CONSUMER AFFAIRS:Retailers are smarting from cross-Border shopping and a move online as value is king for shoppers, writes PAUL CULLEN, Consumer Affairs Correspondent
THIS WAS THE year Rip-off Ireland was supposed to bite the dust.
Shrinking incomes, more assertive consumers, the choice afforded by online shopping and better regulation – these were the factors that would consign overcharging and price gouging to history.
By the end of the year, things were, on balance, probably better than they had been for years. Inflation was at -5.7 per cent, a massive price war was continuing in the grocery trade and access to consumer information and support was greater than ever.
Yet the suspicion remained that consumers could still be stung whenever the opportunity presented itself. At the recent European Cross-Country Championships, a Spanish woman complained bitterly to me about having to pay €40 entry for herself and her two young children. In Spain or other Continental European countries where she has attended similar events, entry costs nothing or at most €5. How much does it cost to fence off a mucky field, she asked me, and isn’t this what the sponsor’s money is for? Earlier in the year, the FAI had the temerity to charge €220 for four stand tickets to watch Ireland play Australia in soccer at Thomond Park. Tickets for the Irish legs of tours by major artists are invariably among the most expensive in Europe.
It was the same story in the shops. Surveys found that Argos hiked its Irish prices by 24 per cent compared to its prices in the UK, while Halfords slapped on an additional 28 per cent on average.
Another survey found that the cost of commonly used services is on average 30 per cent higher in Dublin than in Belfast, even though VAT rates in the Republic are often lower. When HM started selling shoes by Jimmy Choo, they added an additional 45 per cent on to the prices in their Irish stores.
In the grocery trade, where it was easier for consumers to compare prices and to switch supplier, there was better news. The rush across the Border had already started in late 2008 and continued through much of the year. Almost 4 per cent of the grocery business moved North, as shoppers from the Republic generously helped Northern Ireland move out of recession.
Tesco, realising its market was collapsing, was the first big retailer to respond. The “Change for Good” initiative launched in May promised price cuts of over 20 per cent across its entire range; better still, from the company’s point of view, the campaign would be funded by squeezing the margins of suppliers rather than from its own coffers.
The company delivered on most of its promises – prices dropped at least 15 per cent between January and July, according to the National Consumer Agency – but the campaign backfired on a number of fronts. This newspaper revealed that Tesco’s profit margin in Ireland was over 9 per cent, significantly higher than elsewhere in the multinational’s operations. The sight of a British-owned multiple squeezing the life out of mostly Irish suppliers – or so the suppliers claimed – didn’t go down well with the public. And in any case, Dunnes Stores, once again waving the tricolour of home ownership, quietly matched Tesco’s price drops.
By the end of the year, the queues were forming outside Newry again, as shoppers reached their own conclusions. The CSO calculated that shoppers from the South had spent over €430m in the North in 2009, but admitted this was probably an underestimate. Up to 80 per cent of the cars in the carparks of some Northern shopping centres were Southern-registered.
The Budget attempted to curb this exodus, in particular by cutting 20 per cent off excise duty on alcohol. The VAT differential between Ireland and the UK was also narrowed and will drop to 3.5 per cent in January, which may reduce the attraction of cross-Border shopping further.
It may also help that shoppers no longer need to go to the North for their fix of Ikea, which opened in Ballymun in July. The Swedish furnishings giant bucked the general trend of retail misery – or perhaps it is contributing to it – and, to its credit, charged just 9 per cent more in Dublin compared to its UK prices.
However, shoppers don’t need to get in their cars to shop in another country these days – this was also the year that online shopping took off. The biggest online retailer, Amazon, dropped restrictions on deliveries to Ireland and slashed its delivery charges.
Value for consumers isn’t a guilt-free transaction, as shoppers discovered this year. Retailers claimed cross-Border shopping cost 11,000 jobs in the trade this year and thousands more are on the line next year. Countless retailers and suppliers went to the wall this year and many more are hanging on for dear life.
While there was terrific value to be hand in areas such as hotel deals, in the long run less choice may ultimately result in higher prices for consumers. Saving a few bob will matter less if other people saving a few bob results in you losing your job.
