The Competition Authority today published its report on the Irish Retail-related Import and Distribution sector. It finds that increasingly price-conscious consumers are shopping around for the best prices and spurring more competition between retailers and their suppliers. This is causing prices to fall. For example, between January and May 2009 grocery prices fell by over 2%. The Authority says the State must lead in reducing the cost of doing business and price reductions on medicines for consumers must also come from the State. Meanwhile, supermarket leader Tesco confirmed on Tuesday that it had increased prices of 200 items.
Now that prices are coming down on a range of goods, the Competition Authority urges Government to reduce the cost of doing business in Ireland to help Irish suppliers compete and survive.
According to Bill Prasifka, the Chairperson of the Competition Authority: “Falling retail prices are proof that competition works. Retailers and their suppliers are responding to consumers’ changing shopping patterns. Reducing the cost of doing business in Ireland is key to helping suppliers of retail goods to be competitive.”
The Authority says the Irish retail sector, and the supply chain that feeds it, is undergoing a major and necessary adjustment. The large numbers of consumers travelling to Northern Ireland in 2008 and early 2009 exposed the fundamental problems of the Irish retail sector. The Government can no longer devalue Ireland’s currency but addressing the high cost of doing business in Ireland will help all types of businesses as well as consumers.
The Report’s key findings are that many factors contribute to differences in prices between Northern Ireland and the Republic of Ireland. The response of retailers and suppliers to these price differences varies across different sectors:
Groceries sector
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Retailers are pressuring suppliers for better deals and finding alternatives.
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Prices to consumers have fallen as a result.
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Encouraging more competition at retail level - through changes to the planning system - would benefit consumers further.
Clothing sector
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It is more difficult for clothing retailers to find alternative suppliers and renegotiate prices, compared to the grocery sector.
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Consumers are benefiting from more and bigger discounts in sales.
Pharmaceutical sector
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Medicines are highly regulated to protect public health and so imports are extremely limited.
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Price reductions for consumers must come from the State leading the way and reducing the prices it pays for medicines.
The Competition Authority also recommends adjustments to the planning process to encourage more competition in grocery retailing. The Competition Authority welcomes the Government’s announcement that the very high mark-up paid to pharmacies by the State will be reduced.
The Tánaiste and Minister for Enterprise, Trade and Employment, Mary Coughlan, T.D., who requested the study followingconsideration of the findings of a Forfás report, which suggested that the strong euro, which had failed to translate into lower import costs on goods from the United Kingdom, could be indicative of a lack of competition in the import, distribution and retail sectors.
The terms of reference given by the Tánaiste were for the Authority to examine:
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how the retail-related import/distribution sector operates and how competition works in that sector;
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whether any practice or method of competition affects the supply and distribution of goods within that sector;
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the impact on competition within the sector of direct importation from source countries, rather than indirectly through the UK;
and to report to her by 30th April 2009.
The Tánaiste said: “This study confirms that while there are no major systemic problems in the overall retail market, the market dynamics can differ across the various retail sectors with some being more flexible than others.
“We are ultimately reminded however that prices are determined by demand and supply conditions. Pricing decisions, by retailers and manufacturers, are generally made in the context of what consumers are prepared to pay”.
Retail-related Import and Distribution Study Executive Summary.pdf
Retail-related Import and Distribution Study.pdf
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Dominant supermarket group Tesco has raised the prices on hundreds of food items just over a month after they were reduced as part of price-cutting campaign in some stores.
The retailer confirmed it had increased prices on about 200 lines in its “change for good” stores, which stock large numbers of products directly imported from the UK rather than sourced from Irish suppliers.
However, it pointed out that some 300 items had fallen further in price since the new store layouts, or planograms, were introduced in stores near the Border and later Connacht.
Of 50 products reduced in price for the “change for good” strategy in early May, six had risen again to the previous level while five had been reduced further, according to a price survey by The Irish Times in Tesco’s Drogheda store earlier this month.
