Madam, – I read with interest your recent Editorial headed “Sterling differentials” (January 29th) and I support your contention that “the failure of retailers either to lower prices or to justify those differentials [between North and South] has encouraged more consumers to shop around, with Newry and Belfast gaining at the Republic’s expense”.
The National Consumer Agency’s finding that we are paying 51 per cent more for many household items than our UK counterparts close to the reality. I have been connected to the retailing business all my life. I was born into a retail business in inner-city Dublin and also worked for 30 years with the European division of a US FMCG (fast-moving consumer goods)manufacturing company, and as CEO from 1986 to 2007. With that corporation I had experience of dealing with the distribution sector (including retailing) in over 47, mainly Western, countries.
The retail prices of our products were always higher in Ireland than in the UK. In fact, my own little rule of thumb was that retail prices in Ireland were up to 60 per cent higher than UK prices, which in turn were up to 40 per cent higher than mainland European prices, which in turn were 20 per cent higher than US retail prices.
Having thought about this Irish-UK differential over the years, my view is that during the years of De Valera’s trade wars with the British a network of importers/distributors was fostered in the Republic. They dealt with the import red tape, including paying the tariffs and getting the necessary import licences from the relevant Irish Government department. This additional cog in the Irish distribution system was sold to by UK manufacturers and suppliers generally at the same price as they sold to their UK wholesalers. These Irish importers/distributors took their profit margin and sold on to Irish wholesalers. Hence products were in the Irish wholesale market at a much higher price than in the UK. It should be noted that any cost increase at an early stage in any distribution channel rises at an increasing rate as it moves through the channel as each player takes their profit margin on what was their cost. This, I believe, is the history of the “retailing differentials”.
This differential in retail prices is now totally embedded in the Irish system, although the system itself has been radically overhauled over time and made far more efficient. Major retailers now buy directly from global FMCG manufactures for all their stores, including those in the Republic, at one universal cost price and are therefore making super-premium profits in the Republic. The convenience store symbol groups – Musgrave, Spar, Centra etc – have all set up their businesses here, whether of Irish, British or other origin, on the basis that these premiums are available.
Cross-border shopping in Newry and Belfast may shake out these differentials. But it is so, so lucrative for retail operators here that they may invest in apparent “losses” for a long time to come before they will let go. If and when that happens Wal-Mart and currently absent major European retail operators must surely arrive. – Yours, etc,
FRANK MURRAY,
Harolds Grange Road,
Rathfarnham,
Dublin 16.