The following research report contains market research, analysis, statistics and business intelligence relating to research on Apparel Industry In New Zealand.

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ABSTRACT
This ISA focuses on New Zealand's US$400 million dollar apparel industry and covers the lower market segment (primarily children's wear and mass-market apparel) the middle market segment and the middle-upper segment which is mainly branded marketed apparel and top-end designer garments. This report covers HS Codes 61 (knitted apparel) and HS Codes 62 (woven apparel).

Prior to the mid 80s, apparel was one of New Zealand's most protected but least subsidized industries. Domestic clothing manufacturers protected by 65% tariffs and import licensing supplied most of the marketplace demand. Goods tended to be costly and limited in fashion styles. Economic reforms introduced by the Government over the last 15 years to create a more efficient marketplace have included the gradual phasing out of import tariffs and the abolition of import licensing. During 2000, apparel imports represented approximately 70% of the total marketplace demand (value). Overall, apparel imports in 2000 ranked as this country's 10th most valuable import. In 2000, approximately 80% of the total imported apparel was from China (64.1%) and Australia (15.5%). Apparel imports from China have risen dramatically since the market was deregulated.

This small market consisting of 3.8 million people is heavily influenced by trends from the U.S. and Europe. U.S. fashioned leisure wear, sports and college brands are very popular and highly visible throughout the retail sector, but the products are usually not manufactured in the U.S.. The products are either imported from Asia or manufactured domestically under license. Over the last three years, apparel imports from the U.S have been seriously affected by New Zealand's exchange rate. Between 1999 and 2000, U.S. apparel market share fell by 30% -- U.S. apparel imports represented only 1.4% of the total import market in 2000. (One New Zealand dollar equals 40 U.S. cents, April, 2000) Unfortunately until the New Zealand dollar improves, the outlook for U.S. apparel items is not positive.
STATISTICAL DATA:

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NEW ZEALAND APPAREL MARKET
Millions of U.S. dollars 1998
1999 2000
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Import Market 324.2
358.2 358.3

Local Production 120.0
118.0 115.0

Exports 83.6
98.1 81.8

Total NZ Market 360.6
378.0 391.4

Imports from the U.S.
5.8 7.3 4.9

Exchange rate: .5188
.5444 .4574

Future Inflation Rate Assumed: 2-3%

2000 Import Market Share:

China: 64.1% Australia: 15.5% India: 3.2% USA: 1.4%
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Source: Statistics New Zealand

Receptivity Score: 1

End-ser receptivity for acceptance/desirability of U.S. products is on a score of 5 down to 1:

5 = extremely receptive
4 = very receptive
3 = fairly receptive
2 = somewhat receptive
1 = not receptive

Notes:

(i) The import statistics were compiled by using Chapters 61 and 62 of the Harmonized Tariff
(ii) Local production figures are estimated.

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A. MARKET HIGHLIGHTS:

New Zealand consists mainly of two islands equal approximately to the state of Colorado. New Zealand's nearest neighbor is Australia, 1,600 kilometers to the west. There are three main centers, Auckland, Wellington and Christchurch. The country's population is 3.8 million people. Just over 75% of New Zealanders live in the North Island. Auckland is New Zealand's largest city with 29.5% of the population -- 39.3% of North Islanders are recorded to live in the Greater Auckland region. Based on its population ratio, apparel retail sales are highest in the Auckland region. Auckland is New Zealand's "business city" -- it is as well the center of New Zealand's domestic apparel industry. Despite enjoying a high standard of living, compared to the United States, New Zealand is a low-income country.
Prior to a series of economic reforms begun in the mid-80s to create a more efficient and liberalized marketplace, New Zealand's apparel industry was one of the most protected industries in the country. Forty years of protection through import licensing and high tariff barriers had produced an industry suffering from gross under-utilization of capital, horizontal proliferation of units, high consumer prices, an inability to compete on world markets and a dependence on Government support. Eighty per cent of the clothing for sale in New Zealand shops was the reservation of New Zealand manufacturers. The Government recognized that the industry was due for a shake-up and in line with its free market policies, implemented a reduction in import protection. Effective July 1, 1992 import licensing was removed and six months later an apparel tariff reduction program was implemented reducing tariffs from 65%+ to 15% (2001). The Government's tariff reduction program concludes in 2006 when all imported apparel will be able to enter the country free of duty. A study by the New Zealand Institute for Economic Research (NZIER) in June 1999 analyzed that due to the removal of tariffs and import licensing, clothes are 15% cheaper than before deregulation.

