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Retail News Interview: Government must engage with retailers on costs

Posted on: 15 Feb 2024

The overarching issue facing retailers, and indeed every other enterprise in Ireland in 2024, is quite simply the cost of doing business, according to Vincent Jennings, CEO of the Convenience Stores & Newsagents Association (CSNA). 

"Until such time as we as a society and the Government in particular take a realistic assessment and pause to review the costs that are affecting businesses and consumers, that will remain the key issue for retailers," Jennings insists. "We need to look at the costs that the Government themselves, via their various Departments, the Quangos, the semi-state bodies, all of the entire regime, have placed on small industry, and the complexity of adhering to not only European legislation, but Irish legislation. Until we actually get a handle on that and see how necessary it is or consider how there may be alternative ways of doing things, we're going to have customers who are paying more for the products that we offer in our stores and that's not a good recipe."


One of the major problems is scattergun thinking at a macro or Government level, according to the CSNA CEO, who is frustrated at not having his members' concerns taken into account.

"There is zero joined-up thinking", he insists. "It is phenomenal that people get to high ranks in Goverment departments that haven't actually given thought to 'what happens if' or 'what happens when'. You would really despair when not only do they not listen, but they're not prepared to countenance the very clear advice that's coming to them from professionals in the field .Yes, we do have a stake in the game, but there's no doubt whatsoever that both the employers' representatives and employees' representatives can tell them very clearly what happens when X, Y and Z are joined together and yet they chose to ignore us and to either sacrifice things on the altar of populism, or the feeling that somehow it is the right thing to do to give away somebody else's money."

Jennings is referring to the raft of legislation currently before small businesses, with a similar or greater burden coming into view on the road ahead over the next two years. This is particularly the case in relation to labour costs, where increases in the National Minimum Wage and the gradual implementation of a Living Wage combine with the new mandatory sick pay scheme and auto-enrolment into pension plans to ramp up employment costs exponentially. Then there are the costs of an additional statutory public holiday in the form of St Brigid's Day, additional leave entitlements for parental leave, domestic violence leave etc., which are all worthy endeavours in their own right, but together they add up to a perfect storm for retailers. 


The disproportionate effect on small retailers

One of the main issues that the CSNA, and indeed other retail representative groups, have with these legislative changes is that, given the labour-dependent nature of the business, they disproportionately affect small retailers. 

"How does somebody in the service industry manage without a member of staff?" Jennings wonders. "The truth is that hey have to put somebody else in their place. In an office, for example, if someone doesn't turn in, it's not going to be the end of the world; the work will get done next week. That's not the case for a service business; there's no point telling Mrs Jones to come back to the shop when it is less busy at the weekend."

Jennings stresses that Ireland's convenience stores are "the pride of Europe, if not the world", regularly beating off all comers to lift international prizes like the NACS Convenience Retailing Award. He describes increased costs brought about by the raft of legislative changes as "soul-destroying for people who have put their entire savings, their livelihood, their pensions and everything into these businesses and are really proud of what they've got and the team around them."

The increase in the National Minimum Wage doesn't just affect the lowest paid workers, Jennings stresses, with any rates within €3 of that wage now "fair game" for increase: "If it was limited solely to those people who are at the earnings floor, that would be one thing, but we all know that increases in minimum wage and increases that are destined to go towards the Living Wage, whether that is in two or three years' time, will all have a ripple effect or a tsunami effect for other wages. This was already evident to people when they were doing up their payrolls in the first couple of weeks in January when they compared it to the previous payroll and saw the phenomenally large increase."

In order to cope with these increased costs, most small business owners will try to make savings elsewhere, Jennings warns, "but in doing so, you're either dropping your standards, or you are making less of an offering to your customers. And that's not what we want to do."

This is even more frustrating when viewed against the "profligacy" within our state spending: "You would tear your hair out at the absolute waste. We have managed somehow or other to expend the bones of an additional billion euro on the National Children's Hospital and nobody's been called to account on that. All of these things, they are so frustrating when we have a public service who earn 24.7% more than the private sector."

The CSNA repeatedly point out that the figure for the Living Wage is achieved by calculating 60% of the median wage, and argue that this figure should not include public service workers or those employed in multinational companies, as both are artificially high and in fact "skew the real median wage". 

"If there is to be acceptance that the Living Wage is the way to go and it is going to be there for all time, getting the calculations correct is really important", according to Jennings. 

Rising costs = store closures

Ultimately, if business costs continue to rise exponentially, the end result will be store closures. "There's no doubt about it, whatsoever", he says. "People are really at the end of their tether. Retailers are naturally optimistic and they're trying to put the best foot forward, but the amount of additional hours they are having to put in, because they can't afford the additional staffing costs, are extraordinary. Many of them are talking about getting out. You will have a diminished number of outlets. The bigger guys, the multiples, will benefit from this; society won't benefit from it."

