Thursday 13 December 2018

Traditional retailers warned as high street hit by online sales rise

Stock image
Stock image
Ellie Donnelly

Ellie Donnelly

Increased online shopping is contributing to a growing disconnect between rising levels of disposable income and the "unspectacular performance" of a number of retail categories over the Christmas trading period.

In addition, changing consumer spending patterns are contributing to the disconnect, according to Retail Ireland.

"2017 was notable for a rapid increase in online shopping by Irish consumers," said Thomas Burke, director of Retail Ireland.

"Christmas 2017 will show record online sales. This lays the challenge squarely at the door of the traditional Irish retail sector."

In its latest Retail Monitor, which looks at consumer spending in shops across Ireland, Retail Ireland went on to warn that a failure to act on the matter in the short-term would lead to closures and the gradual disappearance of certain retail formats on the high street.

"A clear digital strategy will be crucial in ensuring the future of such businesses who must embrace the challenge at all levels of the organisation."

The group, whose members operate 3,000 outlets across the country, also said that the Government would have a role to play in the retail sector's required transformation.

"Bricks and mortar retailers continue to carry all the burden of costs associated with retailing in the State," Mr Burke said.

"A growing cost base linked to increasing local authority rates, insurance premiums, regulatory red tape and Government mandated wage rates, all give an undue advantage to their competition," he continued.

This competitive imbalance was not sustainable and required a "creative" approach by the Government in the short-term, the industry body warned.

Read more: The world of payments is changing and Ireland has the ability to lead the way - Visa Ireland chief Philip Konopik

Overall retail sales in 2017 were up 3.9pc in terms of value on 2016, with furniture, lighting and homeware stores performing particularly strongly during the year.

Increased sales were reported in all retail sectors during the year, with the exception of speciality food and drink stores, where sales fell by just over 1pc year-on-year.

However in December, traditionally the busiest month for retailers, sales actually fell by 0.7pc when compared with retail sales in November, highlighting the growing importance of and impact of global online retail events such as Black Friday and Cyber Monday.

Such promotional events are now actively displacing consumer spending from later in the Christmas season, Retail Ireland said.

However the lobby group added that the long-term impact of promotional events like Black Friday and Cyber Monday on the retail sector remains unknown.

"Some in the industry suggest they are merely bringing forward purchasing decisions at the expense of profitability due to discounting," Mr Burke said.

"Others say it launches the Christmas shopping season and helps to promote additional spend over the elongated season."

However, it is clear that such promotional events act as a disruptor of traditional end-of-year retail sales patterns, which the body said was also hitting the standing and importance of the traditional January sales period.

Last year, online shopping by Irish consumers increased by 7.4pc compared with the previous year.

The rise in online shopping meant household spending in Ireland continued to go up at a solid pace at the end of 2017.

Irish Independent

Business Newsletter

Read the leading stories from the world of Business.

Also in Business