The Irish retail sector remains optimistic for the future despite the challenges presented by price stagnation and the increased competition from the online channel. “We are a confident and optimistic sector,” says Willie O’Byrne, managing director of BWG Foods and chair of Ibec business sector group Retail Ireland. “We see businesses come and go but we don’t look for handouts or bailouts – retail keeps going on and on.”
He also says the scale of the sector and its contribution to the economy is often not properly understood or appreciated. “There are 37,500 retail and wholesale enterprises in Ireland employing 285,000 people around the country,” he says. “That’s 14 per cent of employment nationally and it is spread very widely across the country with 72 per cent of the jobs outside Dublin. The sector also generates €7 billion in taxes every year, that’s 23 per cent of the State’s tax returns. It makes a very important contribution to the economy.”
The sector has undergone a transformation over the past decade, O'Byrne adds. "That was driven by a number of things. There was the shock of the death of the Celtic Tiger in 2007 and 2008 and that was followed by a terrible recession and it was several years before the economy started to recover. That had a massive impact on Irish retail. You could argue that it was a perfect storm as that was also the period when we saw the rise of the disrupters in the form of the new online players.
“That brought a whole new dynamic and retailers had to become much more fleet of foot and willing to adapt and change radically in order to survive and prosper,” he says.
Deflation
Price deflation has presented another challenge for the sector. “Prices have fallen constantly over a long period,” O’Byrne notes. “Prices are at the same level now as they were in 1999 for the sector as a whole, for food and grocery only they are the same as they were in 2000. We have enjoyed or endured deflation of more than 2 per cent annually over the past 20 years.”
The same period has also seen the rise of the discounters. “The marketplace has become more aggressive and competitive and we have seen profound shifts in consumer behaviour. That’s all providing fantastic value to consumers but on the other side retailers face rising costs in areas like property, energy, labour and so on. Top-line income hasn’t grown but our costs have, and this creates its own pressures and dynamics.”
Retail Ireland has conducted a study on the future of the sector. “Hope is not a strategy, so we carried out some research to put a bit of rigour on our approach,” he says. “This research projected growth of between one and 2.5 per cent out to 2021. This will mainly be driven by population growth and due to the shift to online it will not generate a significant increase in employment.”
That continuing shift to online will place additional pressure on the traditional bricks-and-mortar sector, but O’Byrne is hopeful for the future. “Bricks-and-mortar retailers will continue to dominate. They deliver experience and a social dimension. We are social beings and that is important.”
Smart technologies
While these traditional retailers are opening up their own online channels, they are also embracing digital technology in other ways. “The digital world is not just online, it’s about the in-store experience, the back-office systems like automatic stock replenishment, and the implementation of smart technologies and artificial intelligence to make retail more efficient and to enhance the customer experience. We have seen the move from till operators to self-service scanning, and we are also seeing new proof-of-concept stores which have no tills at all.”
Retailers are also making use of advanced data analytics. “We operate in a fantastic, data-rich environment and we have a great opportunity to make use of that data to tap into the personalisation agenda that’s out there at the moment.”
But it’s not all about technology. “The reality is that people buy from people. Customer service will remain the ultimate key performance indicator. It will be shaped by new ways of selling and conversing with customers, but it hasn’t fundamentally changed. This dials up the people agenda in retail.”
Looking further into the future, he says retail will retain its place in the economy and will continue to provide attractive and rewarding careers. “We are offering training and education programmes to professionalise the sector. People can study retail management from diploma right the way up to master’s level. We are also about to launch a new apprenticeship programme for the sector. The retail sector will remain a fantastic place to spend your working life with great career opportunities across a very wide variety of roles and areas. The sector will also remain part of the fabric of society with a presence in every community in Ireland. When we look at the challenges ahead, we don’t curse the darkness, we light a candle instead.”