The association representing retailers says the sector as a whole looks like it turned a corner at the end of last year, but warns some could still feel the pinch in 2012.
New figures issued on Wednesday show retail finished last year strongly, boosted by the Rugby World Cup and a surge in smartphone sales.
Statistics New Zealand says retail sales rose a seasonally-adjusted 2% in the final three months of last year.
Excluding sales of vehicles and vehicle-related items, sales volumes rose nearly 3% in the quarter, the biggest increase since 1995 when Statistics New Zealand began reporting retail sales data in its current format.
Supermarkets and fuel sales were the biggest beneficiaries, although electronic goods also rose strongly.
Overall, sales were up 3% in the North Island in the December quarter, while the South Island managed an increase of 0.6%.
Radio New Zealand's economics correspondent says the difference reflects more Rugby World Cup games, including all eight knock-out matches being held in the North Island.
Retailers Association chief executive John Albertson says sales turned a corner late in the year, but came at the expense of profit margins.
Prices fell in 10 out of the 15 retail sectors monitored by Statistics New Zealand.
Goldman Sachs estimates prices falls during the final quarter of 2011 were their steepest in nearly a decade.
Mr Albertson says some retailers are feeling the pinch from continued discounting and could be forced out of business if margins do not recover soon.