Deregulation of the local apparel industry has forced many manufacturing and retailing outlets into receivership as cheaper imports mainly from China could not be competed against. All consumers have benefited by the reduced cost of basic clothing items. Home-sewing is no longer popular. Families do not rely on women family members to sew clothes for their households in order to keep to a budget. (Only 12 companies now sell sewing machines for the domestic market. In just 16 years, 79 sewing machine businesses have disappeared. Fabric retailers have similarly fallen and now number only 10.)
Today, New Zealand consumers can purchase a wide variety of clothing styles offered by outlets ranging from discount chains to brand label boutiques. With the exception of a few significant domestic manufacturers e.g. The Pumpkin Patch, most of this country's requirements for children's clothing is imported. Goods for the mass-market, e.g. adults T-shirts and basics are dominated by imported garments.
A Government initiative implemented to introduce further competition took place on Budget night in May,1998 when the New Zealand Government removed through changes in the Copyright Act, the prohibition of parallel importing of copyrighted goods into New Zealand. The United States Government does not concur with New Zealand's legalization of parallel importing. (Pirated goods are still prohibited.)

(Parallel importing of copyrighted goods occurs when products legally manufactured anywhere other than New Zealand are imported into this country without the permission of the local holder of the copyright in those goods)

The Warehouse, New Zealand's largest discounter has been a leading proponent of parallel importing and regularly offers U.S. brands, e.g. Amco, Bodyglove, Calvin Klein and Nike at very competitive rates. The Warehouse has only seriously added clothing in its product range over the last five years but the company has plans to increase its product range. The appeal to New Zealanders of parallel imported products is that they are well priced, good quality, trendy garments. Price is a key purchasing factor.
Since 1990, all goods of Australian origin have entered New Zealand duty-free under the provisions of the Australia-New Zealand Closer EconomicRelations Trade Agreement (ANZCERTA, commonly known as CER). ( Australian apparel ranks as the second most important supplier.) In December, 2000 New Zealand signed a Free Trade Agreement with Singapore. (Singapore apparel exports to New Zealand are very small)

As New Zealand is in the southern hemisphere, climatic seasons run opposite to U.S. seasons, i.e. when it is fall it the U.S., it is spring in New Zealand. The New Zealand marketplace operates approximately one season behind Europe and the United States. A few local importers have used this factor and the seasonal differences to their advantage. The New Zealand companies have bought end of season surplus goods in the U.S. and sold them at price competitive rates at the start of the season in New Zealand. B. COMPETITIVE ANALYSIS:

Domestic Production:
A decade of economic reforms has forced local manufacturers to change how they do business. Some apparel producers not able to meet the new market conditions have gone out of business. Those manufacturers that have remained in business have reduced overheads as far as possible; kept rigorous credit control; focussed more on niche marketing and become independent of the local economy. Some New Zealand manufacturers in order to keep labor costs down have turned to having their products partly sewn in other countries e.g. China and Fiji. Since the May, 2000 coup in Fiji however, Fiji is not as popular as local manufacturers fear supply risks and a lot of the work is being returned to New Zealand. As a result, the domestic industry is now facing a shortage of production space and skilled labor. Investment in new machinery has generally not been kept-up. New Zealand's "brain drain" of the 90s/00s has been strongly experienced in this sector. Local designers, machinists and sales and marketing professionals appear to be well sought after in other countries and are eager to accept new and different life experiences.
The New Zealand apparel industry now consists of 1,017 enterprises mainly centered in the greater Auckland region employing 8,560 people. (Source: Statistics NZ, 2000) New Zealand's domestic apparel producers are characterized as able to provide short production runs at reasonably competitive unit costs. Generally the quality of finished product is very high. Local production is very strong in the leisure sectors. Manufacturing under license U.S. team sport and college brands is widely undertaken. Local manufacture of warm and lightweight vests or jackets made of Polartec fleece manufactured by Malden Mills, USA is currently popular.
New Zealand designers received international respect and local media attention when they successfully exhibited at the 2000 London Fashion Week. The Government's export promotion agency, Trade New Zealand sponsored several New Zealand designers and their collections to the London Fashion Week. Trade New Zealand has also organized for New Zealand designers to exhibit at the Mercedes Australian Fashion Week in May, 2001. New Zealand designers are especially recognized at the top end of the market. However, Canterbury possibly New Zealand's best known international brand (40 shops worldwide) specializes in training gear and fashion sports wear (middle market).

The local domestic manufacturing sector supplies less than one third of the local marketplace demand.

