Forfás proposes retail competition review
Irish distributors dispute Forfás claim that they are not doing enough to pass on sterling value to consumers in Republic of Ireland
9 February 2009
A review of competition in retail import and distribution sectors should be carried out, , claims Forfás. However, Musgrave has said that while late last year it made “good progress” on closing the gap between UK wholesale prices, that further falls in the value of sterling, “completely wiped that work out overnight.”
A spokesperson for the group commented that Northern Irish retailers have benefited from several factors, such as “the economies of scale associated with being part of the massive UK market with its 60 million consumers.” She estimated that it is approximately 30% more expensive to do business in the south compared with the north.
However, Forfás found that higher operating costs would justify a 5% to 6% differential between northern prices; not the 30% differential that currently exists. It also found that while operating costs accounted for 20% to 25% of a retailer’s total costs, the wholesale cost of goods accounted for 75% to 80% of their total costs.
The Musgrave spokeswoman said the group had invested almost €50 million in price reductions since June, and was working with suppliers to take cost out of the supply chain.
“Our own data would suggest that we had closed the gap by several percentage points in the early part of the fourth quarter last year. However, the further collapse in sterling completely wiped out that work overnight and the introduction of an increase in the VAT rate at the same time as the Chancellor in Britain was introducing a 2.5% reduction further exacerbated the problem."
RGDATA has also criticised what it views as a “selective and flawed report”. “In particular the recommendation that the Retail Planning Guidelines should be abolished as a means of reducing business operating costs in the south is cockeyed," said director general Tara Buckley.