Monday, 5 February 2018
The retail sector is currently undergoing one of the biggest structural changes in its history, according to a new report from Retail Ireland, the Ibec group that represents the sector. In its latest Retail Monitor, published today, the group said a growing disconnect between increasing consumer disposable income and the unspectacular performance of a range of retail categories over the crucial Christmas trading period, is evidence of a dramatic pick up in online retail sales and changed consumer spending patterns.
Retail Ireland Director Thomas Burke said: “2017 was notable for a rapid increase in online shopping by Irish consumers. Christmas 2017 will show record online sales with the Irish consumer now more comfortable than ever shopping in the virtual world. This lays the challenge squarely at the door of the traditional Irish retail sector.
“We know that the majority of online trade leaves the State on a daily basis, with some putting an estimate of 70% of all digital purchases transacted on websites based outside of Ireland. For some retail categories we have reached a critical point, where failure to act in the short term will lead to closures and the gradual disappearance of certain retail formats from our high street. A clear digital strategy will be crucial in ensuring the future of such businesses who must embrace the challenge at all levels of the organisation.”
Mr Burke also highlighted the role Government will have to play in the required transformation. He said: “Bricks and mortar retailers continue to carry all the burden of costs associated with retailing in the State. A growing cost base linked to increasing local authority rates, insurance premiums, regulatory red tape and Government mandated wage rates, all give an undue advantage to their competition, most likely based in a warehouse in a city or town in the UK. Such an imbalance in the respective competitive positions is not sustainable and requires a creative approach by Government in the short term.
“We must ask ourselves, as a country are we happy to lose large swathes of commerce providing rural employment and contributing to their local communities? We must face the challenge head on and seek to level the playing field for our retailers”.
The Retail Ireland Monitor also calls out another key trend in Irish retail over recent years. Sales in December fell by 0.7% when compared to those in November, highlighting the growing importance of promotional events such as Black Friday and Cyber Monday, which are now actively displacing consumer spending from later in the Christmas season.
Mr Burke said: “The jury remains out on the longer-term impact of promotional events such as Black Friday. Some in the industry suggest they are merely bringing forward purchasing decisions at the expense of profitability due to discounting. Others say it launches the Christmas shopping season and helps to promote additional spend over the elongated season. What is clear is that it is another disruptor of traditional end of year retail sales patterns, and that it is also impacting the standing and importance of the traditional January sales period.”
Key retail trends set out in the Retail Ireland Monitor include:
Supermarkets and convenience stores:
December showed solid growth over 2016 with the multiples collectively holding their own against discounters, but only through very aggressive price discounting, particularly in beverage lines.
The decrease in total sales value of 4.7% for the month of December compared to the previous month, demonstrates how important Black Friday and Cyber Monday have become, and how they continue to distort the Christmas trading period. A full week’s shopping before Christmas Day meant sales within Department stores arrived later in the month, leading to a very strong final week before Christmas.
Throughout Q4, growth was driven by increasing prices at the pump and sales in coffee and beverages including alcohol. The category achieved record car wash sales in the week prior to Christmas, with sales over double that of the same week in 2016.
Beauty related categories performed well in November but slowed in December, as volume fell 1.0% compared to the previous month. This highlights the growing importance of Black Friday in the health & beauty market.
Fashion, footwear and textile stores:
The early start to the busy Christmas shopping period affected this category of retail, with total sales value decreasing by 0.8% in December, compared to November. Online fashion and footwear sales grew strongly this quarter, helped by comparable prices with the UK, as last year’s currency variations annualised.
Furniture, lighting and homeware stores:
Furniture and home accessories has been one of the best performing retail categories throughout 2017 and this continued in the last quarter of the year. In Q4 this category grew by 8.8% in value terms and total sales volume increased by 13.6% compared to the same quarter in 2016.