while its competitor Pak’N Save has grown market share from 23 per cent to 25 per cent over the same period. The Warehouse Group recently reported a $2.8 million net loss after tax for FY25, with its chair noting that “economic and retail conditions in New Zealand remain extremely challenging”. However, my perspective is that while the macroeconomic environment is undeniably tough, many of these issues are exacerbated by internal missteps and a fundamental misunderstanding of the Kiwi consumer. The problem is complex, requiring both a macro and a micro analysis. The macro environment: a unique challenge The New Zealand economy presents a uniquely difficult trading environment. The country has been in and out of recession for the past two years. The latest data shows a GDP contraction in the second quarter of 2025, which has severely affected consumer confidence and discretionary spending. It is a common error for Australian retailers to treat New Zealand as merely an extension of the Australian market, a “Queensland with mountains”. This overlooks the core cultural and logistical differences.As a smaller population of about 5.4 million, New Zealanders are, culturally, deeply attuned to supporting the underdog and fiercely loyal to local brands, particularly when pitted against Australia. Megan Hudson, a Lower Hutt-based mum and merchandiser, confirmed this, noting that a post-Covid sentiment to “support local” has been strong, giving way to price sensitivity only more recently. One of the logistical issues often overlooked is the geographic diversity and dispersed population. Over 25 per cent of New Zealanders live outside of major metropolitan areas. This means that the shopping experience varies for a large segment of customers, and they often rely on e-commerce and shipping for products not available locally. The customer perspective: price, quality and local pride To understand what Australian retailers are getting wrong, we need to listen to the New Zealand consumer. I recently spoke with three Kiwis – Mary, Emma and Megan – to gather first-hand insights. The themes that emerged were clear: price sensitivity, a demand for quality, and a noticeable preference for brands that demonstrate local understanding. The new shopping drivers In a recessionary environment, price is understandably a major factor. Megan articulated this sentiment perfectly, stating: “Price is probably my biggest factor when it comes to shopping”. Similarly, Mary noted that Australian products are “often cheaper” than comparable New Zealand-made items, making them an attractive alternative. Emma summarised her purchasing drivers as “price, quality and reasonable shipping costs. If they do free shipping, that’s definitely a lot more attractive.” However, price is now viewed through the lens of quality. Megan highlights a shift in behaviour, saying they are “shopping less and spending less because I’m saving up for, you know, a nicer top or a pair of shoes or something nice for the house”. This drive for durability over fast-fashion cheapness is a critical behavioural shift. Mary’s partner, Gary, embodies this: “He goes for quality every time over quantity,” which has influenced her own purchasing. Emma echoed this, stating that if forced to choose between the two, she would always pick “quality”. The ‘sins’ of e-commerce One of the most common complaints revolves around the friction caused by Australian retailers’ poor execution of cross-Tasman e-commerce. As I’ve observed, one of the key ‘sins’ is shipping from the Australian site, with a ‘.com.au’ address, making the purchase feel foreign and incurring more expensive, slower international shipping. Returns are the biggest hurdle. For online shopping, particularly clothing, a seamless return process is vital. As Megan shared, the hassle of returning items to a New Zealand Post shop, which for him is a 15-minute drive with poor parking, often acts as a deterrent. Mary also noted the inconvenience of returns, which she said “kind of puts me off clothing shopping online”. Australian retailers must provide solutions that reduce this friction. I discussed offering free returns for the first two orders as an interesting option to help a customer establish confidence with sizing and quality. All interviewees responded positively to this suggestion and said it would significantly increase their likelihood to purchase from a new brand, and reduce the risk of a first purchase.Additionally, the returns policy must be clear and upfront. As Emma noted, disclosing the policy, especially for sale items, in the checkout area makes customers more “confident in your purchase”. While not common practice, I highly recommend to my clients that they mention their returns policy in checkout, especially with overseas customers. It may not have an immediate impact on your conversion rate, but given the expense and time lost with reverse logistics from overseas, reducing your return rates and associated costs can still have a big impact on your profitability and customer lifetime value. Making it feel local is another critical element. Emma, speaking about Australian brands, recommends “not putting themselves in the mind of New Zealanders, using Australian-centric marketing, voices and scenery”. Megan expanded on this, suggesting Australian companies should use “Kiwi images or a Kiwi person in the ads rather than an Australian person”. She cited the example of an Australian retailer displaying bikinis in cold New Zealand weather, which felt “out of touch and alienated local customers”. For those without a physical presence, establishing trust online is paramount. Megan looks for a brand’s social-media presence, reads Google reviews, and will even directly search “Is this legit?”. Emma, too, relies on “people I know and trust, influencers that are similar age, similar lifestyle” for a confidence boost. Make sure you are investing in getting local reviews and user-generated content from your Kiwi customers and bring this to the forefront in your marketing and onsite content to build relevance and rapport. A critical analysis of struggling retailers The publicly available struggles of three key retail groups – Woolworths, The Warehouse Group and Kathmandu – illustrate that their issues are more complex than simply a tough market.  