In his latest Developments & Insights analysis, Bank of Ireland head of Retail Sector Owen Clifford says the end is in sight for grocery inflation and signals the rise of optichannel retail.
“As the ever more discerning Irish consumer seeks excellence in store standards, Irish grocery and convenience retailers/brands recognise that investment/differentiation is required to retain and attract footfall to their business”
Grocery inflation subsides
Irish grocery inflation stood at 3.3% in November 2024 representing a significant reduction (6.5%) compared to the equivalent period in 2023. This metric will continue to be monitored closely in the months ahead given developing/ wider geo-political factors impacting the food supply-chain.
The large supermarket operators have been proactive in addressing cost of living concerns with targeted ad campaigns and voucher offers being strongly promoted in recent weeks.
The ever-increasing emphasis on “events” across the sector was further underlined with sales across the Halloween/November weekend delivering a volume increase of 5.5% vs the same period in 2023.
Investment continues within the market
As the ever more discerning Irish consumer seeks excellence in store standards, Irish grocery and convenience retailers/brands recognise that investment/differentiation is required to retain and attract footfall to their business. This investment includes the delivery of new and revamped best in class stores that showcase the latest initiatives and offerings from individual brands. In recent months, Tesco have opened a number of new Express format stores in Dublin whilst Aldi, Lidl, Dunnes, Centra and Spar (amongst others) continue to expand their footprint nationwide. Cross-brand collaboration continues to be a feature of the market with Applegreen/ Marks and Spencer, Maxol/Dunnes and Dunnes/Iceland all representing new/expanded partnership propositions being offered to the Irish consumer.
A changing retail landscape
The wider retail sector has delivered a robust performance to date in 2024 with sales volumes in the period January-September (excluding motor sales) remaining in line with the equivalent period in 2023.3 Retailers continue to assess the impact that current inflationary trends may have on discretionary spend and are tailoring their business plans accordingly. Investor interest in retail park/shopping centres has been strong with notable transactions being closed in Cork, Carlow, Kilkenny, Drogheda and Dublin in recent months.3 This has been driven by a re-invigoration of in-store retail in a postpandemic landscape which has seen numerous international brands (Lego, New Balance, Pret A Manger, Kiko etc) open stores in Ireland along with occupancy levels returning to more normalised levels – retail parks and shopping centres now at 95%+ occupancy nationwide.
As I engage with retailers daily, it’s encouraging to see progressive operators continuing to invest in their people, premises and systems whilst delivering a robust financial performance. These retailers recognise that a proactive approach is imperative to navigate the challenges ahead. The following areas will be key in shaping a sustainable Irish retail sector in 2025:
Knowing the Consumer
Our population is aging, and many consumers believe the retail world is not ready for this change in demographic profile.
In Ireland, the number of people aged over 65 has doubled in the last twenty years from c400k to c800k in 2023 equating to c15% of the population. This statistic is expected to rise towards c1.5 million by 2050.5 At a European level, the “silver economy” is set to represent more than 35% of spending consumption by 2030. Given this exponential growth, meeting the needs of our senior shoppers should be a key focus area for all Irish retailers.
Conventional wisdom would dictate that the requirements of middle-income consumers (“the squeezed middle”), navigating an increased cost of living, would be heavily weighted towards a discount proposition. The reality based on both the Irish and European experience reflects a more polarised/nuanced approach with these consumers still seeking premium brands/ products at intervals throughout the year. This behaviour is intrinsically linked – consumers seeking to “treat themselves” with a more expensive product/activity/night out etc after a sustained period of repressed/manged spending. Independent retailers adopting a “middle of the road” proposition therefore need to assess the viability of same in a polarised marketplace that is expected to continue.6
A personnel matter
In a low unemployment environment, the recruitment and retention of personnel remains a critical challenge for the sector. People development strategies that deliver upskill and career progression opportunities need to become embedded within the retail eco-system. This people focused framework should be proactively supported by the smart use of automation to create a better work environment and more engaged staff. Retail focused technology can absorb nonproductive labour-intensive tasks allowing staff to engage with customers, generate more sales and nurture loyalty.
Omnichannel to Optichannel
Whilst COVID-19 accelerated the digital transformation of the sector, considerable investment and development is still required by Irish retailers to meet customer expectations.
Retailers need to compress this workstream into three distinct phases:
- Going Online
- Integrating the online, physical store and supply-chain elements. (Omnichannel)
- Refining the proposition to a seamless, user-friendly, consistent model (Optichannel)
Read the full sectoral Developments & Insights Report, December 2024:
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