In his latest Development & Insight report, Bank of Ireland’s head of Retail Sector Owen Clifford notes that strong store expansion, shifting spending patterns and AI adoption shape the outlook for 2026.
Ireland’s retail sector is entering the second half of 2026 with renewed investment momentum, as operators respond to evolving consumer expectations and a more complex economic backdrop.
New store openings and refurbishments are continuing across the market, with leading grocery and convenience brands placing a clear emphasis on store quality and differentiation. Tesco has expanded its Express format in Dublin, while Aldi, Lidl, Dunnes, Centra and Spar are all growing their national footprint.
“Investment and differentiation is required to retain and attract footfall”
At the same time, retailers are deepening partnerships to broaden in‑store offerings, with collaborations such as Applegreen and Marks & Spencer, Circle K and Offbeat Donuts, and Tesco and Decathlon adding new reasons for shoppers to visit physical locations.
According to Bank of Ireland’s sector specialists, this wave of activity reflects a recognition that the modern Irish consumer expects more from the in‑store experience.
“Investment and differentiation is required to retain and attract footfall,” Clifford notes, pointing to the rollout of “best in class stores that showcase the latest initiatives and offerings from individual brands.”
This push is supported by a recovery in physical retail occupancy and investor confidence. Retail parks and shopping centres are now operating at more than 95% occupancy nationwide, with strong investor demand driving transactions across multiple locations including Cork, Kilkenny and Dublin.
International brands such as Lego, New Balance and Arket have also entered the Irish market, reinforcing the appeal of bricks‑and‑mortar retail in a post‑pandemic environment.
Balancing technology with human connection
Retailers are also accelerating their use of artificial intelligence across operations. The technology is already being deployed to improve stock management, optimise supply chains and anticipate demand trends.
The next stage is likely to focus on customer experience. “The logical next step is to utilise AI to create a more personalised experience… bringing together shopping history and individual preferences,” Clifford observes.
However, the shift comes with a note of caution. Retailers are being advised to ensure technology strengthens rather than replaces personal interaction.
“Retail at its core is built upon human connection,” Clifford says, highlighting the importance of using AI to “augment customer interactions” rather than deliver generic targeting that risks alienating shoppers.
Inflation pressures reshape spending behaviour
While underlying economic conditions such as strong employment and population growth have supported sales volumes, inflation remains a central concern.
Rising energy costs, driven in part by global geopolitical tensions, are putting pressure on both household budgets and retailer cost bases. As essential spending on fuel, heating and transport increases, discretionary purchases are coming under closer scrutiny.
“Retailers will need to review pricing, promotions and communication without damaging their brand positioning,” Clifford says, as businesses navigate the balance between cost recovery and customer sensitivity to price.
The psychology of inflation is also becoming a key factor. Consumers are changing behaviour not only in response to current prices but also expectations of future increases. This is leading to uneven demand, with shoppers prioritising essential purchases and delaying non‑essential spending.
A more fragmented customer base emerges
A prolonged period of inflation risks deepening divisions within the consumer base. Higher‑income households with savings buffers are expected to maintain relatively stable spending patterns, while lower‑income groups face increasing pressure.
This divergence is creating what the report describes as a “fragmented” market, where retailers must simultaneously serve value‑driven and premium segments. Success will depend on clearly communicating value across all price points.
“In an inflationary market, demonstrating ‘value for money’ becomes an imperative,” the analysis states, noting that consumers are increasingly scrutinising every purchase and comparing alternatives across channels.
Retailers are being encouraged to move beyond price‑led competition. Overreliance on discounting risks long‑term margin erosion, particularly for independent and family‑owned businesses. Instead, value is framed as a broader proposition incorporating quality, provenance, service and accessibility.
Private label ranges are also highlighted as a key tool, offering a way to meet price expectations while protecting margins.
Loyalty weakens as shoppers shop around
Consumer behaviour is becoming more fluid and less predictable. Shoppers are visiting multiple stores, comparing prices online and making smaller, more frequent purchases.
This shift reflects both economic pressure and the growing availability of information. “Retailers can no longer rely on habitual buying behaviour and must actively earn each purchase,” the report notes, pointing to the need for relevance and clarity in every customer interaction.
The duration of current global uncertainties will be critical in determining whether these changes become permanent. A longer period of disruption could embed new habits and reshape the competitive landscape.
A sector defined by resilience
Despite the challenges, the outlook for Irish retail remains constructive. The sector continues to play a central role in local economies, supporting employment and commercial activity across towns and cities.
The tone from Bank of Ireland’s Sectors Team is one of cautious confidence. Retailers are seen as adaptable, with a track record of responding to external shocks through innovation and operational discipline.
That broader perspective is reinforced by Paula Feehan, Head of Sectors at Bank of Ireland, who highlights both the pressures and the opportunities facing businesses.
“Irish businesses are facing an ever‑changing economic and trading environment, particularly in the wake of enduring global events, supply chain disruptions, increased costs and changing consumer behaviours,” she says.
At the same time, she points to the importance of sector insight and tailored support. “Our sector specialists work closely with key industry stakeholders… and have a deep understanding of the challenges and opportunities that you face.”
Read the full report on the various sectors including Retail, Agriculture, Manufacturing, Healthcare, Technology & Telecoms and Food & Drink:
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