The real reason for rip-off Ireland?

compsys

When people talk about 'rip-off' Ireland we always seem to blame the retailers for the inflated costs of buying everything in the Republic i.e. Tesco, Dunnes, Superquinn and the like. A lack of competition between shops and blatant profiteering on behalf of the retailers is usually the reason given by Irish consumers for the seemingly excessive prices charged to customers here. However, I wonder whether we've all missed the real reason for Ireland's high price level entirely. I say this because I increasingly believe that it's the wholesalers, and not necessarily the retailers at the further end of the supply chain, who are to blame for our 'rip-off' Republic.

A perfect example as to why I believe this is the case is the stories you hear about pubs, restaurants, and perhaps even the supermarkets themselves purchasing alcohol in northern shops, and thus bypassing Irish distributors down south, to then resell in their shops in the republic.

However, if the end retailer/seller (i.e. the pubs and shops) can buy the goods cheaper from a supermarket in the North than they even can from a wholesaler down south, you've got to wonder where the 'rip-off' really lies? Indeed, a recent report by Forfas and commissioned by Tánaiste and enterprise minister Mary Coughlan hinted at this. Also, I'm convinced this applies to other products and not just alcohol.

What are everyone's thoughts?

jor el

compsys wrote: »

A perfect example as to why I believe this is the case is the stories you hear about pubs, restaurants, and perhaps even the supermarkets themselves purchasing alcohol in northern shops, and thus bypassing Irish distributors down south, to then resell in their shops in the republic.

I don't believe this is happening, at least not widely anyway. If they are, then they're avoiding paying the duty, which is a serious criminal offense, and would be discovered in even the simplest audit. Any business doing this, is taking a great risk.

shellyboo

jor el wrote: »

I don't believe this is happening, at least not widely anyway.

Maybe not down here, but it's rampant in the northern counties. Walk into any border supermarket and say hello to your friendly local landlord stocking up on beers and spirits.

But again, you have to ask why are the wholesalers charging more? Because the distributors are charging more. And the distributors are charging more because the cost of distribution in Ireland is higher than in the UK. Higher wages, higher insurance, higher tax... etc etc etc. And they have to pay the manufacturers, who are also upping their prices... and on and on ad infinitum.

snubbleste

jor el wrote: »

I don't believe this is happening, at least not widely anyway. If they are, then they're avoiding paying the duty, which is a serious criminal offense, and would be discovered in even the simplest audit. Any business doing this, is taking a great risk.

Under EU rules, you can source your products anywhere in the EU. Alcohol and goods purchased in the UK is duty-paid.
There are shops in Ireland who use wholesale suppliers in the North to source their goods because it is significantly cheaper to do so.
I would encourage retailers to tap into the UK wholesale market in order to (try to) introduce competition in the wholesale market here.

ejmaztec

compsys wrote: »

When people talk about 'rip-off' Ireland we always seem to blame the retailers for the inflated costs of buying everything in the Republic i.e. Tesco, Dunnes, Superquinn and the like. A lack of competition between shops and blatant profiteering on behalf of the retailers is usually the reason given by Irish consumers for the seemingly excessive prices charged to customers here. However, I wonder whether we've all missed the real reason for Ireland's high price level entirely. I say this because I increasingly believe that it's the wholesalers, and not necessarily the retailers at the further end of the supply chain, who are to blame for our 'rip-off' Republic.

A perfect example as to why I believe this is the case is the stories you hear about pubs, restaurants, and perhaps even the supermarkets themselves purchasing alcohol in northern shops, and thus bypassing Irish distributors down south, to then resell in their shops in the republic.

However, if the end retailer/seller (i.e. the pubs and shops) can buy the goods cheaper from a supermarket in the North than they even can from a wholesaler down south, you've got to wonder where the 'rip-off' really lies? Indeed, a recent report by Forfas and commissioned by Tánaiste and enterprise minister Mary Coughlan hinted at this. Also, I'm convinced this applies to other products and not just alcohol.

What are everyone's thoughts?

I've commented on this a few times in recent weeks and would say that some people are definitely cleaning up before the goods get to the retailers. I think that the retail margins in Ireland are comparable to those in the UK, and have been pretty much for decades. The question is - who is getting the benefit before the goods reach the shops? The overseas suppliers could be over-charging the Irish importers, or the Irish importers could be over-charging the wholesalers.

All of the people in the chain should learn to negotiate better prices, or they are screwed as much as anyone else in the long run.

jor el

snubbleste wrote: »

Under EU rules, you can source your products anywhere in the EU. Alcohol and goods purchased in the UK is duty-paid.

At the UK rate, and for personal use, not for re-sale. Anything being re-sold here, has to have the Irish Duty rate paid.

