Tuesday 5 May 2009

Tesco Ireland launches a cross-border retail price war…

Tesco is battling against the renewed phenomenon of cross-border shopping by opening what could amount to the biggest shake-up ever in the retail grocery sector in Ireland. It hopes to stem some of the flow of southern shoppers travelling across the border to spend €550m a year on groceries in the north. They closed 11 border area shops and will open them today showing price reductions of possibly up to 20%, and plans to eventually extend the initiative to the rest of Ireland…
Think of the complications involved:
- VAT: Ireland 21.5%, UK 15%
- Euro/£ Exchange rate: €1=£0.89, possibly moving to parity as recession impacts UK economy
- Case-price variation Ireland vs UK
- Cost-to-serve greater in Ireland than UK (currently, subject to Irish Govt. investigation)
- Cost-of-production higher in Ireland than UK (scale, i.e. population differences 1:15 )
Etc, etc
Unlikely that Tesco will want to absorb these differences without help from suppliers in the medium and longer term..
In other words, time for international suppliers to harmonise prices and terms UK & Ireland?
Pro-active suppliers will also anticipate possible application to other border-areas where shelf-price differentials stimulate cross-border shopping…everywhere..

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