Business

Sunday 24 September 2017

Corner shop can-do will loosen the consumers' purse strings

By shopping local, customers and companies can create the multiplier effect – thus boosting employment, writes Martin Kelleher

RETAIL THERAPY: Martin Kelleher believes the retail sector needs a fully functioning banking system to help retain jobs
RETAIL THERAPY: Martin Kelleher believes the retail sector needs a fully functioning banking system to help retain jobs

Martin Kelleher

'A new can-do attitude is emerging with far greater collaboration between firms and agencies'

At times the debate on rebuilding the Irish economy breaks down into a question of where the concentration should focus – attracting foreign direct investment or growing the domestic economy. At SuperValu and Centra, while we believe it should be on both, we are acutely aware of the importance of creating and enabling local economies to develop and thrive.

We partner with more than 660 SuperValu and Centra independent retailers in villages, towns and cities across Ireland giving us a first-hand perspective on the problems local businesses face and the solutions they require.

SuperValu and Centra together employ 24,000 people which gives us a perspective as to how to maintain and grow employment in the Irish retail sector.

Challenges in the Irish economy are mirrored in the retail sector. Retailers themselves have much reduced access to finance to reinvest and develop their businesses.

They face increasing bank charges, high rents, electricity costs that are higher than our nearest neighbours and significant commercial rates bills.

Consumers are struggling against a backdrop of falling incomes, high unemployment and significant direct and indirect taxes. Needless to say, consumer confidence is low, reflected in reduced spending, which exacerbates the problem.

Independent retailers play an important role in our communities as long-term "anchors" driving footfall in towns and villages, giving consumers a reason to stop and spend and effectively creating local micro-economies.

Local people spending their money at local independent businesses begin a cycle in which those businesses then spend their money at local shops, and so on. In this way, local spending equates to investment in the local economy. This provides opportunities for other local businesses to create further employment – the multiplier effect. We have these micro-economies in Ireland – the challenge is sustaining them.

Our SuperValu retailers contribute €1.6bn to the Irish economy annually through purchases of Irish goods and services and have an annual payroll of €213m.

SuperValu and Centra are the only retailers in Ireland to stock 100 per cent fresh Irish meat and 100 per cent National Dairy Council-approved fresh milk.

Our own economic analysis shows SuperValu retailers collectively contribute €300m to local economies by sourcing directly from local suppliers, engaging professional services, through charitable contributions and employment.

Access to Finance

Retail is a crucial sector of the economy employing almost a quarter-of-a-million people in Ireland of varying skills. To retain these jobs and provide more employment, the retail sector needs a fully functioning banking system.

While there has been improvement in the engagement by the banks with small and medium businesses, this has not translated into an increased availability of credit.

A particular difficulty at present is the consistent refusal by banks of credit facilities to retailers operating in leasehold premises, which now form a significant segment of the retail sector.

These are viable businesses and in our view the Government must do all it can to seek to compel Irish banks to change their policies in this regard.

In addition, there are genuine, distressed business cases which must receive attention so that solutions can be worked through to allow these otherwise viable businesses to survive.

A functioning banking system will empower retailers to develop their businesses, to invest and to create jobs in local communities.

Competitiveness

At government and industry level, there is a willingness to address some of the competitiveness issues facing the SME sector and retailing in particular. This willingness needs to be transformed into an absolute determination to tackle the cost issues that hamper our progress.

High energy and waste costs, commercial rates, and insurance all create barriers to employment and growth. While these costs can't be eliminated, their impact must be continually assessed. In addition, we must ensure that policy and other actions don't create further 'roadblocks' for business, particularly in such a difficult economic climate as we have today.

The proposals in relation to sick pay are a case in point. Should a mandatory scheme such as that which has been discussed be implemented, it would add to the employer cost burden and would effectively constitute a tax on business, which could put downward pressure on employment levels.

Good things are happening in our economy. A new can-do attitude is emerging with far greater collaboration between business and State agencies than ever before, leading to exciting opportunities, particularly for start-up businesses.

An example of this is the SuperValu supplier development programme run in conjunction with Enterprise Ireland and Bord Bia.

The right product or idea needs to be matched with the right business skills to become a success. Our mentoring and support programme gives young food companies the business support and know-how they need to achieve retail listings.

This is proving extremely successful and over the last five years, participant businesses have secured €15m in direct sales from SuperValu alone. This programme has been hugely successful and we are committed to growing the number of participating suppliers.

Consumers

Just as we are committed to our suppliers at SuperValu and Centra, so too are we committed to the consumer and to providing shoppers with the best quality products and the best value.

We are alert to changing trends and endeavour to be nimble enough to move with these trends. Just as our core brands have for years recognised and responded to shoppers' desire for quality, for value, and for Irish produce, we are now responding to a growing desire to shop online.

Irish consumers are spending about €3bn per annum online and Irish business must equip itself to be part of that spend – 70 per cent of which is currently leaving this country.

The Action Plan for Jobs and the National Digital Strategy seek to address this through practical steps that will assist Irish business in growing their online presence and capabilities.

We still believe, however, that shopping is about more than just getting the products you need, when you need them. It is about community, social interaction and contributing to the local economy. It's about jobs, and the sustainable employment that local retail can create.

The retail industry and the wider SME sector is the vital component in the regeneration of our domestic economy. A strategic co-ordinated response that suggests real solutions will increase employment creating a renewed consumer confidence and ultimately help our economy to recover.

Martin Kelleher is managing director of SuperValu and Centra

Sunday Independent

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