Irish consumers adjust to brave new world as shopping revolutionised

The pandemic, coupled with a rise in online shopping in recent years, has meant the retail sector is in a very tricky situation. Picture: Denis Minihane

In the second part of her two-day series on how the Covid pandemic has changed how we shop, Niamh Hennessy looks at the explosion in online transactions 

Online shopping has catapulted into our worlds over the last year.

People who had long-favoured the traditional route of in-store shopping have been left with no choice but to shop online.

In a year when retailers had to face the impact of lockdowns, Brexit, a rise in online shopping and nervous consumers, things haven’t been easy.

Some areas have done well but every sector has had its challenges.

Supermarkets saw a massive surge in customers switching to online shopping once the pandemic hit early last year. People had to wait for weeks for a delivery slot for their online groceries if they didn’t get in on time.

In February, online grocery sales had another record-breaking month as shoppers ordered €63m worth of take-home groceries. This accounted for more than 6% of all grocery sales. File picture

The demand for online grocery shopping has continued and in February, online grocery sales had another record-breaking month as shoppers ordered €63m worth of take-home groceries. This accounted for more than 6% of all grocery sales.

In February, 241,500 people made an online order compared with 114,800 in the same month last year, just before lockdowns hit.

In other parts of Europe, online shopping gained in 2020 the equivalent of nine years of share growth.

Kantar analyst Emer Healy said the online share of the grocery market has had an extraordinary uplift compared with the pre-pandemic level of 2.7%.

Lockdown may well have converted some previously reluctant digital customers long term. They are also using services more often, completing 21.7% more digital orders a month.” 

According to Kantar, January this year was a record-breaking month for online grocery shopping, as more than one in 10 shoppers bought groceries through digital channels in the first four weeks of 2021.

Grocery home shopping services

At Tesco, grocery home shopping services, both home delivery or collection, have seen unprecedented demand during the pandemic. Prior to Covid-19, about 3% of Tesco customers who are aged over 65 used online deliveries. This now stands at 14%.

Prior to Covid-19, about 3% of Tesco customers who are aged over 65 used online deliveries. This now stands at 14%

Tesco said demand remains high for slots for delivery and collection countrywide. It has about 650 drivers travelling the country to manage deliveries to customers. Throughout 2020, it opened click and collect points.

However, when it comes to online grocery shopping, many experts say this is not an area that supermarkets are too keen on promoting as they still want shoppers to come into their stores.

Supermarkets are happy for an online offering to sit alongside its main business, which is getting people into their stores. It’s a very different approach to that of the banks, for example, which are very focused on digital. The supermarkets not so much.

Bank of Ireland retail sector head Owen Clifford said when it comes to online grocery shopping, the existing platforms were stretched when dealing with the unprecedented volumes over the past year, leading to some consumer disengagement with the channel.

“The cost of picking and delivery linked to the online channel remains a deterrent to retailers. I would expect a greater emphasis to be placed on user-friendly click-and-collect offerings from all the leading brands in 2021.

“The development of more intuitive and extensive brand apps linking personalised offers, loyalty rewards, click and collect, community initiatives and nutritional advice etc will be a priority for all brands to maintain customer engagement,” said Mr Clifford.

Devan Hughes, chief executive of Buymie: In recent months, there has been a big uplift in supermarkets offering the services of partnerships such as Ocado, Buymie, Deliveroo and Just-Eat.

In recent months, there has been a big uplift in supermarkets offering the services of partnerships such as Ocado, Buymie, Deliveroo and Just-Eat. Lidl and Buymie, for example, have a partnership where they say customers can have their groceries delivered to them in an hour. These external partners will deliver groceries to customers at a cost to the customer rather than a cost to the store.

For the supermarkets, there are questions about the profitability and long-term viability of online shopping.

Darragh Cassidy of Bonkers.ie said: “Ireland’s small market size doesn’t help when trying to achieve economies of scale. And for consumers, things like minimum order amounts and delivery fees mean online shopping is rarely cost-effective for those doing a smaller shop.

