The unprecedented commercial performance of Irish grocery and convenience stores over the past two years has acted as an accelerator for the evolution of the sector.
As family retailers competing with international operators such as Tesco, Aldi, Lidl and Circle K, the recognition that investment is needed to sustain their business has spurred strong activity in the market. Bank of Ireland provided funding of more than 125 million euros to family grocers in 2021, facilitating business development and growth. Here are five areas that are driving this investment and shaping the future of the industry:
1. Redesign of the store and investment: As retailers seek to preserve and grow customer goodwill and engagement, many operators are complete company overhaul. When a robust redesign plan is successfully implemented, retailers can expect to increase sales by 5-10% and margin by 0.5-1%. Currently, the volume of transactions made suggests that those who do not invest in the coming years will find it increasingly difficult to maintain customer engagement.
2. Market Consolidation: Store and group acquisition activity has accelerated throughout 2021 and further consolidation is expected in the Irish market in the coming months.
Ireland’s forecourt sector has seen notable business activity as fuel brands seek to refocus on a takeaway offering. Further developments in this regard are linked to the the electrification of the Irish car fleet.
The added workload associated with Covid-19 has been a catalyst for a number of retailers to consider selling their business. The number of in-store purchase proposals increased significantly in end of 2021.
This growth in transaction volume is expected to continue in 2022, with large groups increasing their store portfolio and the next generation of retailers also having the opportunity to take their first steps into store ownership.
3. Online Grocery: The future of online grocery shopping will remain in the spotlight for months to come. Current low levels (less than 5% of total grocery sales) demonstrate that a real opportunity for growth is available if efficient and reliable service can be provided.
It will be interesting to see if other partnership models develop through Ocado, Buymie, Deliveroo, Just Eat or internal “dark stores”. The cost of pick-up and delivery tied to the online channel remains a deterrent for many retailers.
In the coming months, the focus will likely be more on user-friendly click-and-collect offerings from all the big brands.
Developing more intuitive or expansive brand applications that combine personalized offers, loyalty rewards, click and collect, community initiatives and nutritional advice will be a priority for all brands to maintain customer engagement.
4. Durability: In line with global trends, Irish consumer expectations about the societal impact of retail operations have intensified and many shoppers are now willing to pay extra for products that match their values.
Irish retailers have an important role to play in supporting the government’s roadmap to net zero carbon emissions by 2050. A strong commitment to the proposed deposit scheme and relocation of their supply chains can be important steps in this regard.
A number of grocery stores and convenience stores have already completed green projects or have it as a constant in their capital expenditure or process improvement programs.
Tracking and measuring benefits is now the next step in the transition to a more environmentally friendly business model.
5. Investment in personnel: In a competitive job market, finding and retaining the best people is essential to sustaining a retail business.
Retailers should therefore recognize that two major interconnected investment streams in 2022 will be in technology and their people. A structured employee development plan that incorporates a variety of roles, skill enhancement opportunities, and competitive compensation should be embedded into the company culture.
Smart use of digital/automation tools that can eliminate labor-intensive tasks and increase efficiency within the business will support this employee-centric model. Excellent customer service is the product of a committed team – staff development is imperative for progressive retailers.
The pandemic has not only increased consumer interaction with the Irish grocery sector, but our expectations of local stores are also now much higher. It is therefore encouraging to see family retailers taking up this challenge and proactively investing in their stores. In doing so, they support the vitality of local communities on a national scale.
Owen Clifford is Head of Retail Sector at Bank of Ireland