Tesco prices - Every little (cut) helps

The initiative of Tesco, Ireland’s second-largest supermarket chain, in cutting the prices of 12,500 items by an average of 22% at 11 stores, should be welcomed. Hopefully, this will stimulate the competitive instincts of rivals and bring about a general reduction in prices.

The aim of the move is to stem the flood of shoppers crossing the border to avail of cheaper prices in the North. The actual cost to the economy of the Republic has been estimated to be at least €500m, but Finance Minister Brian Lenihan put the figure at €700m.

Earlier this year, Tesco announced the introduction of a new price stabilisation system for clothes by charging the same numerical prices in both sterling and euro throughout the island. This meant clothes would effectively be 7% cheaper here than in the North.

Tesco does not have a strong presence in the main border towns in the North, so it was losing out to cross-border shopping. The latest price cuts have been achieved by a combination of efficiency resulting from the centralisation of its buying for Irish outlets and the enhanced purchasing leverage afforded by this.

Consumers should always be given the opportunity to purchase Irish products. Of course, that means that Irish products need to be competitive.