Retail lurched in 2021 from winter lockdown to summer boom

As 2021 drew to a close, a large part of the retail sector found themselves better positioned than 12 months previously. As last January dawned, grocers were counting the spoils of record Christmas revenues. But so-called “non-essential” retailers (most shops apart from food stores, chemists and those selling household and work items) were forced into full lockdown at 6pm on New Year’s Eve.

It would last the first 4½ months of 2021: part of the longest economic shutdown to combat Covid-19 anywhere in Europe. Things could hardly have been worse as shops, unable to conclude rent deals with their landlords, clocked up massive bills, with only State supports to keep them afloat.

Non-essential shops finally reopened and the sector emerged blinking into the sunlight on May 17th with a little trepidation but plenty of hope that, in a vaccinated world, the worst might be behind it. Consumer confidence rebounded quickly and pent-up demand ensured a solid second half of the year for many non-essential retailers.

By mid-summer, Central Statistic Office figures showed monthly retail sales were up 2 per cent by value on the previous year, excluding car sales. In July, the State's VAT returns were more than 16 per cent ahead of what had been expected, as consumers experienced a temporary feel-good effect from the vaccines and a glorious heatwave .

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Meanwhile, from early summer, grocers slowly glided downwards from the bonanza turnover levels of lockdown towards more normal trading as the hospitality sector reopened. The grocery sector’s collective revenues were on target to decline by a couple of percentage points, say sources. Still, they will be nearly 10 per cent up on the pre-Covid trading of 2019.

Dark clouds

But as the year ends, the dark clouds of hard anti-virus restrictions are again gathering over the economy. Omicron-fighting lockdowns, including retail closures, are back in vogue in some European countries such as the Netherlands. If Ireland goes the same way and retail is affected – at the time of writing it seems unlikely but there is no certainty as to what might happen – grocers will see sales spike again while the rest suffer the ill effects of closure. Retailers could get stuck in a loop.

"This December, it feels like we have come full circle," says Duncan Graham, the chief executive of industry representative group, Retail Excellence, which represents more than 2,000 store owners.

“You could say 2021 was a game of two halves. We had the lockdown. But online sales remained strong all the way through. Retailers were really delighted to get open again in May, however.

“Going into the summer and the third quarter of the year, there were a lot of positives, especially for retailers that could benefit as staycationers spent money at home. Shops in the main tourist spots did really well.”

Christmas sales have been strong and are well ahead of 2019, according to a bulletin that Retail Excellence recently sent to its members. The non-grocery sector is expecting sales of about €5.4 billion for the seasonal period. Store sales are marginally down on 2020.

The main “downside”, according to Graham, is the persistent decline in retail footfall in major city centres, especially Dublin, as a result of work-from-home orders and a lack of international visitors. The fall-off is estimated at up to 30 per cent in the capital.

“Shoppers are not coming into Dublin city like they are in shopping centres,” he says. “Reviving city centre retail will be the big challenge for 2022.”

Black Friday in November provided a further boost to online as well as store sales. Figures from digital payments platform Revolut, however, suggest that two-thirds of the online sales among its 1.5 million Irish users went outside the country to foreign-owned websites, such as Amazon.

Stock shortages have dogged parts of the retail sector all year. In particular, the technology and IT section of the market has suffered from a lack of supply due to a global shortage of computer chips. Retail Excellence says it has dampened Christmas sales of devices such as iPads.

Inflation in the economy is now above 5 per cent and Graham says he expects more price rises at the tills in 2022. Anything that is imported from afar, he says, such as retail stock from China and especially bulky items such as furniture, is particularly susceptible as shipping costs soar. He says some furniture retailers are being quoted prices by suppliers that are 50 per cent higher for spring 2022 compared with the same period in 2021.

Another major challenge facing the retail sector is a labour shortage. Thousands of migrant workers left the State during the long lockdown earlier last year. Graham hopes it will “ease a little” in 2022 but he also acknowledges that the industry has to “sell itself” to workers.

Further departures

As 2021 turns to 2022, the Brown Thomas and Arnotts department stores have been bought by a Thai/Austrian consortium, as part of an estimated £4 billion (€4.7 billion) deal for their owner, the Selfridges group. The Irish stores may yet fall under the influence of Vittorio Radice, a legendary Italian retailer who is also a director of the Central Group that is in the process of buying Selfridges.

While more investment from new owners may be on the cards for Arnotts, the former Debenhams department store across the other side of Dublin's Henry Street still lies empty following its closure in 2020. It may well be broken into smaller units, say property sources. There were also further departures of British retailers from the Irish market. Carphone Warehouse announced in April its intention to shutter its 80 Irish outlets.

Forecourts retailer Circle K announced in September it was acquiring 10 non-fuel Londis stores mostly in the Dublin area, the group's first foray into high-street convenience retailing in Ireland.

In the supermarket sector, Dunnes Stores started the frenetic year with the largest market share, marginally ahead of SuperValu and Tesco which, between them, controlled more than two-thirds of the market. Aldi and Lidl had about 23 per cent between them. During lockdown, SuperValu performed best and by late summer it was more than 1.3 percentage points ahead of Tesco and 1.7 points ahead of Dunnes, according to Kantar figures. But Dunnes had roared backed into the lead by year end.

“There have been no surprises with Christmas trade yet this year but we are seeing slightly stronger alcohol sales as customers are stocking up ahead of the introduction of minimum unit pricing in the new year,” according to Lidl Ireland’s chief executive JP Scally.

The re-emergence of restrictions on hospitality is likely to push the grocery sector back into growth in early 2022 after sales had settled down again following the last major economic reopening in summer. Scally predicts that healthy eating trends will be prominent in the Irish market over the coming year.