Imports:

Imports now dominate the marketplace (approximately 70% of market share in value). Chinese goods accounted for 64.1% of New Zealand's total imported apparel goods in 2000 (70.3% for knit apparel (HS chapter 61) and 58% of all imported goods for woven apparel (HS chapter 62)). Over a three-year period from 1998-2000, Chinese imports have increased by more than 10% each year. Between 1999 and 2000, Chinese imports increased by 11.3% for knit apparel and 15.1% for woven apparel.
The quality of Chinese clothing has improved significantly since deregulation. In the early 90s when imports began to be access the market, they were most visible in the children's wear and mass-market sectors (lower market). In 2001, Chinese products are now well represented in the lower and middle-market segments. The significance of this is that the middle-market sector is the major area of competition between imported goods and locally-produced items. Chinese goods are now the main competitor to the domestic industry. New Zealand consumers generally consider Chinese clothing to be good quality, trendy and cost competitive. In some instances, Chinese clothing available locally is New Zealand designed.

New Zealand's second largest source of imported apparel is from Australia. During 2000, Australia's market share for knit apparel was 13% (down 24% on the previous year), and 18.1% for woven apparel (down 30.4% in 2000). Although Australian products are good quality and cut for New Zealand body shapes, they are usually more expensive to purchase compared to domestic and Asian goods due to a stronger Australian dollar. Australian brands are well received in the marketplace and tend to be best represented in the middle-top end of the market. The middle-top end of the market is the most profitable sector in the apparel industry. Consumers buying in this sector are the fashion followers and tend to enjoy a high disposable income. U.S. Market Position and Share:

New Zealanders base their impressions on the U.S. mainly through exposure of American pop culture via TV, music and movies. U.S. fast food franchises are nationwide. New Zealand teenagers and young adults are particularly responsive to U.S. sports (sports and leisure are core values to all New Zealand age groups). Outside of the corporate world, New Zealanders dress similar to U.S. people -- casual. It would be easy to assume from observing how New Zealanders dress that they are wearing U.S. -made clothing due to the amount of U.S. branded goods worn. However, most of this product is made in Asia or manufactured under license in New Zealand. In 2000, U.S. knitted apparel imports represented 1.6% of the import market share and woven apparel accounted to 1.2% market share. During 2000, U.S. imports amounted to approximately US$5 million. Between 1999 and 2000 U.S. clothing imports fell 38% (knitted apparel) and 23.4% (woven apparel). The most obvious reason for a drop in demand for U.S. clothing is due to the strength of the U.S. dollar vs. the New Zealand dollar. During 2000, there were weeks when one New Zealand dollar fell to 38-39 U.S. cents. Imports from the U.S. rank 6th for knitted apparel and10th ranking for woven apparel.

During 2000, U.S. imports of T-shirts and singlets (HS Code 6109) was the most profitable item from the U.S., followed by men's or boy's suits and jackets (HS Code 6203) and hosiery (HS 6115).

Recycled clothing from the U.S. is not considered a viable option due to duty rates.
C. END-USER ANALYSIS:

New Zealand's 3.8 million people is approximately four-fifths European and one-fifth Polynesian. The native New Zealanders (Maori) and Pacific Islanders from the Cook Islands and Samoa make-up most of this country's Polynesian population.
The most noticeable aspect about New Zealand's population is that it is aging. Population projections are that by the year 2031, people aged 65 years and over will represent 21% of the total population compared to 12% now. By 2031, the population is expected to increase slowly to reach 4.42 million people and by 2051 the population is expected to grow by 24% to 4.53 million people. Higher fertility among Polynesian races is reflected by the youthfulness of Maori and Pacific Islanders in the population. There are fewer teenagers numerically in New Zealand than for the last 30 years.
There are approximately 1.2 million households in New Zealand. Almost 1/5th of households are occupied by a 65 year-old and over. The predominanttype of local household is "one-family". For the year ending March 31, the average weekly expenditure for New Zealand was NZ$683. The average expenditure by households on clothing and footwear amounted to NZ$27 per week. Women's clothing has traditionally taken up a greater proportion of the household budget than other apparel types. Average annual before-tax for New Zealand households was NZ$49,225 in 1997/98. In 1997/98 weekly income per person aged 15 years and over was NZ$472, with NZ$617 for males and NZ$380 for females. Source: 1998 Household Economic Survey, Department of Statistics

New Zealanders are perceived as sophisticated and discerning consumers that appear to favor anything in black and prefer simply cut garments. As body shapes go, generally New Zealand women are more "hippy" than Northern Hemisphere women due to a lifetime of dairy products.

Sizing: metric measurements are used in New Zealand.
In unisex sizing, XS New Zealand 10 U.S. 8 S New Zealand 12 U.S. 10
WM New Zealand 14 U.S. 12

Petite sizes are rarely available.
D. MARKET ACCESS:

Distribution:
New Zealand has 1,577 clothing retail outlets employing 7,730 people. Source: Statistics New Zealand. This figure does not include department stores, chain stores or discounters. Shifting shopping patterns have changed how consumers buy clothing in New Zealand. The concept of shopping malls and shopping centers, although not entirely new to New Zealand was not on the same scale as in the United States until K Mart entered the local marketplace in the late 1980s. K Mart's policy of building its malls in premier locations introduced other high profile companies to the mall concept as consumer quickly adapted to one-stop convenience shopping. Children's apparel, mass-market apparel and middle-market apparel is dominated by major chains operating from modern inviting malls. Department stores and boutiques located in CBD areas mainly distribute top-end apparel. Weekend trading is now standard business practice.

