clothing and soft goods by 9.8 per cent compared with the same period in 2008.

New Zealand Retailers Association chief executive John Albertson said this meant more businesses would start to wind back aggressive discounting strategies, as margins continued to feel the squeeze.

“Margins are being stretched to their limit [and] the culture of 30 to 60 per cent off can’t continue,” he said.  “The longer it goes, the harder the job is weaning the customer off it.”

Retailers across the board had begun early and aggressive discounting this year, hoping to cash in on tax cuts and expected spending from cold weather conditions.

However, fashion retailers were granted some relief this month with a five per cent fall in import duty rates for apparel. High Street chain Max Fashions, which recently released a capsule collection with Australian designer Kirrily Johnston, said this would allow the sector to maintain competitive pricing.

Max marketing manager Sandy Burgham said while the group still manufactured products in New Zealand, a large percentage of goods were produced in China. The fall in duty rates – from 15 per cent to 10 per cent this month – meant benefits for both front and back end operations.

“Max sees this as a real positive as it will save us on the cost of goods,” she said. “We have ongoing relationships with local suppliers who assist us in the sourcing and development of the vast majority of product. The fall in import rates means we will be able to pass on savings to our customers.”

New Zealand’s Free Trade Agreement with China meant further rate cuts were scheduled to kick off from January 1, 2011. Heavily traded imports from the region, such as jeans and T-shirts, would fall to 10 per cent in 2011 before declining at an average two per cent until 2016, when no duties would be imposed.

Other items of apparel would fall to 8.1 per cent in 2011 to zero in 2014.