Brexit’s impact on Irish retail is far-reaching, but there are positives

Brexit may have faded from public consciousness of late, but that doesn’t mean it has stopped impacting Irish retailers. Regardless of the immense preparations made by businesses in the run-up to the big day, the process was, and continues to be, challenging. From supply chain issues to increased paperwork and customs declarations, or problems in sourcing products, the effects of Brexit on the industry are ever present, and look to remain so into the future. However, the outlook is not entirely bleak, by any means. In fact, for many innovative Irish businesses, things are looking almost rosy.

"Thankfully, the majority of Irish retailers have managed Brexit really well," says Owen Clifford, head of retail sector at Bank of Ireland. "Once the political agreement was finalised in December 2020, they mobilised their Brexit strategies [which had been in development for many since 2016], embedded the new regulatory requirements and on-boarded new suppliers in a proactive manner."

Yes, there were financial blows to deal with, with more than 70 per cent of retailers surveyed as part of Bank of Ireland’s Economic pulse in March 2021 confirming as much.

“Brexit undoubtedly resulted in additional costs to Irish retailers in the first quarter of 2021,” says Clifford. “Feedback from retailers is that this additional cost burden has reduced as they have become more familiar with new requirements and, more tellingly, as they shift their reliance from UK-based suppliers to alternative EU locations.”

Clifford believes Brexit has been the catalyst for Irish retailers utilising and engaging with more Irish-based suppliers – effectively “on-shoring” their supply chain.

“There are a number of factors driving this strategy. It boosts the retailers’ Irish credentials opposite consumers seeking to support Irish; it supports sustainability credentials as it reduces carbon footprint, as goods-in-transit time is reduced; and it improves delivery time, especially in respect of online sales fulfilment, facilitating a leaner ‘purchase to order’ model and more efficient ‘final mile’.”

Additionally, it reduces or avoids completely the tariffs and paperwork linked to the UK land bridge. Clifford expects that these factors will continue to support the development of a vibrant, all-island retail ecosystem.

Challenges

While Irish retailers responded well to the challenge, it was not without pain.

“Brexit has been enormously disruptive to businesses right across the retail sector,” says Arnold Dillon, director of retail Ireland at business representative group Ibec. “It has put up significant trade and regulatory barriers between the UK and the EU, and therefore between the UK and Ireland.”

Lorry tailbacks at port entries were just one symptom of the potentially crippling schism.

“The effect on businesses depended on how the business was set up. For example, businesses that relied on transit through the UK, UK distribution centres, or using the UK as a hub were all affected. Any delays could be massively disruptive and undermine a business model reliant on those transport links. Delays could have a significant bearing on fresh food, for example.”

Some of the challenges to Irish retailers included moving stock, and realigning and putting in place new processes to clear stock as it came through customs.

“There are more complex declarations now depending on the nature of the product,” says Dillon. “For example, certain food products and chemicals would have additional documentation required that would add to the cost of the product.”

Such complications have resulted – in the short term at least – in retailers having to reduce the range of stock because it is too costly or cumbersome to source or supply. It has meant reorienting supply chains, so that products coming from the EU to Ireland would avail of direct shipping routes to avoid transit through the UK. In some instances, it also meant that Irish retailers looked to local providers instead of UK providers to source stock or produce.

Leaving the market

These supply chain, customs and cost issues have also meant that some UK retailers have left the Irish market, with more possibly following.

“Brexit has been cited by a number of UK fashion retailers as a key driver in their decision to exit the Irish market,” says Clifford. “The rule of origin provisions of the Brexit agreement has resulted in complex and often time-consuming paperwork being required to stock their Irish stores. This, coupled with Covid-19, accelerated a review of their physical store network and a subsequent exit from the Irish market.”

What does this mean for the spaces they’ve vacated?

“Irish retail landlords now need to be creative and pragmatic with their stores, says Clifford. “The traditional reliance on UK-based retailers is no longer sustainable.”

The good news for shoppers is that this “will result in a wider variety of international retailers entering the Irish market, following in the footsteps of Jysk, Smiggle and American Eagle in recent times. It will also provide Irish retailers with an opportunity to open pop-up shops – increasing their brand awareness in high-profile locations within short-term agreements.”

Has Brexit benefited Irish retail at all?

Clifford thinks so.

“Internationally focused Irish retailers are utilising Brexit as an opportunity to broaden their customer base,” he says, “presenting themselves as an alternative to UK retailers within the EU market.”

They can trade on their new value-for-money credentials too. “Given the charges and tariffs now in place linked to online UK purchases, Irish retailers can offer a ‘value-based’ proposition to the wider EU market. Covid-19 has accelerated investment in robust ecommerce platforms by Irish retailers. They now have the capability, infrastructure and personnel to target a wider customer base.”