Convenience Stores & Newsagents Association CEO, Vincent Jennings, and National President, John Paul Lonergan, explain why the impact of Covid-19 wasn’t felt equally by all retailers, and discuss the challenges facing the sector in the months ahead as new legislation looks set to increase labour costs significantly.
THE last 16 months have been amongst the most unprecedented and most unpredictable in the history of the State, with no aspect of our lives left untouched. Covid-19 has wreaked havoc on life as we knew it, including the grocery industry.
“It’s not a case that it has treated everybody in our industry equally,” stresses Vincent Jennings, CEO of the Convenience Stores & Newsagents
Association (CSNA). “There are people who, by virtue of where they are geographically located – those in city centres, close to technology parks, in
office-land, who were in big holiday areas – were seriously impacted, and they still are. If it wasn’t for the Government supports, they wouldn’t be in business today. Although they were open and stayed open throughout the pandemic, in the vast majority of cases, they were operating a skeleton service with a skeleton staff.”
New CSNA National President, John Paul Lonergan owns a Spar store in Dublin’s Fairview and has been a member of the organisation for more
than 18 years, and part of the executive committee for the last few years. He served as National Vice President in 2020 and had “wonderful plans to go out and meet members across the country but then Covid hit”. He is optimistic that as our economy and society opens up, he will finally be able to get out and meet fellow retailers:
“It can be a lonely placein the shop, and I think a lot of retailers are running to stand still, while others have seen their turnover hugely affected by the
pandemic. No matter what side of the coin you are on, it has been challenging in different ways.”
The nature of consumer purchasing patterns changed radically, as the vast majority of the country’s workforce switched to remote working, and were not spending their days in offices and colleges etc.
“Their purchase habits were very different; their times of visiting were different; their spends were different; and all of that has an effect on the bottom
line,” Vincent reveals. “Every retailer to whom I have spoken has experienced a drop in their profit margins as a result of the changed consumer habits.”
The collapse of foodservice
The foodservice sector collapsed overnight in March 2020, including a sudden fall-off in deli sales in convenience outlets to a tiny fraction of what business was there pre-Covid; in many cases, the in-store deli closed completely.
“For many stores, the deli is a driver of profit and a driver of footfall into those stores, and yet many of the fixed costs relating to the category remain in place,” Vincent notes. “Sure you can cut back on food, but your refrigeration is still running constantly; you still have to have staff; and you also had additional costs related to Covid, including signage, screens etc.”
As an organisation, the CSNA are “much appreciative of the various State supports that were put in place”, according to the CEO, but he believes
that Revenue could have been more accommodating in understanding the nature of convenience retailing when it came to applying strict criteria which he feels “wasn’t really in the spirit of the response to the pandemic”.
“I know it’s not easy when you have tens of thousands of businesses looking for assistance, but for our members, while their drop in sales may
not necessarily have equated to 25% of turnover, the drop in profits and profitability was way in excess of that. That in itself
should trigger assistance,” he says.
“These retailers are providing an essential service, but it is not simply a social service; they are doing it for the purpose of earning a living. If the smaller retailer and convenience store wasn’t around and it was being left to only the large multiples, there would have been a very considerable level of additional difficulties during the pandemic. You would have had much greater levels of panic buying, putting additional pressure on supply chains; you would have had much bigger levels of queuing; you would have had fewer home deliveries. So we were providing an essential service, but it was at
a cost to ourselves.”
A functioning supply chain
One of the big challenges facing the retail business during the pandemic was ensuring that the supply chain worked, something which John Paul was very cognisant of: “I have to give kudos to the team in BWG because without the supply chain remaining open, we wouldn’t have been able to provide that essential service to our community.”
John Paul pays particular tribute to his staff, who went above and beyond the call of duty, like those in retail outlets right across the country, to ensure that deliveries were taken in, shelves stocked and customers served.
