The Northern Ireland Retail Consortium (NIRC) is the trade organisation that represents Northern Ireland’s retailers including large supermarkets, the local symbol stores and fast food outlets. Like every part of society they have been affected by COVID-19 and await with trepidation the impact of the UK’s departure from the EU single market and customs union on 1 January.

Starting with the pandemic, Aodhán Connolly explained that when the first lockdown happened in March, retailers were experiencing Christmas levels of trade every day of the week. There were big differences, however: “Firstly retailers begin their preparation for Christmas trade from as far out as August but this happened without notice and it was a question of trying to find product supply at any price.”

There was also the issue of protecting customers and staff in shops and this has cost shops in Northern Ireland in excess of £10m (€11m). Then there was the challenge of dealing with how customers wanted to do business with retailers. While there was growth in physical footfall, Connolly explained that there was a huge surge in online shopping that in turn increased the home delivery side of the business. He said this was an area of the business expected to develop in coming years but in fact what happened was “the retail sector had to undertake a 10-year development over just 10 weeks”.

Some of the symbols or convenience stores have seen business up 30%

The pandemic has also created a change in consumer behaviour in its engagement with the retail sector, according to Connolly. “Some of the symbols or convenience stores have seen business up 30% whereas some big supermarkets have seen business down 12% as some people don’t want to go to big places even though social distancing might be easier there.”

As well as not wanting to travel, “people also stopped spending as they were worried about their jobs – people are saving more and paying money off credit card accounts, not making discretionary or impulse purchases”.

Brexit

There are huge concerns in the NI retail sector at what the impact of Britain being outside the customs union and single market after 1 January might be. This is because the vast majority of retail produce sold in NI supermarkets arrives in from distribution centres in Britain. This of course will be a problem south of the border as well because huge quantities of consumer goods on sale in Irish shops are sourced in Britain also.

Supply chains

Connolly explained that “modern supply chains are very time- and money-efficient but they are very fragile”. Retail stores are serviced from central distribution centres, with stock replenishment triggered by computerised recording of product sales. There is a 24-hour cycle to restock shelves, usually involving deliveries arriving into NI ports from Britain.

Three times the sector has prepared for Brexit deadlines last year and there is no war chest to absorb more cost

Anything that disrupts this has the potential to cause chaos.

Connolly said: “Three times the sector has prepared for Brexit deadlines last year and there is no war chest to absorb more cost.” He said that weeks out they still don’t have answers to straightforward questions around what will be required in relation to customs controls and health certification. In the worst-case scenario, this could involve anywhere between six and 12 pieces of paper to accompany each product on a load.

He also makes a distinction between what he describes as a commercial load on a small number of products and a retail load which can have between 1,500 and up to 2,000 different products in a container. In the runup to Christmas, one of these containers could have 300-400 products that require an export health certificate. These cost about £200 (€220) each, adding thousands to a load.

Of course, it may not come to this and an agreement may be struck between the UK and EU. The concern for Connolly is that the narrative in many places is that Northern Ireland is sorted out when that is far from the case with just 10 weeks left. Uncertainty is likely to continue for at least a few more weeks as negotiations continue between the EU and UK. .

Blame game

Connolly takes particular issue with business being blamed for not preparing properly for Brexit.

Not only is this impossible without the necessary knowledge, but modern supply chains that are integrated all directions, North-South and East-West, simply don’t want borders of any type as they bring only cost and disruption to what otherwise is an efficient chain.

One model the NIRC would embrace as a solution is having a retail assured movement scheme – RAMS. This would demonstrate that any product entering a retailer in NI from Britain is for sale to consumers in their NI stores only and not for onward distribution to the EU. Of course, getting such a scheme agreed is the big challenge and Connolly points out that this cannot be assumed as the EU will be wary of creating a precedent given the wish of Ukraine for a VAT derogation on its trade with Poland or Switzerland having 210 separate agreements with the EU.

Comment

An insight to the retail sector during COVID-19 reveals that while more money was coming in, it may also have been going out faster on safety precautions and infrastructure investment. However, large supermarkets in particular will benefit in the longer term. We are having to live with COVID-19 for the foreseeable future, giving more time for payback on the safety measures put in place. Additionally, the longer-term investment in online and delivery has sped up a journey that would have been taken anyway, even if over a longer period. Brexit is a completely different threat to retail across the island of Ireland. Connolly said: “If the cost exceeds the profit, then the product or the business model becomes no longer viable.” This is a threat to the retail and product offering, not just in Northern Ireland but across the entire island of Ireland.