Saturday 16 December 2017

Audacious 'Shop and Save' incentive behind resurgence

The latest data shows that Dunnes Stores had a 22.6pc share of the multi-billion euro grocery market during the 12 weeks up to November 6
The latest data shows that Dunnes Stores had a 22.6pc share of the multi-billion euro grocery market during the 12 weeks up to November 6
John Mulligan

John Mulligan

You can bet that if there weren't Champagne corks popping down at the Dunnes Stores headquarters on Dublin's George's Street yesterday, there was at least some smug satisfaction in being back on top.

Because it looked for a long time like Dunnes Stores had lost its way.

Its market share had declined, and it was taking a beating from rival SuperValu, which has developed new ranges and aggressively marketed its Irish and local credentials, heavily involving itself in local communities.

It's arguable that Tesco's own slide down the ranks was as much to do with its wider problems as a group, rather than just its ability to compete in the Irish market.

The first line of defence for Dunnes was to slash its own margins.

It did so by introducing its popular 'Shop and Save' incentive, where customers get €10 off every €50 they spend. Its popularity even forced rivals to begin accepting the vouchers.

It was an audacious, not to mention expensive, strategy for Dunnes.

Retail experts reckon that since the retailer introduced the scheme over two years ago, it has cost Dunnes tens of millions of euros.

What's telling though is that Dunnes Stores has been able to afford to run that scheme for so long.

That makes one wonder just what kind of profit margin the chain was previously working off, and that if it was losing money to run the campaign, just how much in accumulated profits the business had on its books.

A substantial amount, certainly, but the business is unlimited, meaning it does not have to file publicly available accounts.

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A big challenge now for the chain will be how to introduce an orderly halt to that discounting without losing too many customers, or seeing their spend fall if they do stay with the chain.

To that end, Dunnes Stores has been introducing new products and concepts.

It has also bought the small Dublin-based Café Sol chain to introduce the product to Dunnes Stores, and also acquired artisan butchers Whelans.

And that's just the food side.

With textiles, it has hauled in top names such as Paul Costelloe, Lennon Courtney and Paul Galvin to front labels it hopes will spur sales with more discerning customers.

It's all pushing Dunnes Stores more along the lines of Marks and Spencer (where Margaret Heffernan has even been spotted shopping), rather than the Dunnes of old.

And being number one might also stir interest in the chain from potential buyers.

Margaret Heffernan turns 75 next year, her brother Frank Dunne turns 74.

There will come a day when a decision will have to be made about the chain's future.

Irish Independent

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