Tuesday 16 January 2018

Shoppers' paralysis hits the tills

Consumers are just too scared to shop, writes Jerome Reilly, and retailers are paying with their business lives

Rack after rack of summer clothing and household items in the hot colours and styles of 2010 went on sale around the country in the last few weeks.

On every high street and in every shopping centre in the country, bright neon "Sale" signs are hung in windows.

During the good times, the big department stores planned their sales with military precision. Striking campaigns were conceived and advertising space and time was pre-ordered long in advance.

Now, there is a sense of panic in the retail sector. Managers are looking at unsold stock in the warehouse and deciding that it must be offloaded . . . now.

That means sales and "events" organised at short notice in a frantic attempt to shift summer stock that simply didn't sell.

July was bad in most areas of retail, with the exception of the car trade. While August was marginally better, the anecdotal evidence is that last month was very poor as people scaled back discretionary spending in the run-up to the new school year, and fear increased about the Budget.

The Budget will be held on December 7 -- in the middle of make-or-break time for retailers. The six weeks before Christmas will mean the difference between survival and pulling the shutters down for many retail businesses.

Facing what has already been signposted as the toughest Budget in decades, consumers are simply afraid to go shopping.

"People are really scared coming up to the Budget. There is concern about state-controlled jobs, interest rate hikes on mortgages and so, people are simply not spending," says Dave Fitzsimons of Retail Excellence Ireland. "A December Budget is a disaster for retailers and we cannot understand why the Government continues this practice."

Well-established retailers continue to fall. The latest is Pepe Ireland, which runs six Pepe jeans stores in the Republic and employs 36 workers. It blamed spiralling rent and other costs, combined with falling sales for the decision to cease trading.

The owner of the fashion franchise, Sunil Shah, claims many shopping centres are charging unrealistic rents. Pepe has outlets in new centres in: Athlone, Co Westmeath; Dundrum, Co Dublin; Laurence in Drogheda; Marsh in Dundalk; and Whitewater in Newbridge, Co Kildare.

But they are not the only retailers in trouble according to Mr Fitzsimons. "The only area really holding its own is the discount sector. Anyone appealing to discretionary spend is having a hard time of it. In terms of clothing, retailers like TK Maxx and Penney's are doing okay.

"In grocery, Lidl and Aldi are doing well although even they have seen a reduction in the peripheral stuff they sell, like the garden tools, equine equipment and leisure stuff, although they have won a new market in terms of groceries.

"It is so difficult and challenging for retailers at the moment. There is a total lack of political leadership, no focus on the real economy. It's an economic strategy focused exclusively on Nama and the bank bailout," he says.

"Retail is the largest industry in Ireland and it's in trouble, but we could grow business. If we saw some moves to reduce rents and if we saw some new methodology of calculating rates, we could grow employment," he says.

Torlach Denihan, of Retail Ireland, an arm of the employers group Ibec, says the large number of sales around the country is not typical at this time of year.

"They are a response to the very difficult climate out there. It's a way of delivering price reductions. We have had sustained price reductions to the public for the last 18 months," he says. "Interestingly enough, the last year when there was a year-on-year increase in the price of clothing was 1994.

"People are under the impression that during the boom years retailers were going crazy, but certainly clothing and footwear prices continued to fall every year, even during the good times.

"It's clear that households are watching and waiting to see what the Budget is going to mean for them and their spending power.

"When people are unclear about what the future holds they tend to hedge their bets," he added.

"If there is bad news coming from the Government, it's best that they know sooner rather than later so they can absorb it and move on," Mr Denihan said.

Sunday Independent

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