Rapid shift online has kept Irish retailers afloat

One day in the second week of March, John Smith, the managing director of Best Menswear, gathered the managers of its 12 outlets in the Crowne Plaza hotel in Blanchardstown. The company, which had 130 staff including 70 full-time, was launching its trading plan for the rest of the year.

By the end of the week the plan was out of date, as Ireland slid rapidly into anti-virus restrictions that have upended the economy. In particular, the pandemic has sent retailers scrambling by drastically accelerating the shift to online shopping. During the first lockdown in April, online peaked at more than 15 per cent of all retail sales, two-to-three times what it had been previously.

With a week to go until the Black Friday-to-Cyber Monday landmark weekend for retailers, the Government and public health officials are still hesitating over how to reopen non-essential shops for Christmas trading. Customers have continued to stampede online and many, such as Best Menswear, have followed them to keep up. Cyber Monday has turned into Cyber 2020.

“When the virus first arrived, I thought we’d just wrap everything up for six weeks and then we’d be grand,” said Smith. It soon became apparent that Best’s stores could potentially be disrupted for far longer. Worse, it didn’t trade at all online and only maintained a brochure-style website incapable of handling e-commerce transactions.

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By late April, Smith says, he knew he “needed to do something . . . I couldn’t just sit around making sourdough”.

Best, which had rebuilt its business after an examinership in 2015 caused by losses from the closure of Clerys, had already ventured online twice previously, in 2010 and 2016. Each time, it withdrew. On its first foray it struggled to convert traffic into sales and at the second attempt, Smith admits, the company didn't resource its online operation properly.

E-commerce platform

Prior to the arrival of coronavirus, Best's plan had been to have another go at online trading towards the end of 2021. But as the pandemic continued to permeate every facet of everyday life, Smith knew he'd have to speed that plan up. He picked up a €40,000 online trading grant from Enterprise Ireland and set about trying to make it third time lucky.

After a few Zoom calls, Smith hooked up with high-profile e-commerce platform IRP Commerce, which built its lofty reputation several years ago after it helped to grow small Northern Ireland bikes retailer Chain Reaction into a flourishing online business with sales of about €170 million.

It has also worked with brands such as Newbridge Silverware and menswear brand Magee 1866.

“We made a decision as a team to move fast. We believed IRP could replatform us quickly and we launched the site on September 10th,” said Smith.

After its two previous “bad experiences”, he kept expectations low. Best internally ranks its outlets as “A, B and C stores”, depending on their sales and profitability. The online operation, which is run from the stockroom of one of Best’s city outlets, was initially only expected to be a loss-making “low C” store. But the pandemic has turned the sector’s economics on their head.

“The Business of Fashion magazine says the pandemic has accelerated the shift to online in our sector by up to 10 years,” said Smith.

Now barely 10 weeks old, Best’s online operation is already one of its best B stores and approaching category A status. It operates Click and Collect (a manager calls when the purchase is ready to be picked up) and delivery services. Smith believes the online operation could eventually grow to be 15-20 per cent of the business.

It started with just two full-time and two part-time staff but, by next month, Smith says this will have grown to six full-time and four part-time. It is even targeting export sales.

Sales boosted

The recent dramatic and forced elevation of e-commerce in the Irish retail sector has created pandemic haves and have-nots. The latter cohort includes retailers whose products are not conducive to online sales and delivery, such as some garden centres. But retailers that had already invested in sophisticated transactional websites are now prominent among the most privileged.

Furniture and electrical goods retailer Harvey Norman, for example, boosted its total group sales in Ireland by about 20 per cent during the quarter that included the first lockdown, even though all of its 13 outlets were shut.

It managed to achieve this only because its previous management team, led by Blaine Callard until his departure in 2019, had invested so heavily in its digital operation.

Harvey Norman is normally among the loudest retailers in terms of promoting Black Friday and Cyber Monday discounts. In a normal year, it trumpets its offers weeks in advance. It has been unusually muted in its discount braggadocio this year, however, because its sales have spiked so much due to fun-starved customers investing in their homes. Harvey Norman doesn’t need to shout so loud anymore because its prior digital investment has given it an edge.

Some smaller Irish retailers with online operations have used the fact that so many shopper eyeballs are focused online to invigorate their marketing. Cummins Sports, a family-owned sportswear and equipment operation with eight outlets in Cork, has been sending signed letters of thank you to its new digital customers, giving the brand a warm glow on social media.

‘Quare times’

The jaunty letters lament the “quare times” we are living in and inquire after the customers’ health and safety in the pandemic. It goes on: “We realise that you could have ordered the enclosed goods from any number of outlets – at home or abroad – but chose us and for this we are most grateful.”

