Falling local spending as household budgets face greater pressure is leading to "unprecedented challenges" for the retail sector.
Credit bureau Centrix data shows business liquidations are up more than a third year-on-year, with the retail sector leading the charge.
First Retail Group managing director Chris Wilkinson says more New Zealanders are taking their money offshore on holidays, while others are spending less as high inflation and interest rates eat into household budgets.
He says the pressures are being felt right across the retail sector.
"The big challenge is a lot of spending is now starting to escape back offshore. This year was one of the first periods since Covid that we've seen a lot of people travelling offshore."
Businesses benefited from "captive" spending during the pandemic as New Zealanders spent locally, says Wilkinson.
"Probably the most important aspect has been these extreme challenges consumers are seeing in their everyday lives - the cost of living."
Wilkinson says businesses have to be prepared for the challenging times by thinking hard about how to adapt their business.
"It's all about leaning in, making sure that you are spending time talking to your customers, being in front of them as often as you possibly can."
He says retailers should also build networks within business communities, as working as communities have led to success.
Wilkinson says having an online presence is also important during a tough climate.
"Many consumers start their shopping journey online. While cost is a key aspect for most people, convenience is [also] a key aspect."