Bring Shops to People not People to Shops

10 September 2008

Musgrave Group notes the publication of Ireland's Competition Authority Report on the Retail Planning System as applied to the Grocery Sector 2001 – 2007 and looks forward to engaging constructively with Government in the period ahead to ensure that consumers and communities across the Country continue to benefit from sustainable development and the high levels of competition in the retail sector.  

Musgrave has serious concerns regarding the content of the Report most notably the contention that the current planning regime limits the entrance and expansion of retailers or reduces choice and value for money to the consumer.

The Irish grocery market is highly competitive, as evidenced by the growth in store numbers and capacity in the retail sector. This is evident in the Report which indicates that between 2001 and 2006 the number of outlets of the vertically integrated retailers (Tesco, Dunnes, SuperQuinn) increased by 65% from 204 to 337 while the number of affiliated retail stores (SuperValu, Centra) increased from 1,549 to 2,569 a 66% increase. Over the same period, grocery retail floorspace of the vertically integrated retailers increased by 102%.  Aldi and Lidl have increased their combined store numbers by 119 effectively opening at least one store per month over past seven years.  This increase in capacity and store numbers has driven competition across the grocery retail sector and demonstrates that there have been no restrictions to entry or expansion.

Musgrave rejects the Report’s conclusion that the Retail Planning Guidelines are restricting consumer choice and value for money.   The report only evaluates part of the grocery market namely the seven largest retailers and takes no account of the choice provided by smaller shops in towns and villages around Ireland, which constitute almost a third of the grocery market.   It also makes no reference to the number of stores within easy access for shoppers, which the Competition Authority in its recent Grocery Monitor Report concluded that, by standards applied in both the UK and beyond, the Irish consumer was very well served.

Any potential review of the Retail Planning Guidelines by Government needs to take into consideration the important societal, as well as local and national economic implications of changing the planning system. The recommendation to remove the cap on grocery retail space has been made on the basis that it will facilitate large scale, low cost grocery retailers providing greater shelf area which will increase competition. The reality is that larger stores do not provide greater shelf space for food items. Research from IGD, the leading authority on international grocery and retail trends, demonstrates that larger format stores dedicate up to 30% of their square footage to non-food items such as books, DVDs, electrical products, toys and household items. This does not lead to better choice or lower prices but  in fact  leads to the  closure of smaller  food and non food stores reducing competition.

Musgrave believes that the Retail Planning Guidelines are critical to the sustainable development and competitive nature of the retail sector as well as to the social infrastructure and fabric of Irish society.   To protect communities, the planning system should continue to operate in a way that brings shops to people and not people to shops.
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