Shoppers sold on the North

 

The extreme reluctance of large multiples to disclose their profits here feeds the belief that the Republic’s shoppers are being ripped off, writes CONOR POPE

POLITICIANS exhorting consumers to ignore the lure of bargains across the Border and shop locally in the run-up to Christmas has become as much a part of the festive season as Fairytale of New Yorkor a jolly man in a red suit climbing down your chimney on December 25th.

Last year ministers, union officials, councillors and business leaders pleaded with people to shop at home “in the national interest”. The chorus has started again and last week the Tánaiste and Minister for Enterprise, Trade and Employment Mary Coughlan warned shoppers that they faced a choice of supporting jobs and businesses in their local communities or supporting “her majesty’s government”. Speaking to members of Ógra Fianna Fail at their national conference in Bundoran, she reminded delegates that every euro they spent in their local community was “a stake in the community”.

People do not seem to be listening and seem happy to give their shillings to the queen. Around 250,000 households in the Republic are regularly doing their grocery shopping in the North, up 25 per cent since the end of last year, according to figures published last month by Nielsen Ireland. Shops in Northern Ireland now have around 2.6 per cent – or €900 million – of the Republic’s grocery market and 10 per cent – or €260 million – of our off-licence trade.

It is hardly surprising when you look at the savings which can be made. A recent study published by the Consumer Association of Ireland (CAI) showed that a basket of everyday goods in Tesco was 18 per cent dearer south of the Border while much of the Christmas stock piled high on the shelves at MS is over 20 per cent more expensive in the Republic.

Electronic goods in Argos outlets in the North can be almost half the price as the same items in the Republic while the price differential between clothes in Dunnes Stores outlets north and south can be equally shocking.

A 32-inch LG TV, which costs €999 in Argos outlets in the Republic, costs £549 (€608) in the North. A bottle of Jameson whiskey was selling in Sainsbury’s in Newry late last week for £15 (€16.79) but is €26.99 in Tesco outlets in Dublin while a 250g stick of Kerrygold Butter that is 95p (€1.06) in Northern supermarkets is €1.50 down south. An Xbox 360 Pro sells for £149.99 (€168) in the North but is €229 in the Republic while a TomTom satellite navigation system with maps covering the UK and the Republic costs €400 in the Republic and €244 in the UK.

The price discrepancies go on and on. All the big retailers who operate in both jurisdictions insist that the higher prices in the Republic are due to the higher cost of doing business here. While there is some truth to this, few people believe it explains such large price differentials. The retailers’ extreme reluctance to disclose how much money they make in this market feeds the conviction that the Republic’s shoppers are being ripped off.

Dermott Jewell of the CAI is weary talking about the problem. “We’re in the same position this year as last and I can’t really see any difference except maybe in the way that the Northern businesses are doing more to make sure shoppers from the south keep coming across the Border with special promotions, particularly on alcohol,” he says.

Jewell does not accept the retailers’ excuses about the higher cost of doing business in the Republic. “As far as I and the CAI are concerned, there are profit margins built into the sterling prices and these should be more than enough to cover the cost of doing business here.”

He says the lack of transparency in the retail sector is a serious problem and he points out that there is “no good reason for them not to disclose their profits”. He believes the reason “they choose not to is because their profits are so high in the Republic compared with other jurisdictions. Suppliers are being asked by retailers to take big hits. It seems to me that everyone is taking a hit except the big retailers.”

Jewell is concerned that nothing will be done unless legislative changes are introduced which would force transparency on the big multiples. “I don’t think the situation will change significantly unless the retailers are actually forced to disclose the levels of profit they are making in this jurisdiction.”

Torlach Denihan of Retail Ireland dismisses these claims and insists there is no smoking gun linked to higher profits in the Republic. He says the price differentials are down to higher overheads – notably electricity and wage costs – and differing tax regimes.

He points out that 30,000 jobs have been lost in the retail sector throughout the course of the current downturn and says small, medium and large retailers have all been very negatively affected. “Businesses are under huge pressure and, if someone could flick a switch and align prices with the North, they would do that,” he says.

“If there were supernormal profits to be made in this country then retailers would be piling in,” something, he says, which has not happened. He says the entry of Tesco, Lidl and Aldi into the Irish retail sector over the last 15 years is down to growth in the market rather than the potential for any supernormal profits.

Price Watch contacted Marks Spencer, Dunnes Stores, Tesco, Lidl and Aldi last week to ask why the companies did not break out the details of the profits they made in the Republic as part of their annual reports and whether or not they accepted that failing to do so undermined their justifications for higher prices in this State.

Marks Spencer claimed its Irish prices had to “take into consideration factors specific only to the Irish market such as higher rental, operational and employment costs”. The company said it had 20 stores in the Republic out of 315 stores internationally and claimed it was “not possible for us to break down our international results by individual territories”. We asked why it was impossible but the company refused to elaborate.

AS A PRIVATELY-HELD company Lidl said it did not disclose any financial information to the public. It points to high costs in areas such as insurance, transport and wages, as well as “extremely high property-related costs for retailers”. It said while Ireland has “a relatively low level of direct taxation”, VAT and excise duty are high which “hampers, for instance, price comparisons on products between different countries”. Tesco said it was “an established fact” that business costs and taxes in the Republic were higher than in the UK. The higher overheads “compounded by currency fluctuations” mean “price differentials will always be a fact of life”.

It said its practice of including its Irish profits in the group’s European figures was “consistent with the reporting norm in the Irish grocery retail sector where no major retailer (whether Irish or internationally based), and few suppliers, presents annual profit figures for Ireland”.

It claims that no retailer had done more than it had to bring down prices in Ireland this year and says the “overall price differential with Northern Ireland across the range of supermarket products is at its lowest for 30 years”.

Aldi and Dunnes Stores declined to comment.