The Irish retail market is set for further consolidation as price competition grows and the battle for scale and quality retail space intensifies, according to a new report by retail consultancy, Verdict.
The London-based firm says the rapid pace of change in retailing, the internationalisation of the sector and closer European integration poses both opportunities and dangers for domestic and overseas retailers.
The report found that retail sales in the Republic were substantially outperforming Britain and the rest of Europe but sales would have been even higher without government caps on super-store sizes.
Verdict says that if the ban on super-store size is lifted or relaxed this year, there will be an acceleration of sales growth with increased competition, possibly with the arrival of firms such as Sainsbury, B & Q and Asda. The last-named currently the subject of rumours of a link-up with Dunnes Stores.
The Verdict report notes that Europe is an arena of mature retail markets and adding to sales is becoming harder. Many retailers are now desperate to find "pockets of opportunity" such as the market in the Republic.
"There may be organic growth and/or growth by acquisition," says Verdict. The report notes that the Republic is viewed as an attractive retail space in which to operate and forecasts further incursions into the Irish market.
If the ban on super-store size is not lifted, Verdict still expects a spate of mergers and acquisitions as new formats develop within the size restrictions. "Either way, there will be seismic shifts in Irish retailing," it says.
The report also refers to the Groceries Order, which outlaws below-cost selling by retailers and demands for `hello' money from suppliers, as a second significant legislative control.
If this were to be abolished, it would have implications for the viability of smaller grocery operators which currently boast a market share of more than 40 per cent compared with a figure nearer to five per cent in Britain.
"The strength of indigenous retailers is not to be under estimated," Verdict says. "Community preferences are still importance and it is significant that Tesco has failed to extend its market leadership since it re-entered the market in 1997."
Verdict expects that retail sales growth in the Republic will remain healthy given the strong growth forecast for the economy as a whole. However, retail spending should slip in relative importance within overall consumer spending as demand for cars, holidays, personal finance and other services increases.