Ten or 15 years ago, it seemed like everyone was forecasting that most grocery shopping would be done online by now. But that hasn’t happened at all. Partly because the option hasn’t even been there.

“Out of all the main supermarkets, Tesco probably has the most established online service but competition for delivery slots at times can mean it’s not perfect and sometimes it’s quicker and more convenient to just go out and pop into the supermarket yourself.

“Dunnes only started home deliveries late last year through a partnership with Buymie, similar to what Lidl has done, but only for the Dublin and Cork regions.”

“I think people accept having to make the trip to their local supermarket and almost want to do it more than they do for other types of goods.”

The supermarket sector is strong and will continue to grow as will the DIY sector.

DIY sector

Kingfisher, the owner of DIY giant B&Q, reported a surge in sales and profits for last year as people turned their focus to DIY. Chief executive Thierry Garnier said the company had seen “extraordinary demand” in the past year and he has predicted the DIY revival will keep going even once lockdown measures are lifted. 

It also saw a huge rise in people shopping online over the last year. Overall online sales increased 158% to account for 18% of overall group sales. This is more than double the 8% share before the pandemic hit.

Woodie's has a similar story. Its owner Grafton Group said that in November last year, 50,000 online transactions were performed on the Woodie’s website, which is an increase of more than 800% when compared to the 6,000 sales online in November 2019. It called 2020 a year of “exceptional growth”.

Good news indeed for these sectors. However, the future is less uncertain for the retail market in general. We will unlikely see many supermarket store closures in the same way as we’ll see other types of stores come under pressure due to online retailing.

“Whereas online shopping in general (clothes, electronics, personal care items) still tends to be skewed towards a slightly younger demographic – grocery shopping skews a bit more towards an older demographic, so it’s unusual in this respect,” Mr Cassidy said.

Taking the retail sector overall, figures from the CSO show there was almost a 22% monthly drop in the volume of retail sales in January, with the value of sales down almost 20% compared to December.

Retail Excellence Ireland, the organisation that represents retailers, is not happy about lockdown measures taken by the Government.

Chief executive Duncan Graham said the decision to include non-essential retail in the lockdown is “a hammer blow to the retail sector.”

“After the year we have had, I fear that many shops that close now may never open again. Our members will need urgent, significant financial support to have any chance of reopening,” said Mr Graham.

The pandemic, coupled with a rise in online shopping in recent years, has meant the retail sector is in a very tricky situation. CSO statistician Stephanie Kelleher said the pandemic and the restrictions imposed had a significant impact on the retail sector last year. Even more so than the rise in online shopping.

“The percentage of online sales in Irish-registered enterprises remained stable since records began in 2018 at between 2.5% to 4% prior to the impact of Covid-19.

"In April 2020, the percentage transacted online increased to 15.3%. While overall retail sales fell in April, the closure of non-essential shops and outlets saw many consumers move online to purchase goods. As traditional shopping reopened, the proportion of transactions online fell. 

”It’s tricky for retailers right now and many are faced with very little options. Research from .IE, the organisation that provides domain names, found that almost three-quarters of consumers will not feel comfortable shopping on their local area until the virus is under control.

The Tipping Point report found 27% of shoppers will not be comfortable until vaccines are available to the general adult population, not just at-risk groups.

Even more grim news

In even more grim news, 16% said they would prefer to wait until the Government confirms that social distancing and masks are no longer required, while 6% say they will never feel comfortable shopping in-store or their local streets ever again.

The report found that one in two consumers do the majority of their online shopping with small and medium-sized enterprises from Ireland. However, a slightly bigger share, 51%, place most of their online orders at international retailers.

.IE chief executive David Curtin said: “Irish consumers want to support local businesses through a difficult period, but SMEs can’t expect that goodwill to last forever.

A stable, long-term ecommerce strategy cannot be built on crisis solidarity alone.”

