The association, which plans to launch a branch in Dunedin later this year, from among its 300 existing Otago members, estimates the sales of small to medium-sized retailers nationally were down 8% to 15% during 2009.
Association southern regional manager Brian Finlayson, who has been visiting Otago members in recent days, said while there was anecdotal evidence that many established Otago niche-market retailers increased sales during 2009, some by more than 5%, it was a tough outlook again for retailers this year.
"There's still a lot of volatility in retailing, with the economic situation, redundancies and money just not being out there," he said.
While forecasting sales would be better than 2009, with increases of 3%-5%, but for many even a 5% increase on a 10% decline last year would still leave them in the red.
"It could be a harsh year ahead. Key for the year ahead is keeping stock inventories in the right balance and having fully-trained staff - this is all essential," Mr Finlayson said.
In a quarterly economic forecast yesterday, ASB chief economist Nick Tuffley said the economy would "progressively recover over 2010" with 2.5% growth, having shrunk more than 3%.
He noted households in a number of countries were preferring to pay for purchases with money they have, rather than money they borrow.
"That trend is likely to continue for some time. New Zealand is included in this group, with spending and borrowing habits conservative at present," he said in a statement yesterday.
Mr Finlayson said all areas of retail trading had to be scrutinised, including insurance, freight costs and telecommunication charges through to wages.
Mr Finlayson "all too often found" retailers who were busiest from noon to 2pm were halving staff numbers for their lunch breaks at the same time, or hiring inexperienced staff during busy weekend periods.
"Staff will need training. First and foremost is taking care of the customer," he said.
The retail sector volatility has been reflected in the results of bell-weather retailers Smiths Group and The Warehouse in recent weeks, respectively booking a small financial loss and forecasting an unexpected flat profit expectation, similar to the previous year's trading.
While clothing retailer Hallenstein Glasson delivered a surprise forecast of a 40% boost to its half-year after-tax profit last week, some analysts believed this was in part due to good purchase and supply decisions and maintaining the right level of stock.
"[Small to medium] retailers entering into major discounting [sales] will just see their gross profit margins cut . . . they can find themselves eroding profits hand over fist," Mr Finlayson said.
"There's a big difference between [showing a healthy] turnover and what the bottom-line profits may be," he cautioned.
ANZ chief economist Craig Ebert said while retailers could see some positive signs in housing and low interest rates, they had to remain cautious this year.
While the general economic situation was improving, the level of sustainability was unknown.
"We are not signing off to a huge growth phase, but there will be some supporting [economic] activity," Mr Ebert said.
Mr Finlayson was telling members to look closely at stock lines carried, to ensure they matched trends and stock which reflected what the target-customers wanted, as opposed to what the retailer thought was a good purchase.
A suggestion being passed on to association members has been that retailers should include an "order to be confirmed" note when ordering from representatives, so they can analyse the stock they are considering purchasing and change it later, before committing to a large purchase.
Mr Finlayson was "by-and-large" impressed with the service of most Dunedin retail staff he encountered this week, but in the worst-case scenario, recounted "task driven" staff working solely on computers when customers were left unattended in the shop.
"Retailers have to look at investing in trained, experienced staff, not just taking the first person off the street who applies," he said.
Mr Finlayson, who is based in Blenheim, said that during the first quarter of the year the association hoped to host a meeting in Dunedin for members and look at establishing a retailers association branch in the city, which he had successfully promoted in other cities around the country.
