Why is shopping so much more expensive in Ireland than it is in the United Kingdom?
Mark Paul, Business Affairs Correspondent at the Irish Times, joined Mandy Johnston for Taking Stock to explain why goods sold in Irish stores often cost more than when they’re sold in British shops.
For example, German supermarket chain Aldi has stores in both Britain and Ireland; the company’s accounts show that in 2020 Aldi’s profits rose by 46% - likely due to so many people eating at home instead of in restaurants and cafes. However, its Irish outlets are 70% more profitable than their British counterparts.
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Ireland is often nicknamed the ‘Treasure Island’ in international business circles and Mr Paul says there are a number of reasons for the disparity:
“The Irish profit margin [of Aldi] is 3.6%... but the profit margin in the UK is only 2.1%. Now these German multiples, like Aldi and Lidl, they operate on really wafer thin margins.
“The reason he [Aldi’s Managing Director Niall O’Connor] said that the Irish operation was so much more profitable as a percentage of sales was for two reasons.
“Number one, he [Niall O’Connor] said the UK is more competitive, it’s a much bigger market with much bigger players and competition is much more aggressive and fierce over there. So that has an impact on prices.
“And the other reason that he gave, is that the Irish operation because it’s so inextricably bound up with the British operation, they sort of piggy back on it. So sort of come in on its coattails with some of their costs.
“So for example, their app, their technology stuff is designed in the UK by the UK’s technology team. There’s no reason in the world, he says, for them to have two big IT teams. So they piggy back on stuff like that. So they can keep their costs lower by basically using some of their functions in the UK.”
Mr Paul also says that other factors could include a willingness by Irish consumers to buy more high quality brands:
“In recent years in particular, they [Irish consumers] have shown in the grocery sector a real willingness to spend on premium products.
“So I’d imagine it’s a little bit of all those factors mashed in together.”
Main image: A woman takes a trolley out for the shop. Photo: Georg Wenzel/dpa-Zentralbild/ZB