Woolworths Group (ASX: WOW) The rebrand from the well-established ‘Countdown’ to ‘Woolworths’ starting in early 2024 is a strategic move that carries cultural weight. The change is a stark reminder to Kiwis that the supermarket chain is Australian-owned. As Mary observed, the supermarkets are facing “a lot of bad press about the duopoly that we’ve got in New Zealand” and are perceived as “Aussie owned”, leading more people to “support local butchers and bakers”. Its declining market share is not solely due to the rebrand. It is compounded by its market position as “higher cost and quality”, which is less appealing during a cost-of-living crisis. Homegrown rival Pak’N Save’s focus on value has helped lead to its gain in market share.Pak’N Save’s brand identity, famously featuring a stick figure to show it spends money only where it matters, cleverly plays into the national psyche of value-conscious Kiwis. Megan noted this key difference: “Woolies, they don’t specifically say we’re Australian but they don’t say anything related to country, while Pak’N Save proudly advertises its Kiwi ownership and lower prices.”Woolworths needs to develop a local USP that appeals to Kiwis and highlights investment in the local economy through staff and suppliers. All interviewees said they would feel significantly more positive towards retailers who have invested in the local economy through people and products, rather than just sending all the funds back overseas. I also think there is an angle here for them to highlight quality and even bring in little handwritten notes about the staff favourites in each store, like is done in a few other kiwi stores. It reminds customers of the humans behind the brand. KMD Group (ASX: KMD, NZE: KMD) Kathmandu, once an “iconic and treasured NZ brand”, appears to be a shadow of its former self and has lost its way. The brand is suffering from an identity problem, having diluted its Kiwi roots in an attempt to appeal to a younger, global market, subsequently alienating its core customer base.When I ran online for Kathmandu from 2013-15, over 77 per cent of Kiwis over the age of 18 with access to the internet visited kathmandu.co.nz. When you went to a rugby game, you’d be the odd one out if you weren’t wearing a Kathmandu black puffer jacket. It was our unofficial Kiwi uniform. In a recent survey I ran to inform this article, over 52 per cent of respondents said they don’t shop with Kathmandu, and 33 per cent said they shop there significantly less. The brand’s controversial 2022 marketing campaign, which featured animations and a fox shooting lasers from its eyes, was a bizarre departure from its traditional, stunning outdoor imagery. This shift has changed customer perception. Megan now feels the brand’s products are targeted towards activities she doesn’t do and agreed that competitors like Macpac now feel like “more of a New Zealand brand” than Kathmandu.Logistically, the retailer has reduced its technical range and, in a critical move that affects the 25 per cent of Kiwis living outside major cities, stopped shipping some key products, such as tents, making them ‘in-store only’. This has a direct impact on the brand’s accessibility and relevance. The Warehouse Group (NZE: WHS) While not an Australian retailer, The Warehouse Group is the largest retailer in New Zealand. Its recently reported NZ$2.8 million net loss and the group’s internal turmoil suggest that the issues run deeper than a difficult market. It recently sold Torpedo7 for just NZ$1 and shut down The Market.com. The interim CEO even admitted to “too many own goals”, including holding onto unprofitable ventures for too long and a misguided ecosystem strategy. The Warehouse is struggling to defend its ‘value’ position against international online-only behemoths like Temu and Shein. Megan observed this first-hand, noting she is shopping less at The Warehouse because prices “have increased, but the quality hasn’t really increased”. She is “just purchasing less crap” and focusing on “quality over quantity”. The Warehouse’s physical stores are often described as not offering an “enjoyable shopping experience” being “overwhelming” and messy. The rising customer trend of “quality over quantity” is a fundamental threat to The Warehouse’s low-cost, high-volume model.Noel Leeming is another brand within the group, selling primarily electronics. Three months ago, the NZ Commerce Commission laid criminal charges against the brand over its “Price Promise”, alleging repeated breaches of the Fair Trading Act. They were also charged and fined in 2018 for misleading customers about their rights under the Consumer Guarantees Act. This erosion of trust in the brand has reportedly sent both customers and brands towards Australian brands like JB Hi-Fi, Harvey Norman and even Dick Smith.Additionally, the group has faced internal challenges with multiple leadership changes and some expensive lessons learned through its digital transformation and adoption of agile ways of working. Recommendations for Australian Retailers To successfully navigate the New Zealand market, Australian retailers must move beyond the “mini-Australia” mindset and commit to genuine localisation. Localise the customer experience Contextual marketing: Employ Kiwi imagery, accents and local references in all online advertising and social-media campaigns. This builds immediate cultural resonance. Prioritise local infrastructure: Acknowledge that a physical presence in New Zealand (stores, depots) builds greater goodwill, as it’s seen as “investing back into the country” and supporting local employment. Overhaul the returns and shipping model: Seamless returns: This is non-negotiable for online clothing and non-grocery items. Offer free, easy returns, ideally with a New Zealand depot address, to minimise cost and inconvenience. Explore courier pick-up options, even if charging for them, as a superior alternative to long drives to a post shop. Prioritise free shipping: New Zealanders generally prefer free shipping over fast delivery, even if it means waiting “a couple of extra days”. Free shipping thresholds should be realistic. Clarity on pricing: Display all prices clearly in NZD, avoiding foreign currency checkouts that lead to ‘Oh s***, I thought I only spent this much’ moments of frustration. Establish trust through quality Focus on durability: Align product offerings with the growing ‘quality over quantity’ mentality. If your brand cannot compete on the lowest price point, ensure it wins on longevity. Build trust signals: For new brands, offer an incentive like  free returns for the first two orders to mitigate the customer’s perceived risk on sizing and quality. Ensure high-quality reviews and a clear social-media presence to validate legitimacy. Ultimately, the challenges facing Australian retailers in New Zealand are not insurmountable, but they demand more than a half-hearted, templated approach. A deep understanding of the Kiwi consumer, coupled with a seamless and locally sympathetic e-commerce operation, is the only way to turn challenging trading conditions into trans-Tasman success.