Black Friday and Cyber Monday will be a “double-edged sword” for Irish retailers with margin pressures incurred from major discounting offsetting the spike in business, a retail expert has said.
Thomas Burke of Ibec trade body Retail Ireland says that with 70% of digital purchases in Ireland going to firms outside the country, retailers were under huge pressures to offer major discounts that could undercut their margins.
“On one hand, it does generate lots of business and tends to get people more looking forward to Christmas, but on the other hand it can put significant margin pressures on SMEs, with discounts up to 40%. That is a fair squeeze for any business. It is a double-edged sword,” he said.
Mr Burke said there were indications that retailers may not have to discount as much this year as in previous years, which would relieve some of the pressure on smaller outlets.
“With the economy going well, there is more disposable income and perhaps the big discount-driven nature of Black Friday in recent years may not be as much this year,” he said.
Retail Ireland has said the period until the end of the year will make or break it for many retailers, with some doing over 30% of their annual trade.
A pilot scheme introduced by the Department of Business to support online businesses to strengthen their online offering in September to compete internationally was doubled last month from €625,000 to €1.25m. Mr Burke said it was a good start but that the sector was going to need much more support as online shopping grows.
“While not the panacea or silver bullet that will change things, it is welcome. However, retailers will need lots more support, especially in the context of 70% of online purchases going out of the country.”
At least 50% of the total number of grants awarded through the scheme, which will be administered by Enterprise Ireland, will be reserved for retail SMEs with their headquarters outside Dublin.
A “levelling of the playing field” for Irish retailers competing online with their counterparts outside the country would also help, Mr Burke said. Fellow trade body Retail Excellence has called for making online marketplaces “jointly and severally liable” for the collection of Vat and duties on imports.
Currently, the Revenue collects it but with such huge numbers of parcels coming into Ireland every day, it is physically impossible for them to intercept each and every one, says Retail Excellence chief executive Lorraine Higgins.