Bars soaking up all the profit in the retail sector

Retailers relying on discounted prices for sales growth, but bar trade bucking the trend

Full house: While retailers are seeing sales growth, only bars are seeing prices rise too. Photograph: Marco Cristofori/Getty

Full house: While retailers are seeing sales growth, only bars are seeing prices rise too. Photograph: Marco Cristofori/Getty

 

Bars are the only retailers experiencing both sales growth and rising prices, according to a report by property firm Savills Ireland.

The study of the Republic’s retail sector suggests while other non-bar retailers are experiencing sales growth, it is coming at the expense of discounted prices.

“While sales volumes are up by one third since January 2013, deflation has been a consistent theme across Irish retail for nearly five years,” John McCartney, director of research at Savills Ireland, said.

“In fact, in eight out of 10 sectors where prices are falling, the extent of discounting has deepened over the last 24 months,” he said.

“ One reason is an ongoing compositional shift in the Irish retail landscape towards mid-market and value offerings such as Penneys and the discount supermarkets,” he added, noting it also reflected lower input costs for retailers due to lower oil prices since mid-2013 and, more recently, weak sterling.

The report suggested increased competition forcing retailers to pass on cost savings from cheaper oil and weak sterling.

“But the fact that retailers are being compelled to pass on these savings to the consumer illustrates just how competitive the retail market in Ireland is, and the continuing disparity between volume and value sales is an area of focus for retailers trading in Ireland,” Dr McCartney said.

‘Omni-channel’

Savills also noted the growth of “omni-channel” retailing, where businesses are exploiting the natural synergies between online and physical retailing, enabling them to capture two modes of consumer behaviour: buying online after experiencing the product in-store, and buying in-store after browsing and researching the product online.

“Although it is a relatively new phenomenon, the trend of omni-channel retailing is growing rapidly,” Kevin Sweeney, retail director at Savills Ireland, said.

“Initially, the dominant pathway to omni-channel retailing has been for traditional operators to establish online platforms. However, we are now also seeing online-only retailers migrating to an omni-channel approach by opening physical stores, such as Amazon and Missguided, ” he said.