Get ahead of the fast-approaching festive season
New Zealand’s small and medium-sized enterprises (SMEs) face a major juggling act as they prepare for the holiday season, which unofficially kicks off with Black Friday on November 28.
Boxing Day remains one of New Zealand’s top traffic days for end-of-year sales, particularly for online platforms and peak transaction bursts, but appears to no longer be the undisputed leader.
With the sales season fast-approaching, New Zealand’s SMEs must overcome how to make large upfront cash outlays for the inventory required. This must often be paid for sooner than it is sold, tying up working capital and creating cash flow pressures.
Holding more stock also comes with higher costs for storage, insurance and handling, as well as the risks that the stock will be damaged, become obsolete or not be sold.
There are also indirect costs associated with having money tied up with inventory, such as interest on loans and opportunity costs.
A key challenge is forecasting what kind of sales season they can expect and how much inventory they will need. This could be influenced by multiple factors. One is consumer confidence.
Lower spending appetites
Worryingly, the Westpac McDermott Miller Consumer Confidence index edged down 0.3 percentage points in September to 90.9, effectively unchanged from the June quarter and still a fair way below historic averages.
A level below 100 indicates that more households are pessimistic about the outlook than those who are optimistic.
With the economy hitting a soft patch mid-year and cost-of-living pressures on the rise, Westpac economists report that economic confidence in New Zealand has remained “soggy” despite the Reserve Bank of New Zealand’s (RBNZ) recent interest cut and indications that there are more to come later this year.
They attribute the weak consumer confidence to softness in the jobs market, increases in living costs and weaker house prices. These, they say, are affecting spending appetites.
Similarly, the ANZ-Roy Morgan New Zealand Consumer Confidence fell 2.7 points to 92.0 in August, its lowest level in 10 months, while its future conditions index (made up of forward-looking questions) fell 2 points to 98.8. According to ANZ, this suggests that the retail sector will continue to find the going tough for now.
Greenshoots for retailers
While it is too soon to say that the retail sector has turned a corner, Retail NZ CEO Carolyn Young says new data suggests that retailers may be starting to see some green shoots.
Stats NZ’s Electronic Card Transactions for August34 showed a small increase of 0.7% in total retail spending compared to July (seasonally adjusted monthly values). This is the third consecutive monthly increase.
“Some of the increase may be attributed to increasing prices, but the continued spending increase suggests that a turnaround may be starting for the embattled retail sector,” says Young.
“We’re pleased to see there has also been a small increase in the number of transactions, suggesting that consumers are bringing their cards out a little more often.”
Young says this will hearten retailers as they prepare for the traditionally busy Christmas season. “We are hoping this will give retailers confidence to buy stock and retain staff in the run-up to the end of the year.” So, with this impending spike, retailers and their wholesalers need to be prepared with stock on hand.
The SME juggling act
The MYOB 2025 Business Monitor shows that economic confidence among New Zealand’s SMEs is the strongest in five years, with the highest proportion of respondents since 2016 expecting the economy to improve – most likely because of falling interest rates and easing inflation.
However, MYOB reveals that rising operational costs continue to weigh heavily on SMEs. The top pressure points include rising inflation, cost of living, and climbing fuel and utility costs.
Those surveyed reported that their overhead costs have increased by a margin-squeezing average of $1,600 per month over the past year, and many are bracing for further increases to energy bills.
One in five SME operators is “very concerned” about rising energy prices and their impact on business operations this year. Further pinching SME margins are rising compliance costs, possibly linked to changes in tax and reporting obligations, vehicle licensing and health and safety requirements.
Taking action
According to Xero, planning is difficult for SME owners amid heightened uncertainty about the global economic outlook. On the one hand, the RBNZ has aggressively cut interest rates, lowering debt repayments for small businesses and giving customers some extra dollars to spend.
On the other hand, New Zealand is a small open economy that is dependent on exports. The direct impacts of US tariff policy are expected to be limited. However, the risk for New Zealand is what these tariffs do to the global economy.
Any slowdown in global growth is likely to flow through the domestic economy and affect SMEs, even those not directly involved in exporting, says Xero.
So, what’s the general advice to SMEs facing cash flow challenges at this time of year?
The first step is to forecast your cash requirements between now and the festive season as well as your cash outflows over November, December, January and February. Include projected sales, supplier lead times, deposit schedules, payroll and tax payments. Don’t forget to add additional festive season costs like the extra sales staff needed and marketing spend.
This forecast should reveal cash flow timing gaps that you will need to take care of.
Next up, consider staggering and prioritising your stock orders. Order high-margin and fast-turning stock first. Try to negotiate smaller minimum order quantities with suppliers of slow movers that are still important to stock.
Also, ask suppliers for extended payment terms, partial deposits or consignment arrangements. Emphasise your long-term relationships with them and repeat business when negotiating.
Look to cut costs wherever possible and eliminate or minimise any non-essential business expenses until your cash inflow picks up again after Christmas.
Use discounts to clear out older inventory, making room for Christmas stock. Plus, consider capitalising early on holiday season sales by taking pre-order and layby-style deposits or starting a loyalty program.
Another strategy is to investigate the many working-capital solutions available. These could include Invoice Finance, where you sell unpaid invoices in return for cash now, and Trade Finance to close the cash flow gap between sales and the procurement of materials or stock you need, domestically or internationally.
Further, you could start tightening credit to slow-paying customers and chase aged receivables now.
Also, weigh up incentivising earlier customer payments – for example, with discounts – and proactive ways to secure prompt payment from customers. These could include using automated invoicing systems, invoicing straight after delivery and providing multiple types of payment options (such as credit card, EFT, direct debit, PayPal and BNPL).
Start protecting your cash flow now and become innovative in how you prepare!