Company director Áine Cummins said the business has traded online for five or six years, “but it took a pandemic for online sales to explode”. Initially the timing was difficult, as the March lockdown arrived just as its previous e-commerce platform was in need of improvement. But the business stumped up between €70,000 and €80,000 for an upgrade and now the website is functioning “essentially as a ninth store”.

Cummins Sports is well-known as a purveyor of hurling sliotars (its recent fluorescent version was a major hit) and it sells these at home and, occasionally, abroad, although export sales are not a major part of its strategy. Its sliotars have been sent to GAA clubs in Shanghai, Dubai and Iceland.

At home, online sales during lockdown have spiked but there have been distinct differences between the shutdown in March/April and the ongoing restrictions.

“In the first lockdown, with all the kids off, we sold so much ball games, yoga mats, leggings for ladies. And we almost ran out of socks! But the second lockdown is different. It feels much more Christmas-oriented. We’re selling a lot of hoodies and that type of product.” And, of course, plenty of sliotars.

But while online sales have been a boon for digitally-enabled retailers deemed non-essential by public health officials, they cannot make up for the fact that stores remain closed with no clear plan for how or when to reopen. “We badly need our doors open again,” said Áine Cummins.

Scale of delivery

Worries have begun to emerge in the retail industry over the ability of the State’s postal and parcel delivery operators to cope with an online sales surge, which has matched what would usually be pre-Christmas levels for much of the year, apart from a lull in summer.

CSO figures show the online proportion of all retail sales fell back to 4.3 per cent by September. But the ongoing lockdown, coupled with the desire of many consumers to get their Christmas shopping done safely and well ahead of time, has driven online sales volumes back up to fresh heights in recent weeks.

Some prominent retailers have been told by their privately owned home delivery partners recently that they will have to ration the number of parcels they deliver for them each day. This doesn’t constrict the amount of transactions the retailer can close online. But it will slow the delivery process down, spurring pre-Christmas angst among consumers and providing a headache for retailers.

Industry lobby group Retail Excellence says it believes there is "severe pressure" on home delivery logistics systems.

“Since the emergence of Covid-19 in March, these companies have, on a weekly basis, been delivering a volume of goods that is on a par with what they delivered for Black Friday last year,” said Duncan Graham, its chief executive.

“This is not sustainable as we approach the busiest time of the year. It stands to reason that demand will increase even further and waiting times for deliveries will increase yet again, especially as outlets remain closed. The earlier we can reopen retail, the more beneficial it will be for these businesses.”

An Post, which is the market leader in retail parcel delivery with a share of more than 45 per cent, said its volumes are up by 130 per cent over last year and it has been hitting 2.5 million parcels per week since the second lockdown began last month.

‘System can cope’

Garrett Bridgeman, the managing director of its mails and parcels division, acknowledges that the sheer volume of retailing taking place online might put pressure on delivery schedules for a few weeks, but he rejected any notion that the system is in trouble.

“We have modelled it all out with retailers. We know that the peak is coming on Cyber Monday but volumes will then begin to drop off considerably. By the second week in December, the volumes of letters will have started to increase as people send Christmas cards. There may be delays of a couple of days with some parcels but we are not worried about whether the system can cope. It can cope.”

An Post has invested €30 million at a site in west Dublin on two new lines to process parcels, which it says will help it cope with the surge. It asked for retailers to have patience as it deals with parcel volumes that it had not expected to hit for another three or four years.

Another worry of indigenous Irish retailers is that, when consumers shop online, previous estimates suggested that up to 70 per cent of sales went to retailers based outside the State such as Amazon.

Bridgeman and An Post say this trend has started to reverse in recent times, however, as Irish consumers make a concerted effort to buy online from local retailers that are getting to grips with the digital world. The split between foreign and local retailers is now “50/50”, says Bridgeman. This time last year, it was 15 per cent Irish retailers and 85 per cent for those abroad.

There is also growing evidence from the postal system that small Irish retailers have been witnessing huge sales spikes online since the end of summer. Bridgeman said that sales of prepaid packaging, such as stamped jiffy bags that might be used by a retailer dispatching only a couple of items each day, were up tenfold in August.

“Covid has picked us up and dropped us in 2024,” said Bridgeman. “After the first few weeks of the first lockdown, we had a review and realised the system we have built in recent years is actually fine. We just need to be a bit quicker.”

In the meantime, the Government has yet to give any guidance over the release of a reopening plan for the non-essential retail sector’s traditional stores. Online sales may be keeping many of them afloat for now. But anxiety levels in the sector are unlikely to drop until retailers are allowed reopen their doors.