Booming Ireland
Published: 18 February, 2008
Over the last decade retailers have capitalised on the growing affluence of Irish consumers and expanded into the Irish Republic's E24.4bn retail market, which has grown by 34 per cent over the last five years. As major new shopping centres lift customer spend and a relaxation of store size limits enables development, major international retailers from Ikea to Lidl are being attracted to Ireland's shores.
The Republic's strong economic framework has attracted a plethora of foreign retailers to Ireland says Daniel Lucht, retail analyst with Verdict Research and author of the report. "Alongside players such as America's TKMaxx, Sweden's Ikea and German hard discounters Aldi and Lidl, UK retailers stand out when it comes to expansion into the Republic and the modernization of its retail offer. Examples include Arcadia in clothing, B&Q and Argos in home-related markets, Debenhams and M&S in the department store arena and Tesco in grocery retailing."
Due to Ireland's relatively small population, and to an extent the rural infrastructure, achieving economies of scale is difficult. Despite this, it has proved a fertile ground for international retailers and property developers.
International retailers have been attracted to Ireland by a combination of buoyant economic growth and a favorable demographic profile. Purchasing power in Ireland is among the highest in the EU, with only Luxembourg rivalling it and GDP growth is forecast to continue, albeit at slower levels.
In tandem, Ireland's demographic set up constitutes a significant growth driver for retail spending. Compared with most other EU countries its relatively young and highly-educated population profile acts as a pull factor for foreign retailers.
Furthermore, since the 1990s Ireland's buoyant economic growth has enabled it to retain key talent, and the economic pull encourages many expatriates to return. Going forward, total household numbers will increase, while their relative size will shrink. This will ultimately play into the hands of DIY, furniture and homewares retailers.
Looking ahead, as a consequence of the amendment of the Grocery Order Act, the relaxation of out-of-town development regulations and the entry of foreign multiples, Verdict warns that many Irish independents, operating across a range of retail sectors, are set to disappear in the future and only the best will stay on to fight.
According to Verdict, much of Irish retailing is up for grabs now and over the next couple of years market leadership in Ireland will be cemented. Tesco is expected to be very aggressive, while the hard discounters will expand further. Home Retail Group, the UK's leading home and general merchandise retailer, which trades under the Argos and Homebase fascias, will make its presence felt and Ireland's Dunnes Stores will come under attack from the UK department store operators. "The likes of Tesco, Ikea and Home Retail Group will aggressively grow their market share of Irish retailing over coming years and build up a sustainable competitive advantage," says Lucht.
The research also highlights futher opportunities that exist in Ireland for the right players: internet retailing is one, despite broadband penetration still lagging behind considerably when compared to other EU nations, largely due to Ireland's rural structure. Moreover there are still under-served pockets in Ireland for grocery, home and clothing retailers. But it warns that retailers need to adapt their strategies and store portfolios to the regional circumstances, and decisions have to be taken whether to move into secondary and tertiary towns. New retail formats should provide another stimulus to growth - depending on ongoing relaxation of the planning regime.
Lucht concludes: "To succeed and stay in the game, retailers must execute the right strategy at the right time. For incumbent and powerful new entrants the opportunity is massive - relatively high personal debt levels indicate that Irish consumers are not shy when it comes to spending."
