Solutions and the Way Forward for the Irish Retail Sector
This is a guest blog post written by the business consultant James Raleigh of Raleigh and Associates. James is a Certified Management Consultant, CMC, and a member of the Institute of Management Consultants and Advisers www.IMCA.ie .
James highlights that in order to regain growth in the economy, action must be taken within the retail sector.
✦Retail is country’s biggest employer with 250,000 currently employed (a drop of 50,000).
The value of Retail Sales in 2012 is 88% of base year 2005 (some categories 68%). Retail has to be part of the growth solution for Ireland.
✦Online Sales €2.96 billion in 2010 (Visa) and may now top €4 billion. Retailers now must have online presence to survive.
✦Retailers can go online selling through 3rd party channels (Amazon, E-Bay – sales commission 5%-30%), create a free cloud based website (www.gettingbusinessonline.ie with up to 10 products, and free custom e-mail and record keeping for up to ten users www.googleapps.com ) or create a custom e-commerce website with ongoing costs.
✦Barriers to entry for new Retailers are too high. They include lack of capital, high rent, rental deposits, rates, fit out costs and a track record.
✦Current system looks for a Mark who can pay rent, rates and other outgoings as a Tenant. The Agent checks focus on whether the use for the Unit has appropriate planning or is prohibited by overall shopping center agreements.
✦Tax designation created current problems and existing system is not working.
✦Solution is to create new commercial leases with a % of turnover for both rent and rates paid weekly on EPOS data.
✦This aligns the interest of the Landlord, Council and Retailer (& Ireland), breaks down the barriers to entry and focuses them all on the success of the retail venture.
✦Non-Recourse funding provided by the banks at a reasonable margin (capital guaranteed by the Government) to New Retailers to document the concept, deliver a business plan, create an online presence, and a % of the fit out cost (must do some work themselves and stocking the shop).
✦Same funding available to existing Retailers who operate only on the Island of Ireland to expand or create a master Franchise Agreement to facilitate expansion.
✦Huge stock of vacant shops throughout the country (many Nama owned), no commercial rates on vacant units, bad debts for Councils on Retail closures, 435,000 people claiming social welfare, depressed economy and retail sales.
✦Examples given of vacant stores in Sutton, Sandyford, Clongriffin, Dundrum. They highlight that the Landlord (Nama) and the Council have had no income from many units for a number of years. The state is still waiting like Godot for thousands of “Marks” !
✦Homeplus (owned by Tesco) opened the world’s first virtual store in a metro station in Seoul. People scan a product with their phone, order it and it is delivered to their home. Their online sales are up 130% and concept has been extended to 20 bus shelters.
✦Amazon have opened a store in Seattle selling tablets and readers which may be a reaction to being delisted by Target. Target fighting trend where people look at the product in store but buy online (often comparing prices on a App in store).
✦Apple Retail have shown how to create an integrated store and e-commerce website which builds a community who feel welcome in the stores.
✦UK has many vacant units on High Street but council collect rates from Landlords.
✦Major worry that vacant units may become the norm due to online and other trends
The full article can be read at www.raleighandassociates.ie