“My staff and myself were coming in at 6am to take in early deliveries, to get the store stocked up and then to serve and limit the amount of customers in the shop. It was a surreal time, but I was blessed with the team I have, who were flexible and adaptable, who put in extra shifts when needed.”
The silver lining
Some good things have emerged from the Covid months, however, chief among them a renewed appreciation for local retailers.
“As a local store, we have been busy during the pandemic,” John Paul notes of his own store’s experience of the pandemic.
“More people have been working at home and have come to the shop. I also think that people have realised the value of a good local shop, as shops like ours really stepped up and served their local communities over the last 18 months, with click-and-collect, home delivery etc.”
“Local matters,” states Vincent. “Being local and servicing your local community matters. There is certainly appreciation for local retailers and what
they have done but we need to build upon it. People have re-engaged with local businesses, not just in convenience retailing, but in other aspects. One of the aspects of so many people working from home was that they spent muchmore time in their locality, probably got to know their neighbours a lot more, and understand the importance of community, and of maintaining a safe and clean community. So I think there will be positives to come from this.”
The impact of Brexit
As if dealing with a worldwide pandemic wasn’t enough of a challenge, Ireland also had to come to terms with Brexit, with negotiations rumbling on until the 11th hour, and even though a deal was signed, there have been significant repercussions for the supply chain.
“In the UK in particular, and not just in Northern Ireland, there are still very serious structural difficulties throughout the supply chain that are affecting people,” says Vincent. “As a nation, we understood the import of planning far more than our neighbours and we did a huge amount of work. I know there have been difficulties and delays, and that some companies have chosen not to supply into the Irish market or the European market because it is proving too problematic for them. But by and large, I think we have done pretty well.”
However, the CEO feels that the legacy of Brexit will be with us for some time: “Structurally, there will be some difficulties and on a year-by-year and incremental basis, we will have to get used to these difficulties. Because we are working in an unusual fashion due to Covid, it’s hard to know sometimes when you have delays like those that were experienced by the meat industry if they are Brexit-related or Covid-related. Our agri-business hasn’t seen the full impact of Britain’s removal from the European Union yet and that will continue to have an effect on the whole of the business world
and rural Ireland as a result.”
Spar, Philipsburgh Avenue, Fairview, Dublin 3.
Challenges ahead
Aside from the twin issues of Covid and Brexit, which have rightly taken precedence over recent months, there are a host of other challenges facing store owners in Ireland, not least among them the high cost of doing business here.
Pre-pandemic, the issue of labour was a serious one as the Irish economy hit Celtic Tiger-esque levels of employment, making it extremely difficult for the service industry, including retailers, to attract and retain staff. Combined with an ever-increasing minimum wage and a tightening of margins, the cost of labour is proving to be the biggest cost challenge facing the trade.
“Finding staff and the cost of labour are going to be real problems for people who have rigid cost bases and models that
require substantial numbers of workers,” Vincent insists. “The convenience store model depends on considerable numbers of store workers per square metre. It’s not just that there will be progressive increases in the National Minimum Wage and the expected introduction of a new Irish living wage model, but there will also be additional costs that will come from the proposed introduction of auto enrolment insurance, which will over the course of time add a 6% additional cost onto an employer’s wage bill.”
Auto-enrolment is a scheme which automatically signs staff up to a pension programme, in addition to the State pension, for those who don’t already
contribute to a private pension, with employer and employee contributing equally to the fund. It will begin life as a 1% levy but will increase to 6% over a period of time, according to the CEO, who also points to the forthcoming legislation which will introduce 10 days per annum of statutory sick pay, to be phased in over a four-year period.
On the issue of sick pay, John Paul feels that ensuring all sick pay is certified is crucial to the working of the scheme. He also points out that the CSNA has partnered with a company called Spectrum Life to provide mental health and wellbeing supports for members and their staff nationwide. “It covers
everything from mental health to life coaching, counselling, nutrition advice,” John Paul notes, while also pointing out that BWG Foods brought a similar plan to market called the BWG Be Well programme, a digital health app for staff.
