Large supermarket chains have been proactive in addressing cost of living concerns, writes Bank of Ireland head of Retail Sector Owen Clifford.
Grocery retailers continue to deliver a strong performance with the latest Kantar data outlining a sales increase of 11% when compared with the equivalent pre-pandemic period in 2020.
The large supermarket operators have been proactive in addressing cost of living concerns with targeted advertisement campaigns and voucher offers being strongly promoted in recent weeks (Kantar Monthly Grocery Update).
“Maintaining grocery inflation at this level will prove difficult in the months ahead if a sustainable supplier model is to be maintained”
Grocery inflation is currently estimated to be running at c2.5-3% which remains significantly lower than other European and international markets.
Given the ongoing cost pressure on suppliers linked to rising energy costs, supply chain disruption and unavailability of key ingredients – maintaining grocery inflation at this level will prove difficult in the months ahead if a sustainable supplier model is to be maintained.
Retailers are reducing promotional activity to maintain margins and consumers are reverting to own brand products to manage their grocery budget. (ShelfLife and Checkout).
Showcasing the brand through investment
As the ever more discerning Irish consumer seeks excellence in store standards, Irish grocery and convenience retailers recognise that investment is required to retain and attract footfall to their business.
This investment includes the delivery of new, best in class stores that showcase new initiatives and offerings from individual brands. In recent months Lidl, Aldi, Tesco and Supervalu have all announced new store developments nationwide. These new additions to their brand portfolios are being complemented by revamped/refreshed stores across a wide regional footprint.
Given the well documented increase in build and fit-out costs – independent retailers undertaking this type of investment need a robust business plan underpinning same.
Changing retail landscape
The wider retail sector delivered a promising start to 2022 with sales volumes (excluding motor sales) circa 8% better than the equivalent period in 2020. There were strong performances in the electrical, fashion and furniture/home improvements sub-sectors in particular (CSO Retail index 28/03/2022).
Consumer sentiment has been dampened in recent weeks linked to rising energy/fuel costs in particular. The indirect impact of the Russian-Ukrainian war on discretionary spend patterns will be monitored with interest in the months ahead. Retailers also recognise that they need to manage a rising cost base whilst maintaining an appropriate focus on their price/value proposition for their customers.
On a positive note, the Irish market has seen the entry of a number of new retail operations in recent months – Flannels, Carhartt, Anthropologie, IKEA design stores etc – all supporting the delivery of a diverse retail offering to the Irish consumer.