The woman, in her mid-30s, whom one witness described as a "wild-eyed woman with long dreads", was shot dead by police after holding a man hostage for an hour.
Five other staff had left the store through a rear door.
Police later found an air rifle at the scene.
She was the first woman shot and killed by New Zealand police, and the 22nd person to die that way since 1941.
The drama unfolded after 9am when the woman en-tered the First Mobile store in central Whangarei, demanding to speak to a staff member.
A source, who asked not to be named, said he was a friend of the salesman the woman was demanding staff contact.
The man said last night he had been in contact with the salesman's family and they had told him the woman had been "like a bigger sister" to the salesman's daughter, who was aged about 22.
"They were friends about two weeks ago, so I don't know what had happened."
The man said the woman asked staff to get the salesman so he could bring his daughter to her.
Witness Glenn Lambert was in his cafe across the road when he saw two people in the store.
"We could see them through the window.
''She made [the hostage] sit on chairs at the front in the reception area, but most of the staff had run out," he said.
Mr Lambert then watched as the woman walked out the front door, waving the gun around.
Police said the woman emerged from the store twice that they were aware of and officers had directly challenged her both times.
The woman was shot as she walked out of the store on the second occasion.
Witness, Arthur McKeshnie, said: "It was as if she was hunting - with the shotgun barrel pointed down - as she came out and looked around."
Several witnesses said police yelled at the woman to drop her gun.
But instead, she pointed the weapon towards them.
An armed offenders squad officer fired at her, shooting her once in the chest.
Three onlookers said they watched the woman topple backwards after she was shot.
Colin Probst, who has a photography store opposite Vodafone, was working at his desk when he heard the armed offenders squad on his roof.
Then he got a phone call from the police telling him to shut the doors and stay inside.
Acting police district commander Inspector Chris Scahill said an air rifle was found at the scene, but he could not say if it was loaded or what calibre it was.
The woman's body remained at the scene last night.
It is expected to be removed today for a postmortem.
Police expected to release her name today once family had been notified.
Insp Scahill said the shooting was a "tragic incident" for all those involved.
The male staff member who shot the woman was "shaken up" and, like his colleagues, receiving support from victim support.
Insp Scahill said investi-gations, including one by the Independent Police Conduct Authority, were under way.
The officer who fired the fatal shot would be "part of those investigations".
When asked if there was any attempt to negotiate with the armed woman, Insp Scahill said: "She came out of the shop on two occasions that we are aware of and on both occasions she was directly challenged by police".
There were "a million different factors" that went through an officer's mind before deciding whether to use lethal force.
Police Association president Greg O'Connor, who flew to Whangarei yesterday to show his support for the officers involved, said police were unable to comment on many aspects of the shooting because of pending investigations.