New Zealanders are high users of the Internet. On-line shopping is gaining popularity but consumers here do not shop over the Net as readily as in the U.S. Consumers worry about sizing difficulties and credit card fraud. (A new code for the e-retailing industry is imminent.) Mail order is also not widely accepted but it is gaining acceptance. Two domestic suppliers, The Pumpkin Patch and Ezibuy both offer mail order.

Advertising budgets compared to other industry sectors are modest. The top advertisers are mainly chains specializing in sports wear and casual clothing. In all categories over 2000, The Warehouse ranked as New Zealand's second largest advertiser. Source: Marketing Magazine, April 2001.
Tariffs:

Since 1990, all goods of Australian origin have entered New Zealand duty-free under the provisions of the Australia-New Zealand Closer Economic Relations Trade Agreement (ANZCERTA, commonly known as CER).

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HS Code: Description: Duty Rates:
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61 Knitted apparel July 2000 15%
July 2004 10%
July2007 5%
July 2006 Free

62 Woven apparel July 2000 15%
July 2004 10%
July2007 5%
July 2006 Free

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All goods imported into New Zealand are liable for a Goods and Services Tax (GST). GST is an indirect tax that is imposed on each sale or supply of goods and services starting from the beginning of the production cycle and finishing with the sale to the final consumer. Intermediate suppliers of goods and services receive a credit for GST paid, so that the cost of GST is borne only by the final consumer. The Government determines the percentage level of GST. The current rate is 12.5%. Thetax is normally payable to the New Zealand customs Department at the time of importation.

There are no importing licensing requirements.

Legislation:

Consumer Guarantees Act, 1993: The Act includes regulations that manufacturers/importers must ensure that all goods are of acceptable quality. This is they must be free from minor faults, they must be safe and durable and the goods must correspond with any description, sample or demonstration model which is given or shown to the consumer. As well the law enforces that consumers should pay no more than a reasonable price unless a price has been agreed.

Fair Trading Act, 1996: This Act consolidates the law on misleading advertising; prohibits deceptive or misleading conduct and "false representations"about the provision of goods and services; prohibits certain unfair trading practices; and, provides for new consumer information and product safety standards.

Standards:

Apparel products sold in New Zealand may need to comply with a number of the following standards available through Standards New Zealand:

AS/NZS 2392: 1999
"Textiles - Labelling of clothing, household textiles and furnishings"

AS/NZS 4502:
"Method for evaluating clothing for protection against heat and fire"

AN/NZS 4501:
"Occupational protective clothing"

AS/NZS 4503:
"Protective clothing - Protection against liquid chemicals"

AS/NZS 4543.3:2000:
"Protective clothing and protective devices for gonads"

AS/NZS 4453:
"Protective clothing for users of hand-held chainsaws"

AS/NZS 4399:1996
"Sun protective clothing - Evaluation and classification"

AS/NZS 4399:1996A1
"Sun protective clothing - Evaluation and classification"

Standards New Zealand's business contact details are:

Standards New Zealand
155 The Terrace
Private Bag 2439
Wellington
Ph: 64 (4) 498-5990
Fax: 64 (4) 498-5994
Email: snz@standards.co.nz Financing:

Finance activities are akin to normal U.S. practices. Payment terms are negotiable between vendor and purchaser. For example, cash with order, irrevocable letter of credit, normal letter of credit, or cash against shipping documents, all are acceptable methods of payment. As a trading relationship between a U.S. company and a New Zealand company develops (i.e. trust), it is regular practice for a U.S. company to offer open account terms. Key Contacts:

In accordance with the Department of Commerce's current policy, we no longer provide key contacts in our ISA reports. Tailored contact lists are available for a small fee from:

Commercial Service
American Embassy
PO Box 1190
Wellington
New Zealand
Ph: 64 (4) 472-2068 x 236
Fax: 64 (4) 473-0770
Email: Janet.Coulthart@mail.doc.gov

DISCLAIMER
Information in this report relies on sources including Government Publications, Opinions of industry experts and other public sources. Infomat can accept no responsibility for the accuracy or completeness of such information or for loss or damage caused by any use thereof. All prices subject to change without notice.

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For the 2008 Edition

Published: 2006 August
Market: Mens Womens Childrens
Region: New Zealand
Industry: Apparel
Pages: 45
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