“This is an area that is important for staff and can also help retailers by reducing stress on staff and potentially reducing staff days missed,” John Paul
says. “If your staff are coming to work happy and healthy, hopefully they won’t miss as many days.”
However, the combination of all this new legislation - the National MinimumWage, the living wage, the auto enrolment pension and statutory sick pay – will place significant additional costs on employers who have a high reliance upon workforce numbers, according to Vincent,
who warns that some employers will be forced to reduce staff numbers: “Within a short space of time, you will find that a store owner who could previously earn a reasonable living will see their earnings reduced considerably. In some cases, in the models I have studied, without significant price increases, stores will be working on a break-even basis and nobody goes to work simply to break even. So we have to try to exert some control on labour costs, but that has to be done in a fashion that is fair to your staff.”
The maths are simple; if a store employs 10 staff with an average salary, including PRSI etc, of €25,000 per year, which is far and away the biggest single cost.
“As an expense item, your wage costs are the most important, and every percentage of that, up or down, makes a significant difference to your
annual costs,” Vincent reveals. “If I get a 1% cut in my insurance premium, it will make some difference, but if I get a 1% difference, up or down, in my wage bill, it is a significant amount.”
The CEO worries that the consumer desire to source goods as cheaply as possible will be “put to the test” when these new costs drive retail overheads
up: “Coming out of this pandemic with bruises and new business models, it is not going to be an easy time for people to be in business.”
“Rising labour costs are going to be a challenge,” John Paul admits. “There isn’t an unlimited pool of money to draw from to pay staff.”
Insurance reform
Both the National President and the CEO believe that there has been “significant progress” made on insurance reform.
“It appears that there is finally light at the end of the tunnel in terms of insurance. I’m cautiously optimistic, but the proof will be in the pudding when you open that renewal notice,” says John Paul.
“Bringing the costs of claims down is a massive help, because some of the awards have been way out of line with the rest of Europe.”
Vincent agrees: “This particular government grasps what the difficulties are and is making significant progress. But the devil is in the detail, so it will only be when we get our renewal notices that we can see if premiums are reducing. If insurance companies are being spared money because awards are going down, because there are fewer claims going in, and because the Personal Injuries Assessment Board is doing its job, we have an expectation that our premiums would go down. It is up to the State to ensure that the benefits do filter through in terms of reduced premiums for policy holders.”
Rates & Rents
The commercial rates waiver “has to continue while we are in this restricted business model”, the CEO believes, but he also argues that the rates valuation model needs reform.
“There is a substantial amount of business being done online, with huge sums being made by companies outside
the country who are not making any financial contribution to the country, as the bricks-and-mortar retailers are. I would call on the State to review the
entire valuation process and see if in this 21st century, the model that was born of the 19th century is fit for purpose,”
Vincent says. “
A lot of the assumptions that formed rateable valuation have disappeared with modern business practices. We really need to see if there is a fairer way of forwarding monies to the local authorities, who don’t seem to be accountable in how they spend that money. Considering how much the business community funds the local authorities throughout the country, perhaps businesses should have a greater say in how that money is spent.”
Rent too is an area that may prove problematic as businesses attempt to get back to some form of normal trading practices.
“There have been a lot of Government supports in terms of commercial rates and wage subsidies to help keep businesses afloat,” John Paul notes. “It
seems crazy that having kept all these businesses going, they are suddenly met with a huge bill for rent arrears. I would be hopeful that something can be done at a State level to support businesses or rent arrears could be the death knell for some businesses, which would be a huge shame when we are nearly out of the woods in terms of the pandemic.”
The CEO argues that “protecting a small business from eviction is equally as important from a social protection point of view as protecting a family from
being thrown out of their house. We live in a capitalist society, but it doesn’t mean that we have to have one born on
greed. There are responsibilities that go with being a landlord; it is not fair that you will continually increase rents, not taking cognisance of downturns. It is time that the State gives very serious consideration to removing what they see as the restrictions on their getting involved in the constitutional right to own property. They can manage to do it in the private rental sector, so why not in the commercial sector as well?”