However, even before the virus, technology had already accelerated on move to online – not just for shopping, but banking, travel and even dating.

According to the Banking and Payments Federation Ireland (BPFI), direct debits rose 25%, with many consumers and businesses relying on direct debits for regular bill payments.

In fact, almost half of adults who paid energy bills used direct debits in April last year.

Research by UBS in the UK found 71% of respondents said they would shop online “as often or more after the Covid-19 situation improves”.

In Ireland, Visa also saw an almost 40% increase in ecommerce transactions in December 2020 compared to December 2019. In Ireland, almost 40% of Visa card holders who traditionally did not shop online pre-pandemic changed their behaviour after March 2020 to use ecommerce transactions.

Courier company DPD even announced plans late last year to create 700 more jobs this year. During the height of the pandemic, DPD said it saw an 800% increase in deliveries of electrical goods alone.

Mr Cassidy said the move to online shopping has been a key feature of the pandemic for all retailers.

“The question is how much of that spend will revert back to the high street once things return to ‘normal’. A lot of it will – but not all of it and this is something that should worry Irish retailers in particular, as online shopping is an area where a lot of Irish retailers struggle.

“Either they have no online presence at all, or they just provide a poor user experience.”

Amazon

There has been a big focus too on Amazon and how that is impacting retail sales in Ireland.

A lot has been written about Amazon and the impact it’s had on the Irish retail landscape — often to the detriment of local retailers. But a lot of time people shop on Amazon because they can’t find what they need elsewhere.

“They realise the importance of supporting Irish retailers, but at the end of the day if you can’t find what you need with an Irish retailer or the delivery will cost too much or take too long, you’ll just go elsewhere,” said Mr Cassidy.

There has been a big focus on Amazon and how that is impacting retail sales in Ireland.

Despite some success stories, overall there really is a perfect storm of problems for retailers right now and Irish consumers are understandably anxious. In fact, a recent report by Deloitte said Irish shoppers are now the most anxious in Europe for the second time in three months.

Deloitte Ireland head of consumer affairs Daniel Murray said: “While Irish consumers are once again the most anxious in Europe, the research shows us that this is driven in the most part by health concerns. Many have lost their jobs or had their incomes negatively impacted and many remain in a state of financial uncertainty.

“However, looking at the national picture against that of our European neighbours, it appears that the supports introduced by the Government have cushioned the blow to a certain extent.

“This could mean that spending will start to pick up again once the worst of this new wave of Covid-19 has passed, as it did following the first two waves in 2020, which would be welcome news to retailers.”

Internet scams

Not only have retailers had to manage this anxiety faced by consumers there is also the issue of online safety. Shoppers are always more anxious using their data online as things can go wrong.

The Deloitte report also found half of consumers reported being more concerned about the security of their personal data now they are shopping more online.

The Banking and Payments Federation Ireland said there was a 50% increase in reports of online fraud last year.

Gardaí recently issued a warning for people shopping online, saying there has been an increase in internet scams.

The Banking and Payments Federation Ireland said there was a 50% increase in reports of online fraud last year. Banks are very much on top of this in Ireland and are constantly working on making sure consumers are safe when shopping online.

Online shopping will continue despite such concerns. More retailers are transitioning online too which helps when people want to ‘support local’.

There has however, been a big push to support local and for the first time ever there was a genuine appetite to really support local businesses last year.

People do want to support local but there is a road to travel yet in that area. Paypal said 88% of Irish consumers who shopped online last year bought from websites outside the country.

The study found almost four in five of those who bought from websites outside of Ireland spent with UK retailers during this time; 43% bought from websites based in Europe, while 38% spent with websites based in China and 21% purchased products from US websites.

It said 65% of respondents said their main reason for buying outside Ireland was better pricing, 51% said more choice, while 46% said greater availability.

Meanwhile, 48% said they chose Irish websites due to faster delivery.

