Retail chains who are seeking to expand in Ireland realise that positioning is crucial to success, writes Gretchen Friemann

Home furnishing giant Dfs is expected to open its first Irish store at a leading retail park within the next 12 months.

The sofa retailer is among a number of UK chains looking to establish a foothold in the Irish market and cash in on the SSIA-fuelled consumer-spending boom.

According to property sources the pet shop chain, Pets at Home and the carpet retailer, Allied Carpets, are also scouting out possible store locations in the Republic.

But it is the arrival of Dfs that is likely to generate the greatest excitement among developers and investors of retail warehousing schemes.

The furniture company, which is controlled by the Tory peer Lord Kirkham, already operates a popular outlet in Belfast and is expected to roll-out stores in Cork, Galway, Limerick and Waterford following its launch in Dublin.

Dfs markets its products as stylish but affordable and its expansion into Ireland will shake up a sector that is largely dominated by Reids furniture.

In the UK, where Dfs operates a network of 71 stores, it claims to sell more sofas than arch rival Ikea and sources claim the company intends to take on the Swedish giant with a 2,601 sq m (28,000 sq ft) outlet in Dublin.

So far, however, the furniture chain has yet to find a suitable location, as competition for space in the capital's retail warehousing schemes remains intense despite the over-supply problems facing the sector.

Allied Carpets and Pets at Home, the UK's largest pet shop chain, are said to be facing similar difficulties. While these companies are eager to capitalise on Ireland's buoyant consumer economy they are also reluctant to shell out expansion costs on a secondary location.

Most market entrants want to avail of the high footfall of Dublin's top retail parks at Blanchardstown, Liffey Valley, Carrickmines and Airside.

But the projected influx of new tenants coincides with the aggressive expansion plans of established market players such as Halfords, Harvey Norman, Curry's and PC World.

Harvey Norman, the Australian behemoth, is opening six new stores this year and aims to roll-out a further seven within the next four years.

Although the retailer, which ranks as one of Australia's largest and wealthiest companies, is still regarded as small potatoes in Ireland, it is committing vast sums of cash to establishing the brand here.

Currently Harvey Norman trades from retail parks in Swords and Dundalk but has recently paid a premium for the former ESB outlets in Blanchardstown, Rathfarnham, Tralee and Mullingar.

The cut-price superstore, which sells everything from electrical goods to bedding and furniture, has also taken 3,716 sq m (40,000 sq ft) of space at Newhall retail park in Naas and is due to open a 4,180 sq m (45,000 sq ft) outlet within the next few months at the City East scheme in Limerick.

But after investing €10 million in its Irish launch three years ago, it's understood the Aussie retailer is still struggling to grow sales at its Dundalk outlet.

Property sources claim the town highlights the problems associated with the sector - namely an over supply of retail space in a relatively low population catchment area.

Dundalk has two large warehousing schemes catering to around 30,000 people. But as one industry expert pointed out, those consumers can compare prices on similar products across the border in Newry.

It's this pricing squeeze that is finally beginning to take the gloss off the retail warehousing sector.

A recent report from Davy stockbrokers showed that despite record house completions, the main DIY operators experienced sluggish sales growth for 2005 with Grafton, the parent company of Woodies and Atlantic Homecare, posting a 4 per cent slide in like-for-like sales during this period.

B&Q Ireland meanwhile reported a 21 per cent drop in profits to the end of January 2005 although the chain claims this was partly due to expansion costs.

But these are tough times for the UK DIY retailers. Kingfisher, B&Q's parent firm, is weathering a fall in like-for-like sales across the group and recently described Britain's home improvement market as "depressed" and "price competitive".

While conditions in Ireland are markedly different from the UK, property sources acknowledge that the unprecedented expansion of the retail warehousing sector is leading to market saturation for the DIY operators in certain parts of the country.

The Davy's report showed that DIY superstore retail space has doubled in the past three years to 22,296 sq m ( 2.4 million sq ft).

However property experts are concerned the tightening trading conditions will encourage the DIY retailers to rein in their expansion plans.

There are already concerns over Homebase's rollout strategy after the company pulled out of a couple of developments that it had previously expressed an interest in.

The anticipated arrival of new market players may give a boost to some warehousing schemes but property experts are repeating their long-standing warnings that poorly located developments are in for rocky times ahead.