Jennings insists, however, that this is a problem that can be fixed. "There can be a reset. Fundamentally and structurally, our business models and the way that we bring product to market are working. What is skewing the pitch is the continued interference by the State in our business."

Playing devil's advocate, the Government would probably argue that they are merely delivering on what they promised in the Programme for Government, which was to protect and strengthen workers' right and rates of pay. 

"The Programme for Government was set up before the Ukrainian war, before Covid, so you cannot be so hidebound in saying that 'This is our programme and we're not moving from it.' There has to be some renegotiation", he insists. "When you have these unbelievably chaotic situations, you can't pretend that it is business as normal. It's not. The Government surely have to reprioritise certain things."

If small businesses begin to close, the knock-on effect for the communities in which they operate is massive. "It is really time that the State actually presses pause on this", he stresses. "We need to consult with all parties, to join-up our thinking and come up with something that at least gives a fighting chance to small businesses because all they're doing otherwise is clearing the way for a clear-out."

Retailers, he stresses, need "some level of cushion" against these cost increases: "In the service industry, our payroll costs are our single biggest cost. There is nothing comes near. Insurance is high, rates are high but in our business, labour represents at least 54% and as much as 70% of our costs. So any changes to labour costs disproportionately affects our bottom line. Any reductions in other costs are welcome but the truth of the matter is that increasing labout costs is the quickest way to ensure that we're out of business."

When the Low Pay Commission made their recommendation to Government to increase the National Minimum Wage by 12.4% to 12.70 per hour in mid-2023, Government Ministers and TDs insisted that business owners, particularly small business owners, would be helped, "that the cost would be mitigated", Jennings states. Such help did not materialise. Politicians, he contends, were "talking out of the side of their mouth."

"I challenged the Tanaiste, I challenged the Minister for State, I challenged the Minister of Enterprise to point to one single item in the Budget in which retailers and only retailers or service providers are only service providers are the beneficiary", he says. 

Jennings describes the "much-vaunted 250 million rates rebates" as a "drop in the ocean to our costs and a really unfair way of transferring a benefit, because not everybody is being treated in the same fashion. These are labour-based increases, so you should be getting any grants or allowances against your additional labour costs."

The fluctuating VAT rate is another issue. "I think we would all benefit from bringing the VAT rate on food down from 13.5% to 9% and giving a saving to people, because deli is an important part of our business and I think we could guarantee that prices would drop accordingly."

Energy costs

While the record energy costs of 2022-2023 have thankfully passed, the CSNA chief believes that "we may never see the rates that we had pre-Ukrainian war". He accuses some of our energy providers of "gouging, having made windfalls on the backs of consumers and businesses in Ireland."

Indeed, the CSNA Chief Executive believes that the Government should look at "redistributing profits that are earned unfairly, because if we are looking for funds to assist business and consumers, you couldn't expect the Government to do it; it would have to come from the energy companies." He insists that the precedent for such a move exists, as "we've had emergency taxes levied upon the insurance industry in the past."

Deposit Return Scheme

February 1 saw the introduction of Ireland's Deposit Return Scheme, which herald a sea-change in the way plastic bottles and cans are treated in this country. "From a societal and environmental point of view, you cannot argue against it", Jennings notes. "Unlike other things that Ireland has done on its own and maybe done foolishly, this is replicating what is happening in 40 other jurisdictions around the world." He estimates that just over half of all CSNA members have installed a Reverse Vending Machine (RVM) on their premises. For those who haven't invested in an RVM, it's mainly down to the fact that they are "horrendously expensive. When these machines were made available in Hungary, Scotland, Estonia etc, they were not the same cost as they are here. 

"My concern will be that some people may think that the small shopkeeper wouldn't accept returns but there are a myriad of reasons why they can't do it", he adds, "including the financial one, the ongoing risk, and asking staff members to handle plastic and cans that could potentially be a source of Wiel's Disease. These are very valid reasons for a person not to want this product lying around in their stores."

With any scheme of this nature, Jennings believes "there's the known, the unknown and the unthought of, but I think the structure of the DRS has been pretty well designed."

There will be teething problems, though, as would be expected. He cites the example of retailers who provide a home delivery service to their customers and "the absence of a methodology by which those products can be taken back, particularly if the reason for home delivery isn't just convenience but because someone is bed-bound or house-bound.

"It has been accepted by the Deprtment and by Re-turn that you cannot expect returned bottles to be put into a container or a vehicle while there is food inside that vehicle, like a delivery van", he argues. "If you accept that principle, then there is no way in the wide world that you could expect that there should be a manual return system. If you can't expect the delivery van driver to know whether or not a bottle or can is in or out of scope- whether it comes from Northern Ireand, for example - why should I expect my staff member in-store to do the same just because my store is greater than 250 square metres?"