Breakthrough on retail crime?
Crime against retailers and antisocial behaviour have been huge issues for retailers and their staff. The CSNA Crime Survey from late 2020 found that a massive 80% of the retailers reported that they or a member of their staff had experienced an incident involving aggressive, violent and threatening behaviour within the previous three months.
“The majority of people coming into the store are fine. But there is a percentage who cause issues,” John Paul admits. “Customers not wearing masks has become a big issue in recent months, and it is upsetting and uncomfortable for retailers and their staff. I know of one store where a customer told another shopper to wear a mask and it almost turned into a fist-fight. These things shouldn’t be happening. A little bit of calmness is needed.”
Shoplifting is a perpetual problem for most convenience store owners. John Paul cites the example of a recent case in his own shop, where the shoplifter was identified by CCTV and subsequently arrested and charged. The store owner had to take a day off work to attend the court hearing, along with two Gardaí, and just before the case was to be heart, the youth involved changed his plea from ‘not guilty’ to ‘guilty’.
“It’s very frustrating, because I wasn’t just at the loss of the items that were shoplifted, but I lost a day of work, and I brought another staff member in to
cover my absence for that day,” John Paul says. “Surely there has to be a better way to deal with this kind of crime because some retailers may decide not to bother reporting these crimes, as they end up losing a staff member for a whole day, which could be 10 times the value of the product which was stolen in the first place.”
That said, the CEO reveals that the Association is close to a “breakthrough” in potentially operating a shared information system amongst retailers, in a manner similar to a pilot project in Belfast, which has operated to considerable success.
“We have been dealing with the Gardaí, the PSNI and Dublin Town on the initiatives that have been successfully used in Belfast on issuing bans to people from shops on a civil basis, backed up by the police
services,” Vincent reveals.
“Initially, any plans to use CCTV images to identify and ban certain persons from shops were being thwarted by the Data Protection Commission, but we have found a way of working within the law but also meeting our needs. We are very excited about the possibility of finding a breakthrough on this.”
As a retailer, John Paul is delighted by the possibility of collaborating with other stores on trying to stamp out crime:
“It would be nice to be able to communicate with my fellow retailers for the greater good of the area, to swap information on repeat offenders. These
shoplifting cases can happen in seconds and you can find yourself up to €50 down in the blink of an eye.”
There has been a rise in recent years of individuals very obviously picking upproducts in store and either concealing them on their person or in bags etc; they subsequently return said item surreptitiously and then when they are challenged by a staff member, they become affronted and a defamation
charge follows swiftly after.
“It’s effectively a set-up,” says John Paul. “A lot of it comes down to training your staff not to jump the gun, but whenindividuals are deliberately trying to make it look like they are shoplifting so they are challenged, they often receive a payout and the retailer’s insurance premium rises as a result. As retailers, all we want to do is protect our business. We don’t want to be accusing people in the wrong.”
John Paul advises retailers to document every incident, to keep CCTV footage, witness statements, to ensure that the evidence is there to fight any
spurious claims: “You want to present your insurance company with as much evidence as possible to fight a fraudulent or exaggerated claim.”
Facing the future
Despite the challenges facing grocery retailers in the months ahead, both President and CEO are cautiously optimistic for the future, as society begins
to open up to pre-pandemic levels.
“There are some cost issues and other challenges coming down the road but I think the gains the local and neighbourhood shops have made with local consumers will be here to stay,” John Paul says. “I think insurance reform is going in the right direction. From a retail view, I am optimistic about the future, as shoppers realise the importance of their local store and I think that will help us in the long run in stores right across the country.”
Vincent believes that as a country and a society, “we will be learning the lessons from the pandemic for long periods of time. But the resilience of our sector is extraordinary. The value of the local shop has gone up in people’s estimation, and also the importance of our staff, whichcannot be taken for granted; we are very appreciative of the incredible work done by our staff to create and preserve safe environments for our customers.”
