Big ticket items are top of the wish-list, writes Arthur Beesley, Senior Business Correspondent

Retail spending is set to speed ahead in 2006 as consumers take their long-awaited first cut from the multibillion-euro special savings incentive scheme. Such growth will be crucial to the overall economic picture.

Yet as store-owners steel themselves for another big year, they know that shoppers are becoming more and more aware of their rights. The result is intensive competition on the high street and in shopping centres, as retailers fight for a bigger share of the action.

The big retail story this year was Senator Feargal Quinn's €450 million sale of Superquinn to the Select Retail Holdings group, but official filings show that retailers across the board are rapidly growing their profits as the spending boom continues.

After a long period of complacency about the "rip-off" culture, the value-for-money agenda came to the fore in 2005 in the form of a populist TV show fronted by businessman Eddie Hobbs, who styles himself as the arch consumer champion.

In addition, a damning report by the Consumer Strategy Group concluded that consumers were not getting a fair deal. The group found that Ireland ranked highest in the euro zone for many consumer prices, "but does not rank highest" for many business costs. "The price gap - which is particularly noticeable in the case of internationally traded products - is not easy to justify," it said.

Such findings were instrumental in the Government decision - after years of dithering - to abolish the Groceries Order, which prohibits the below-cost selling of packaged goods.

While symbol group retailers such as Musgraves and Spar-owner BWG group fought a tough but unsuccessful battle to retain the order, it remains to be seen whether consumers will reap the benefits of its removal in the form of deep price cuts for basic goods.

Despite the perceived strength of the symbol players, the latest research from TNS-Worldpanel Ireland indicates that the big multiple chains such as Tesco and Dunnes have taken a greater share of the €8 billion grocery market this year.

Their share rose to 83.8 per cent in the year to December from 82.2 per cent last year. The symbol groups' share fell to 6.7 per cent in the same period from 7.4 per cent.

TNS attributes this performance by the multiples to longer opening hours and new stores. Its figures also imply high concentration in the Irish market with the top three players - Tesco, Dunnes Stores and Musgrave-owned SuperValu controlling 68.2 per cent of the market.

Separate TNS figures show that Tesco grew its market share to 25.9 per cent in the year to November from 25.4 per cent a year earlier while Dunnes' share rose to 22.7 per cent from 22.3 per cent. These figures are significant because every 0.1 percentage point rise in market share implies an annual increase in sales of €8 million while a similar loss of market share implies a loss of €8 million in sales.

The big loser in these figures was Superquinn, whose share fell to 8.2 per cent from 8.5 per cent. After years of stagnation in Superquinn, Select Retail Holdings plans a €63 million investment to revamp its 21 stores, assuming a pilot project works as planned at its Blanchardstown outlet in west Dublin.

The chain's new chairman, Simon Burke, has made a point of pitching Superquinn at the higher end of the grocery market.

At the lower end of the scale, TNS figures show that the German discounters Lidl and Aldi increased their total share of the market to 5.5 per cent in the year to November from 5.2 per cent a year earlier.

If the growth of the discounters since their entry just six years ago suggests a strong appetite for good value in the market, it is still unclear at this point whether a new spirit of consumer resistance will kill off passive acceptance of profiteering.

Consumers can no longer claim ignorance of their rights. But for all their complaints about poor value, they spent money with aplomb in 2005.

"I think the main economic story in Ireland this year has been the strength of consumer spending. It has been the main driver of the economy this year and it looks set to be in the next two years, at least," says Philip O'Sullivan, economist with Goodbody Stockbrokers.

"The economy is expected to accelerate over the next two years, driven to a large extent by this consumer boom. It is this positive outlook that has helped to lift consumer confidence. That has an obvious knock-on effect on consumer spending."

None of that would be possible without high employment and rising wages, yet O'Sullivan says there is ample scope for further growth as the Special Savings Incentive Account (SSIA) scheme matures early next summer. "One in three adults has an SSIA and the scale of the funds is the same as 10 per cent of the economy. We estimate that around €15 billion will be released between May 2006 and April 2007."

Surveys suggest that consumers will spend about 40 per cent of their money on big-ticket purchases such as cars and once-off home improvement items such as kitchens, bathrooms and conservatories. O'Sullivan says such sectors are well-placed given that the average SSIA payout will be in the order of €14,000 per account.

The home improvers were out in force this year. While Bank of Ireland said in a recent report that 2005 would be the best year since 2000 for retailers generally, it made a point of highlighting the sector's strong performance.

"Hardware remains the star performer reflecting the new found Irish love affair with everything to do with the house or garden... Spending on clothing and footwear is also growing at a double digit pace," Bank of Ireland said.

The hardware sector saw significant consolidation when Woodies owner Grafton bought the Atlantic Homecare chain as part of its €338 million takeover of the Heiton group.

Grafton has continued on the acquisition trail since that deal, as family-owned and other independent hardware groups cash in on high values in the sector. British-owned groups B&Q and Homebase House and Garden are also extending their reach.

The annual sales of big Irish home appliance sellers such as Power City (€88.83 million) and D.I.D. (€65.76 million) are now eclipsed by the British-listed DSG group.

Its brands - Dixon's, Curry's and PC World - had an Irish turnover of €117.59 million, excluding VAT, in the year to April. The group has 21 stores, six of which opened this year.

DSG Retail Ireland general manager Declan Ronayne says like-for-like sales were up 10 per cent in six months to November 12th, while all sales were up 22 per cent.

"The challenge of an expanding business is to get the right people to run stores because there's a lot of retail development out there. The second biggest challenge we have is property costs. Lots of developers out there have a relatively optimistic view of the worth of their properties."

Ronayne also has difficulties with the EU Waste Electronic and Electrical Equipment directive, which requires electrical retailers to charge an additional amount to fund the future recycling of the product. "I don't need more of that. It's a very over-regulated directive from a business point of view. Any level of over-regulation is going to increase business costs and ultimately the cost to the consumer."

For the fashion trade, 2005 was marked by rapid growth of international mass market groups that carved out a significant share of the Irish market.

These include British magnate Philip Green, whose Arcadia chain of 90 Irish stores has annual sales of more than €76 million. The Mosaic chain, embracing ladies fashion brands Oasis, Coast, Whistles and Karen Millen, reported annual sales of more than €30 million.

Newer entrants include Spanish group Zara, which notched up annual sales of almost €17 million at its first Irish store in Henry Street, Dublin, before a big expansion in 2005. Swedish chain H&M entered the Irish market this year with a store at Dundum Town Centre which recorded sales of €4.5 million in its first three months of business.

In the department store business, Brown Thomas marched ahead with record pretax profits of €24.19 million in the year to January 2005 on the back of a 12.5 per cent rise in sales to €211.99 million. At the same time, Arnotts is spending up to € 100 million on the purchase of retail units and other buildings in the immediate vicinity of its landmark outlet on Henry Street.

The company reported pretax losses of €4.6 million, including €9 million for exceptionals and a pensions write-off. Excluding these items, the accounts showed pretax profits of €4.4 million on sales of €153.3 million.

The other Dublin department store icon, Clery's, went into the red in 2004 with pretax losses of €742,875 following a marginal decline in sales to €35.3 million. While considerable speculation surrounds the future prospects of this business, Clery's owners and its board have refused to engage in public debate. As retailers lick their lips at the prospects of another big year, car dealerships may yet find themselves to be the biggest beneficiaries of all in the SSIA bonanza.

But while the motor business always does well in a growing economy, the sector may yet encounter unwelcome publicity in the coming year. A Competition Authority file on alleged price-fixing by certain Ford dealers is known to be with the Director of Public Prosecutions.