Duncan Graham: Retailers may have to pass on cost hikes to consumers

Irish retailers are struggling after an extraordinarily difficult 18 months and the surge in prices isn't helping their recovery

Local authorities in Dublin, Cork, Limerick, and other centres need to get creative to entice people back into urban centres. File Picture: PA

After a truly extraordinary and difficult 18 months, every industry in the country has been affected in some shape or form. The retail industry is no different and, as such, it is worth reflecting on the challenges that remain for retailers, along with genuine opportunities that exist for the industry. 

It is grimly ironic that, as the effect of pandemic recedes, hard-pressed retailers have been hit by several problems, not least significant supply chain issues and an energy crisis which has led to sky-rocketing prices for goods and services.

Every conventional utility provider in the country has announced double-digit increases in the cost of energy this year, while the cost of a shipping container from the Far East is now at least four times more than it was at this time last year.

Asian manufacturers have been hit by enforced Covid lockdowns, with knock-on pressure evident in Europe’s biggest ports such as Rotterdam. Covid uncertainties are leading to cautious forward buying by consumers, while sourcing product through the UK has been affected by Brexit.

Indeed, plummeting demand during lockdown followed by a spike in sales when economies reopened have made forecasting very difficult for retailers.

Increased costs and unpredictable demand are putting serious pressure on margins. Retailers are trying to keep prices in check for this Christmas, but price hikes are likely to follow next year as retailers may have no option but to pass the cost on to consumers.

Unfortunately, the challenges do not stop there. Retailers are still dealing with significant legacy debt after nine months of enforced closure. 

Staffing is a major issue as the retail industry, and employers are struggling to fill vacancies at a critical time. Furthermore, retailers have reported that many foreign workers who returned home during the pandemic have not returned, leading to further pressure on staffing.

Welcome State support

Government grants have been very welcome throughout the pandemic. There have been four rollouts of the Enterprise Ireland online retail scheme aimed at helping retailers with more than 10 employees to get online. Unsurprisingly, these schemes have been oversubscribed.

However, smaller retailers with fewer than 10 employees — the ones who arguably are in greatest need of support — are unable to access this level of finance and are missing out.

Even though retailers are clearly still navigating a perfect storm of increased costs, supply chain issues, and staffing shortages, there is light at the end of the tunnel for the industry in Ireland.

This year, it’s more important than ever to support Irish retailers and indeed suppliers, who are not dependent on international trade and as such can respond quicker to demand trends. Importantly, using an Irish supplier is a more sustainable choice too.

Even though it may be more difficult to source the goods you want this Christmas, there will likely be an extended sales period in the New Year which will give retailers a much-needed boost during what is generally a fallow period.

The Government can help by updating and streamlining relevant visas for foreign workers and easing restrictions on student employment. Furthermore, an extension of online schemes to include our smallest retailers would make a meaningful difference.

Local authorities' role

After the pandemic, city councils have the opportunity to reimagine how we live, work and shop in our town and city centres. The post-pandemic recovery has already begun, but it is clear that some areas are lagging behind such as Dublin and, to a lesser degree, other cities including Cork and Limerick.

In Dublin, footfall is still 30% down on pre-pandemic levels, driven largely by a major decline in office workers and tourists. City councils and the Government need to get creative to entice people back to urban centres in the short term, and start to think about how we want our cities to look like in the medium to long term and plan accordingly.

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The retail industry has been though the most challenging period it has ever faced, and its problems are far from over. However, if we make the right decisions now, we can reap the benefits into next year and beyond.

• Duncan Graham is managing director of industry group Retail Excellence