Mike O'Donnell: Predicting the future of retail spending

Mike O'Donnell is a professional director, writer and strategy adviser. Stuff.

September 2, 2023

OPINION: Statistics NZ quarterly retail surveys are not exactly bodice-ripping page-turners.

Written in a “just the facts” style, they succeed in making the interesting sound flat. But as Greek philosopher Aristotle noted in his Nicomachean Ethics, if you want to know where society is heading tomorrow, just look at what they are eating today.

The short version of that is people are consuming less and spending less. The longer version is a bit more complicated. The June quarter figures show the third decline in retail spending in a row, with the latest sales volumes down $25 billion across three months (1%), and 11 of the 15 industries surveyed having lower volumes and lower revenue. Food and beverage were hit hard, down 2.3%, as were hardware and building, down 3.4%.

But the biggie was petrol and diesel retailing, down $184 million (7.1%). The funny thing about that is on the opposite side of the ledger, the largest increase for the quarter was for cars and car parts, which grew a solid $134m (5%). So on the one hand people are buying more cars, but on the other they are paying less for fuel.

Apart from some increases in metro public transport, the big driver of this is the move to electric cars.

With a good stiff southerly behind it (courtesy of government subsidies and skyrocketing fuel prices), electric cars are zooming from the fringe to the mainstream. It’s a sea-change in what people are prepared to put their hard-earned cash into.

Remarkably, at a time when families are finding it harder and harder to make ends meet, they appear happy to lash out $20,000 for a used EV or over $50,000 for a new one.

In July, electric vehicles accounted for a staggering 54% of total new car sales, surprising the maximum rebate scheme concluded in June. And the biggest sellers weren’t the comparatively cheap MGs or BYDs, it was the premium-priced Teslas.

Against this broader context it’s probably no surprise that Wellington startup FTN Motion​ had the last of its first 100 pre-sold hand-built Streetdogs motorcycles roll out of its Haining Street​ factory this week.

I penned a column in 2022 about the innovative company and its svelte-looking electric motorcycles that look like a cross between a 1960s cafe racer and something out of science fiction. All 100 of those Streetdogs sold out in a matter of weeks.

Notwithstanding a couple of bespoke local sports car assemblers, constructing 100 vehicles in a year likely makes FTN Motion Aotearoa’s first consumer automotive production operation since the 1990s, when Honda and Ford closed their factories.

FTN Motion is now getting ready to scale up, opening a new generation of bike sales and moving to bigger premises. It is also investing in mass-manufacturing tooling and moulds so it can get its per-unit costs down, an important part of any company moving from startup to scale-up. It is also eyeing Australia, a country where most electric motorcycles look like 1980s kitchen appliances, so the appeal of a stylish alternative could be strong.

To do all this, the company is in the middle of a $3m capital raising and has already passed its commitment threshold. Which is great for the business and the professional investors it targets, but it makes you realise there are few ways for retail investors to get exposure to local companies sailing this sea-change of electric vehicles and electric motors.

We’ve seen the likes of ChargeNet​ and FTN Motion do what are effectively private placement capital raises for habitual investors, but by definition these are not retail offerings.

Apart from buying shares in electricity “gentailers” or listed hardware manufacturers like AoFrio​, it's pretty hard for mums and dads to buy into what is clearly going to be a growing part of the market.

Those who have access to buying foreign shares through their bank or an online trading platform like Hatch or Sharesies can buy into American stocks like Tesla and Rivian Automotive​, or lithium mining stocks in Australia.

Another option is buying into decarbonisation funds like the Punakaiki Climate Venture Capital Fund​.

Whatever form this takes, I’m guessing the investment charge will be led by the recently converted, those who know the joy of electric vehicle ownership. That is the Tesla owners and the Streetdog owners.

Which reminds me of another Aristotle quote, this being the businessman Aristotle Onassis​: “The secret of investment is to know something that others don’t yet know.”