Joachim Goyvaerts of PayPal said the research shows  demand for online shopping has never been greater.

“As a result of the pandemic and recurring lockdowns, it is no longer just important but absolutely necessary that Irish businesses provide a digital offering.

“Of course, they shouldn’t look at this as a short-term investment because the growing dominance of online shopping won't ease, even when restrictions do,” he said.

Buy Irish

Kantar research shows  Irish shoppers are very keen to buy Irish in supermarkets. They said that 44 of the 100 top-selling take-home grocery brands in Ireland last year were Irish-produced, recording growth of 18% to a total of more than €1bn in combined sales.

Brexit will also continue to have an impact on the way we are shopping online. People are concerned now about custom duties and extra charges on items they buy from the UK. This surely will push more people to Irish online stores.

“An increase in the purchase of Irish and [other] European produce is likely as a result of Brexit,” said Mr Cassidy.

An Post has been very clear on how shoppers will be affected by Brexit and buying from the UK now. It said any charges on incoming items will have to be paid by the receiving customer in advance of delivery and it has set up good systems to help with this. An Post international trade director Cyril McGrane said Brexit is “the single biggest change to the customs regime in the history of the State”.

An Post said it expects about 16m parcels will be purchased by Irish people from the UK this year and all of these parcels are made available to Irish Customs for inspection.

Penneys recently announced it would be expanding its store on St Patrick St in Cork in what was seen as a huge vote of confidence in city centre shopping. Picture: Dan Linehan

If Irish Customs decide that VAT or customs charges are applicable to UK deliveries, then customers will either pay these charges in their shopping basket to the online retailer or directly via An Post online or at a Post Office in advance of delivery.

Penneys

There are glimmers of hope, however. Penneys recently announced it would be expanding its store on St Patrick Street in Cork it what was seen as a huge vote of confidence in city centre shopping. It is confident people will come and is investing millions on that bet.

It will take imaginative thinking from the sector, councils and Government to build on that confidence and to get shoppers once again voting with their feet when restrictions are lifted and we get back to life as we once knew it.

Online shopping tips: Check out these before you click and buy

1. An ‘.ie’ domain is not a guarantee of an Irish-based business. The most important step to now take is to check where a business is based before you buy. Check the business’s registered address in the terms and conditions (T&Cs) section of the website to find out where it is registered. If the registered address is within the EU, it is not only required to provide its trading name and address but it must provide you with other important consumer protections. If the registered address is outside of the EU, which now includes the UK, then your consumer rights may be different. If a business has more than one website with a number of different domains, e.g. ‘.de’ or ‘.co.uk’, be sure to check the registered address on each website before you buy from it.

2. You may have to pay additional taxes and charges. From January 1, all online shopping orders received from the UK (excluding Northern Ireland) are subject to Irish Vat and customs charges, depending on the value and the type of items. Before ordering from outside the EU, check the T&Cs to find out what Vat and import charges you may have to pay. Goods under €22 are exempt but Vat is payable on goods over €22. For goods over €150, customs duty and Vat are payable.

3. Always check the T&Cs for a returns policy before you buy from a non-EU website. If you are buying from a non-EU website, including a UK website, you may not automatically have the right to return an item, or the timeframes for returns may have changed. So, before you buy, always check T&Cs to find out what it says about returns. Also, check what the T&Cs say about faulty products and if there are any limits to the business’s returns or faulty goods policy. If so, you may consider buying from an EU-based website to ensure you have strong rights.

4. If you buy from an EU website, you have strong protections if something goes wrong. If you buy from an EU-based business, you have strong consumer protections, which ensure that you have enough clear information and are not misled before you buy. Importantly, it ensures that you have rights if something does go wrong, particularly, the right to a refund. Buying from a non-EU website means that these rights do not automatically apply; therefore, if something does go wrong, it may be more difficult to get the issue resolved. This is particularly important to consider if you are buying high-value items.

• Source: Competition and Consumer Protection Commission