He believers the organisers of the DRS should have listened to the CSNA's suggestion that returned bottles and cans could be scanned in-store "to ensure you are weeding out any attempted fraudulent use".

He also worries about the potential discrepancies between a shop's manual returns and the amount they receive from Re-turn, potentially due to issues such as damaged bottles or a bar-code not reading properly, when the retailer has already paid out the money to their customers: "None of that would happen with a Reverse Vending Machine and very little would happen if we had a hand-held machine".



The thorny issue of insurance is one that has been on the radar of shop owners for years now, with very little progress, despite the fact that the number of personal injury claims remains far lower than pre-pandemic, with the average value of an injury compensation award down by more than one third, according to the Injuries Resolution Board (IRB). 

"There have been no new entrants so it's just not a competitive market", Jennings points out. "In fairness to the State and to Leo Varadkar, when he was Minister for Enterprise, he prioritised insurance and they made legislative changes to improve the situation. Those things are now in place but it is almost like turning an oil tanker around because it is so slow. I think Simon Coveney now needs to actually ensure that the good work that was done by Leo Varadkar and the Cost of Insurance Group within the cabinet is dusted off and given additional impetus because the cost of insurance remains far too high. It's up to the Irish insurance industry as well to step up and actually acknowledge that these real savings that we put in place are reflected in terms of people's premia."

Crime & antisocial behaviour

Another topic which has remained to the forefront is the increasing levels of crime and antisocial behaviour against store owners and their employees. Jennings is sickened at the "level of racist and misogynistic abuse that is being levelled at staff members."

He points to "significant societal changes post-pandemic, allied to the growth of social media and the anonymity that goes with it", noting how "the willingness of people to be abusive online is now morphing its way into everyday life: I am embarrassed that this is happening in my country." He feels that it is incumbent on everyone in Irish society to call out this abhorrent behaviour: "I would love customers to call out somebody who was abusing a shop worker and tell them it is not acceptable. And maybe when we as customers realise that someone serving us is from a different country, we can go out of our way to thank them, as some kind of balancing against this horrible abuse, to make them feel that not every Irish person is nasty."

Retailers have consistently called for more Gardai on the streets to combat this kind of anti-social behaviour, with the clarion calls getting louder following the rioting in the capital's streets in November 2023. There were more Gardai on the beat in the wake of the rioting but recent weeks have seen reports that these numbers are being reduced. 

"The €10 million earmarked to guard against violent crime in Dublin has been wiped out", Jennings sighs. "The additional Gardai on the street is not happening as of next week (at the time of writing)."

Increased numbers of recruits in Templemore will eventually help "as long as they're on the streets and not inside in public order vehicles or Garda cars. They have to be in the communities, in the suburbs. They have to get known and be known and they have to let people know that they're never far away."

Reporting of shoplifting

Shoplifting is a constant thorn in retailers' sides, and one which the CSNA chief had been confident would improve, thanks to an identification programme for repeat offenders similar to that which runs in Belfast. However, concerns around GDPR guidelines mean that such a scheme has been put very much on the back burner, much to Jennings' chagrin. 

"There are elements of what we were suggesting finding their way through the Oireachtas as part of the Justice Bill, relating to body cams for example. But in the main, GDPR should be used for the benefit of society, not as something that people can hide behind", he sighs. 

Lenient sentencing and lack of deterrents have made some shopkeepers reluctant to even report shoplifting, but the CSNA Chief believes that we must report every single incident.

"I know that it might seem frustrating and you might believe that you'd be better off doing something else, but until there are statistics that can actually show how much shoplifting is going on, people and politicians won't realise how big an issue this is. In some stores, they could have five or six incidents every day, along with other public order instances and abusive behaviour; it is soul destroying. But every time something happens, you should make the 999 call because the only way of eventually getting a service is by ensuring that they're aware of the problem. If we're paying Gardai to look after us, then we've got to ensure that we give them the tools to do their job."

The future

Looking forward, Jennings believes that if the Government can help beleaguered small retailers to cope with the additional costs of complying with the raft of new legislation, particularly that related to labour costs, then his members could continue to thrive and provide welcome employment throughout the country. While contending that an economy at full employment brings certain challengs for employers ("Retaining staff is a problem, particularly for those in rural Ireland, where the pool is very small."), it also means that most consumers have disposable income in their pockets and so retailers will continue to provide them with an ever-expanding range of products. "I think it would be a very different society if we had, God forbid, 18-20% unemployment and people worrying about their future", he concludes. "But we have full employment and as retailers, we're great at being able to give people what they want, when they want it, and I'm sure that each and every CSNA member will continue to do that in 2024."