European countries are sharing the same currency for the first time since the fall of the Roman empire, a new report from IBEC and the Association for the Monetary Union of Europe points out. This time round, of course, Ireland has deigned to be included in the membership club, which will hopefully be more successful than its predecessor.
Retailers will be at the heart of the euro's introduction as the Economic and Monetary Union (EMU) official currency on January 1st, `Euro: Preparation Guide for Retailers' says and some of them will be in the forefront, having to "pay their suppliers, obtain finance or receive payment in euros" in a little over six months.
"The retail sector will be the pillars of confidence for the consumer, because it is when the consumer actually spends the euro, as opposed to obtaining it, that he/she will start to learn about its value, and be confronted with a new set of reference prices that have little or no relation to past values," the guide says. The task facing retailers in the three-and-a-half transition period from January 1999 - when the euro will be born as a paper currency - to July, 2002 - when national currencies will finally disappear - will be to maintain consumer confidence while dual currencies operate. Businesses involved in such sectors as tourism, like a busy hotel close to one or more borders, will benefit from early use of the euro, while banks' and multinationals' early adaptation "may initiate a snowball effect".
Most consumers are expected to await the introduction of euro cash in January, 2002, before relinquishing pounds and pennies, even for most paper transactions. But some categories, such as frequent business travellers "are likely to demand a rapid use of the euro".
"Purchases which will outlive the transition period could also be preferred in euros; e.g. if a house is purchased in 2000, the mortgage will be automatically converted to euros after 2002; consequently, it may be advisable to indicate the price of houses in euros," the preparation guide says. The retailer's approach may be one of "defensive adaptation". But embracing the euro enthusiastically at a time of matching technological innovation could be a better strategy. There will be opportunities for better product sourcing through price comparisons with EMU members and elimination of foreign exchange risk. The consolidation of the largest economic area in the world will create a bigger `domestic market, and financial services will be more competitive which "should increase the size, the liquidity and the specialisation of the market". The preparation guide recommends a six-point action plan for managing the changeover involving, in the first instance, a management meeting to determine the project's scope, and the appointment of a project manager to monitor and co-ordinate developments.
Project managers will have to have some semblance of the "europhile" about them. The guide reminds them to "avoid losing time on eurosceptics' discussions since the strategic decision must be made on the assumption that Economic and Monetary Union will take place".
The third step is to identify the issues and impacts within each company department, external information sources and service providers such as accountants, consultants and software providers.
A changeover plan needs to be drawn up, concentrating on "optimising opportunities resulting from the euro and minimising possible threats, organising the changeover in the most cost efficient manner and using the changeover to the euro as an opportunity to improve the efficiency of the company". Fifth, the project manager should establish a euro task force for implementation of the changeover plan.
"According to the pace of the introduction of the euro, retailers may need to adjust their own changeover plan," the guide notes.
The sixth step is to communicate progress "to all of the company's constituents" including customers, suppliers and banks, with the emphasis on co-ordination "to avoid consumer confusion which could well arise if different organisations issued contradictory messages".
The Government has already produced its own information campaign, but retailers will need their own communication campaigns so that the consumer can `think' in euros and not believe that they are being used as vehicle to disguise price hikes. One group in particular, which includes the elderly, the illiterate and perhaps special categories such as the blind, will be confused and inhibited "and will require special information and special attention".
The guide warns that, when converting, rounding up may lead to significant price differences for low value items and suggests that, for retailers to demonstrate that they are not making a profit, they should commit any extra earnings to charity or provide customers with vouchers "at least equal in value to the price difference". Retailers will need to increase their till float in the immediate aftermath of e-day - January 1st, 2002 - by a factor of between 5 and 10 "because the tills will not be replenished by customers who will tender national currency and be given change in euros".
But the adoption of non-cash payments is likely to decrease the dependence on hard currency. This headache period is likely to be shorter than the six month-period allowed for it, and the cash changeover "could be over in two or three weeks". After that, pounds and pennies will rapidly become a distant memory. `Euro: Preparation Guide for Retailers', written by Mr David Croughan, chief economist, IBEC, and Mr Guillaume Lepecq, director, corporate relations, of the Association for the Monetary Union of Europe, is available from IBEC, Confederation House, 84/86 Lower Baggot Street, Dublin 2. Tel (01) 6051545/6051651. £5 for non-members of IBEC.
