The economy may be booming, but Irish shops are dying

“Can’t believe they’re closing.” “So upsetting.” An “absolute pox”. Many expressed sorrow this week at the news that Waltons music store was departing Dublin city centre, to concentrate its business in a Blanchardstown retail park.

But while these expressions – articulated in print, online, on radio and television programmes, and across multiple social media platforms – were no doubt genuine, they formed a soundtrack that has become wearingly familiar.

It was similar to the mournful tunes played when Frawley’s, Guineys, Fred Hanna’s or Greene’s bookshops, and Clerys department store shut up shop for the last time.

As with those retail institutions, if those who expressed upset at Waltons’ departure had actually visited the shop and spent money there occasionally, it might not have had to move. While we express sadness at the departure of the dear old Dublin stalwarts, we are also somewhat to blame for their demise.

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As news spread of Waltons’ decision to close its last city-centre shop, many struggling retailers who face dramatic changes to the retail landscape will wonder: Who’s next? The answer wasn’t long coming.

The MacDonald family opened their first Dublin bicycle shop on Bride Street in 1922. Business boomed in the decades that followed, with two wheels the only realistic mode of transport for Dublin residents. The shop moved, first to Aungier Street and then on to Wexford Street, which is where Ken MacDonald started out in the early 1970s.

He has sold bicycles to Dubliners for 47 years, and has seen good times and bad. Bicycles were a poor man’s transport when he started selling them, then became essential during the oil crisis and irrelevant in the 1980s. Today they are both cool and tax-efficient.

But at the end of this month he will close his doors. “I have seen many big changes in the business and in the area in my time, but the biggest changes have been over the last seven or eight years when so many small and independent shops disappeared to be replaced by cafes and restaurants,” he says.

“It is becoming so much more difficult to do business. People don’t come into this area to shop during the day, and the footfall only starts after 6pm when I’ve closed. I’ve talked to locals and they really don’t like what has been happening because it has just sucked the life out of the community.”

MacDonald owns the premises but can’t bring himself to sell the building so will lease the shop – to a restaurant. “I’m 62 so maybe it is time. I suppose I am happy in one way to be leaving it behind but I am sad too. It is a bittersweet moment for me.”

Grant Thornton's Bernard Doherty says more closures of family enterprises are inevitable. He points out that while the Government targets foreign direct investment through tax breaks and grants, Irish family businesses have received no such incentives to grow and expand.

“I think we will lose out when Irish-owned businesses close or sell to overseas interests because indigenous owners understand Irish culture, but when you have a vulture fund running a business you have accountants like me squeezing every cent out of it and they don’t really have the same cultural alignment.”

Best of times

These should be the best of times for Irish retailers. After a lost decade, people have more money and appear more willing to spend it. A Consumer Market Monitor published by the Marketing Institute of Ireland and UCD Michael Smurfit Graduate Business School last week said retail sales were “very strong in 2017” up by 7 per cent for the year with sales of €40 billion and at a level not seen since the boom times.

Disposable incomes rose by 5 per cent to a total of €102 billion, higher than the previous peak of €101 billion in 2007.

The report’s author, Prof Mary Lambkin, said: “It is great to hear the cash registers ringing again for Irish retailers, and signs are positive for continued growth.”

But for many shops, the cash registers are staying stubbornly silent. So what is going on? If people are spending again, why are shops closing? If the economy is booming, why are retailers so gloomy about the future?

We may be mirroring the bleak experiences of the US, where 25 per cent of malls are expected to disappear as more and more shoppers embrace the online retail world.

“The problem highlighted by Walton’s decision is one which been experienced by retailers all over Ireland for more than 10 years,” says Retail Excellence deputy chief executive Lorraine Higgins. “It shows how difficult retail is with the migration of consumer spending online and the plethora of cheap exports from sites based outside of the European Union.”

Of the €5 billion Irish consumers spent online last year, €3 billion was spent overseas. “Consumers see a huge differential between the prices but the overseas online sites do not include VAT or duty or delivery so seem much cheaper,” she maintains.

“It is presenting a massive challenge to the retail industry, and to Revenue, and will lead to more shops closing, which will have a knock-on effect on the quality of our town centres.”

Higgins says more needs to be done at State and EU level to force all retailers to impose the appropriate levels of tax at the point of purchase, rather than at the point when products enter the State – which can be hit-and-miss.

She also believes retailers need help to get online and points to Retail Excellence figures, suggesting that more than three-quarters of Irish retail-based websites “have no e-commerce functionality while 22 per cent don’t have any web presence at all”.

Biggest challenge

Kenny's Bookshop in Galway is not one of the retailers without a website. It was one of the first shops in Ireland to recognise the potential – or threat – the internet posed. It set up its first online shop in 1996. (It has a business arrangement with The Irish Times to sell some of the books reviewed on irishtimes.com.)

Virtually all its business is now in the virtual world and Kenny’s is still standing. “We have survived,” says managing director Conor Kenny. “The biggest challenge now, as it has been for a long time, is logistics,” he says, “getting the product to the consumer at a reasonable price”.

"One of the reasons we have survived is we cut our margins savagely but it is what we had to do. Another reason I think we continue to do well is that we are at the end of a phone, and you can't say that about Amazon. That is a significant thing for a lot of people.

“But it all comes back to logistics,” he says. A couple of years ago, as an experiment, Kenny sent a pallet of books to the UK and shipped individual orders from the UK to customers in Ireland and across the world. It was cheaper to do that than ship the books directly from Ireland. “I’m not sure if people were mad about the Royal Mail stamp on the packages they were getting from us though,” he says with a laugh.