Buying from whole-sale in the North, or from Britain or elsewhere, should be fine, as long as the proper duty us applied. The OP is talking about businesses buying alcohol from supermarkets in the North, and then selling that on their own shelves down here, which is illegal.

If businesses here are going into Dunnes or Tesco and buying 23 bottles of Bud for €17, then selling them individually for €4.50 each, there's nothing illegal, as the duty will have been paid. But, the Irish brewers and distributors, will not be too pleased if they find out what that pub/restaurant is doing, and could cut off supplies of other drinks.

old boy

i know of at least 10 pubs that do this, and they did not start last year either

snubbleste

Thanks for the clarification jor el

antoinolachtnai

Cutting off customers because they don't buy all their goods with you is probably illegal (section 5 of the Competition Act if I remember correctly).

olaola

There was Forfas study completed to find out the acutal costings difference between NI & ROI pricing - taking into account: Rents, wages etc. The difference is 6%

You cannot blame the wholesalers when shops get their goods manafactured at the same factory!!

ejmaztec

olaola wrote: »

There was Forfas study completed to find out the acutal costings difference between NI & ROI pricing - taking into account: Rents, wages etc. The difference is 6%

You cannot blame the wholesalers when shops get their goods manafactured at the same factory!!

Who do you think is to blame?

olaola

ejmaztec wrote: »

Who do you think is to blame?

The retailers. They are selling the same product in two different countries, when it has been proven that the difference should only amount to approx 6%!
It costs them the same amount to manafacture the item no matter where they are going to sell it.

techdiver

A combination of reasons as follows:

1) VAT in Ireland is 21.5% and only 15% in the UK.
2) Ireland has the highest minimum wage in the EU.
3) Insurance costs are higher in Ireland.
4) Rent and Rates are higher in Ireland.

and

5) Retailers are also taking a slice of the pie by taking the p**s. Especially UK retailers who trade here.

gerrycollins

i posted this comment elsewhere but it was largely ignored.

I was up north recently and I looked at some prices etc everyone else but the ones I was interested in was baby food.

why? well baby food in the republic has no VAT and I was naturally assuming the the north was the same. so with no VAT the comparison was closer

So I looked at 2 products because I know them personally and it was amazing and back up the OP comments.

I work for a large irish retailer and I have first hand knoweldge of profits made on whats sold here. One product SMA (Red Cap) progress 900 sells in dunnes,tesco etc for about €12 something. its northern counterpart equivalent €8 at the exchange rate of a few weeks ago.At the worst exchange rate of 71p to the euro its still around €9

now I know that the shops make very very little margin on the SMA because it is a foot driver but to be still €4 dearer than the north where is this €4 difference gone and dunnes for example buy direct from SMA.

The other product was a jar of a baby food which was cheaper in the north by a similar equivalent

olaola

http://www.forfas.ie/media/The%20Cost%20of%20Running%20Retail%20Operations%20in%20Ireland.pdf

"Our analysis highlights that higher operating costs in Ireland add approximately 5-6 percent to the total cost base of retailers in Dublin versus those operating in Belfast"

ejmaztec

techdiver wrote: »

A combination of reasons as follows:

1) VAT in Ireland is 21.5% and only 15% in the UK.
2) Ireland has the highest minimum wage in the EU.
3) Insurance costs are higher in Ireland.
4) Rent and Rates are higher in Ireland.

and

5) Retailers are also taking a slice of the pie by taking the p**s. Especially UK retailers who trade here.

The retail price levels in Ireland, making it the most profitable in Europe, were set long before any foreign retailer showed up here. The likes of Dunnes, Musgrave/Centra/SuperValu etc weren't operating as charitable foundations in the good old days, or they wouldn't have been so loaded. The foreigners all jumped on the band-wagon. The "rip-off" aspect in Ireland has been going on since the founding of the State, but only in recent times have people woken up to the situation.

Take a trip to your local wholesaler and find out how much the retailer has to pay them for goods.

antoinolachtnai

2 litres of milk - wholesale eur 1.07. (Before fall in value of sterling)
2 litrs of milk - retail eur 2.49

This is a big markup.

grahamo

I blame the Irish consumer. Its only the last few months their starting to kop on that they are being fleeced. An example was last year on Holiday in Spain. The bar in our complex (full of Irish holidaymakers) charged 3.50 a pint. The Complex next door (Mainly British Holidaymakers) Charged 2.60 a pint. The complex across the road (Mainly Spanish & German holidaymakers) was even cheaper at 2.40 a pint.
Most of the Irish stayed in their own complex and paid the higher prices. (I didn't).
If the Irish are willing to put up with being fleeced the wholesalers and retailers will duly oblige.
I would encourage people to shop around and force prices down.

andrewh5

I found out last week that rents on Grafton Street in Dublin are higher per metre squared than Oxford Street in London!!! That is just downright stupid & gombeebery of the highest order by the landlords. I suggest we start looking there for the causes of the price differentials.

ejmaztec

antoinolachtnai wrote: »

2 litres of milk - wholesale eur 1.07. (Before fall in value of sterling)
2 litrs of milk - retail eur 2.49

This is a big markup.