“But what is does show is how hard it is for businesses operating in the online sphere here. If we are going to compete against the Chinese and the Amazons and the rest, then we need some support to be able to get our materials to our customers for less.”

I think we need to teach the capricious consumer exactly what the consequences of their actions are.

Kenny expresses incredulity that so many Irish retailers still do not have a website. “We launched our first online shop in 1996 and for a long time we were used as a poster boy by Enterprise Ireland as an example of what could be done. The fact that there are still so many retailers who are not in that space is shocking.”

Looking at the wider retail landscape, Kenny believes some towns and cities in Ireland struggle because they have surrendered too much of their retail space to coffee shops and restaurants at the expense of a mix.

“I think the retail business in the Republic needs new blood but there are signs of that happening all over the place. Look at Westport. It is a great place to wander round, and they have preserved their shops. Yet they still have a good mix for consumers; that is what we need to replicate elsewhere.”

“Desperately sad,” is how Thomas Burke of the Ibec umbrella group Retail Ireland describes Waltons decision to move out of Dublin city centre. “But we are going to see more of it.”

He says there are four things that “keep retailers awake at night”: the cost of labour, the cost of insurance, local authority rates and rent. “Those four areas are the real pressure points.”

“Online retailers don’t have those pressure points. Many of the those selling in to the Republic from the UK are based in warehouses in the northeast of England, where rents and rates are low and wage costs are lower, but that is the cold reality of modern Irish retail.”

He expresses alarm at the 22 per cent of Irish retailers that do not have an online presence. “It is a scary statistic and will have to change. Maybe not every single retailer will need to have a transactional website and it could be as simple as having a Facebook page or a Twitter or Instagram account.”

He cites the example of Penneys. It does not sell online and instead has "real conversations with its customers in the online spaces where they are, and that is incredibly important".

While he is not blind to the challenges facing retailers, he is not overly pessimistic. “I see it as a glass half-full kind of situation. You have to remember shopping is not just about the transaction; it is a pastime and a social activity, and I think retailers need to take advantage of that fact while they cannot just go toe-to-toe with the big online retailers when it comes to price, they can offer something a bit different.”

Comfort of online

“Experiential” is the buzz word in retail right now. It was at the core of last autumn’s Retail Ireland conference in Dublin, where delegates discussed how to stay alive in this new world.

Stores such as Penneys offer manicures and massages in an attempt to engage with consumers on an emotional level, while Arnotts has a pop-up dry-styling studio in the store. Avoca tempts shoppers through its doors with the promise of freshly-baked treats.

Volumes of international research show how younger shoppers in particular respond to initiatives such as these. And retailers will have to engage with digital natives in other innovative ways, if they are to survive.

Dr Deirdre Duffy is a lecturer in DIT with a speciality in fashion retail. She says the nature of the shopping experience has been radically transformed. Unless Irish retailers move with the times ,then they will become irrelevant.

“People like when their bricks and mortar shops give them an experience. It encourages footfall, and if retailers are to survive then that that is what they are going to have to do.”

Duffy says that it would be a mistake to believe online shopping is all about price. “Shopping online can be a much more comfortable experience. Think of place like Zara which by lunchtime on any day can be turned into a jumble sale with clothes all over the place. Instead you go on to Zara’s site, pick and choose the clothes you want without any stress and have them delivered to your door the next day.”

Dunnes Stores has been quicker than most to recognise a shift in shopper behaviour, Duffy says. "And what they have done well is they have given a lot less space over to actual products in store and made it a more enjoyable experience to actually browse before buying online. They recognise people don't have to go to the shop and come out with something under their arm."

While retailers struggle, consumers have never had it so good, either in terms of price or choice. With retail outlets from Shanghai to San Francisco now open for business to any Irish consumer with a credit card, should we care about the state of retail at home?

Higgins thinks we should. There is “a moral challenge” being faced by Irish consumers, she says. “If people want thriving town centres and a varied experience with a lot of products put in front of them in the real world, then they have to support Irish retailers and they have to support the jobs that Irish retailers create. We have an existential problem here and we don’t have enough support.”

While Higgins’s plea has an element of self-interest to it, retail expert and DIT academic Damien O’Reilly – who has no skin in the game – agrees, to a degree. “If we are buying more and more online then we are losing the local multiplier effect where every €100 spent in the local economy is actually worth €500.”

Local spending can increase by that much because the money circulates in the local economy. It is spent on locally sourced goods and services and wages, which are also spent locally. But when the spending is online and outside the country, then all of the money is just hoovered up and leaving the country.

“There is a moral dimension to this absolutely,” he says. “People are looking for more and more stuff and they want it right now,” he says, likening the Irish consumer – particularly the younger cohort – to Roald Dahl’s endlessly demanding child character, Veruca Salt.

“I think we need to teach the capricious consumer exactly what the consequences of their actions are. But we also need to establish exactly what kind of shops are operating where and what we want.”

He believes the blame does not rest solely with shoppers and their whims. “I don’t think many retailers in Ireland are good enough at getting people into their stores and encouraging them to spend,” he says.

“I always marvel at pharmacies where you might have four or five people waiting for a prescription and they’re all standing around yet none of them are buying anything else. That tells me pharmacists might be really good at being pharmacists but they not really good at retailing. And you see that in many other spaces too.”

Duffy is philosophical about retail’s future: “The question we have to ask is: are we mourning the closure of certain shops and clinging on to others for nostalgic reasons, or do we believe they add value to our lives?

“If we are only holding on to them for nostalgia reasons then maybe they should become museums.”