But some people still pay this whopping price, rather than hand over 1.65 for the milk next to it. Some people are led to believe that the cheap stuff is from the North, or is inferior in some way. I know that our local co-op provides super-markets with the same milk, but with different labels, depending on how much it will sell for in the shops.

gerrycollins

antoinolachtnai wrote: »

2 litres of milk - wholesale eur 1.07. (Before fall in value of sterling)
2 litrs of milk - retail eur 2.49

This is a big markup.

where are these prices from? pm me if you want im just curious

antoinolachtnai

Well, the 2.49 is from my local fresh convenience store.

The other one is the price that a company which buys a fair amount of milk (but not thousands of litres by any means) pays for milk delivered. I can't really say where, but the milk is from the North.

gerrycollins

antoinolachtnai wrote: »

Well, the 2.49 is from my local fresh convenience store.

The other one is the price that a company which buys a fair amount of milk (but not thousands of litres by any means) pays for milk delivered. I can't really say where, but the milk is from the North.

1.07 is probably right but its wholesale not delivered and packed?

as for the selling price thats is a bit much, i charge €1.65 and make 8c per unit sold.

the fridge electricity usage eats most of this

shellyboo

andrewh5 wrote: »

I found out last week that rents on Grafton Street in Dublin are higher per metre squared than Oxford Street in London!!! That is just downright stupid & gombeebery of the highest order by the landlords. I suggest we start looking there for the causes of the price differentials.

Property is more expensive here = higher mortgages = higher rent. Also, retail rents are falling in the UK, don't think that's the case here.

antoinolachtnai

gerrycollins wrote: »

1.07 is probably right but its wholesale not delivered and packed?

as for the selling price thats is a bit much, i charge €1.65 and make 8c per unit sold.

the fridge electricity usage eats most of this

Nope, that's delivered and packed.

compsys

techdiver wrote: »

A combination of reasons as follows:

1) VAT in Ireland is 21.5% and only 15% in the UK.
2) Ireland has the highest minimum wage in the EU.
3) Insurance costs are higher in Ireland.
4) Rent and Rates are higher in Ireland.

and

5) Retailers are also taking a slice of the pie by taking the p**s. Especially UK retailers who trade here.

1. Most food in Ireland has NO VAT so this doesn't apply to most of the products the superemarkets sell. Why do people keep forgetting this? Plus, up until last month, the UK VAT rate was 17.5% (and will return to that rate in 2010).
2. I'm almost certain Luxembourg has a higher rate and yet grocery prices there aren't as expensive as here...
3. True but they have been coming down greatly. Plus, some insurance down here, like motor insurance, is actually cheparer than the UK.
4. Again not always true. Depends on the location. Indeed, an Irish Times article in the commercial property section of the paper around one year ago about the then soon-to-open Victoria Square shopping complex in Belfast stated that once rents AND rates were taken into account, total rental costs in the shopping complex exceeded those in comparible places down south i.e. Dundrum town centre, Liffey Valley. They said the story was similar in most other centres in the North.

5. Completely agree.

compsys

olaola wrote: »

There was Forfas study completed to find out the acutal costings difference between NI & ROI pricing - taking into account: Rents, wages etc. The difference is 6%

You cannot blame the wholesalers when shops get their goods manafactured at the same factory!!

Yes, and the same report stated that:

the cost of buying goods for resale was by far the biggest cost faced by retailers in the Republic and accounted for 75 to 80 per cent of their total costs.

This is why I'm wondering if the wholesale market is where the real rip off is...

antoinolachtnai

Then why don't the retailers just source from the North? It's not that hard.

luckat

I thought there was no VAT on food in Ireland - was I wrong?

ejmaztec

antoinolachtnai wrote: »

Then why don't the retailers just source from the North? It's not that hard.

I know several retailers who do, but the majority don't drop their selling prices accordingly because they can get away with it.

windsurfer99ie

One poster blamed this on UK retailers, and I think that is a bit simplistic. Someone I know is a manager at Tesco, and he told me that when they entered the market here they looked at the competition and undercut it. Had the competition been cheaper, he reckons they would have come in at a lower level. I presume that he would justify their higher prices here by their higher costs. Personally, I stock up on coffee, kids cereals etc whenever I cross the border - the stuff I buy in Tesco's is typically half the price when I buy in the UK.

Ultimately us consumers are to blame - buy as much as you can in the UK and their prices here will fall.