February 17, 2011
By Staff Reporter
In a statement released on Tuesday, the supermarket giant said prices on 12,500 goods stocked in the stores had fallen by an average of 22 percent, which it claims brings the price differential with supermarkets in the North to its lowest level since 1979.
Tesco has seen a significant proportion of its customers travel north for their shopping, with its stores in border counties particularly hard hit. The main reason for the cross border shopping rush has been the fall in the value of sterling against the euro.
As it does not have a strong presence in the main border towns in the North, this shift in shopper preference has seen Tesco lose sales to other retailers on the northern side.
Tuesday’s price cuts follow a decision by Tesco to centralize buying for its Irish outlets through its UK parent to better leverage its purchasing power.
The opening of a new distribution center outside Dublin has allowed the retailer to make this change.
A spokesman said the price reductions were a combination of efficiencies from centralized buying, the retailer taking a lower profit margin and “some contribution from our suppliers.”
The British retailer has refused to reveal its profit margin for its 116 stores in the Republic and says the price differential between its outlets in the North and Republic was due to the higher operating costs in the Republic.
The stores with the revised pricing include those at Bailieborough, Ballinamore, Cavan, Carrick-on-Shannon, both stores in Dundalk and in Drogheda, Letterkenny, Monaghan and Sligo.
Tesco said its new pricing policy was a structural change not a promotional one. The policy will be introduced to its remaining Irish outlets over time.
Last Saturday, Tesco shut 11 outlets in southern border counties worst affected by the flow of shoppers to the North.
Announcing the reopening of the stores in Tesco’s Ireland chief executive Tony Keohane said: “This substantial investment will enable us to compete in the long term with prices north of the border and will remove the incentive or the need for consumers to travel, which has been bad for jobs, for local economies and the national economy.
“When currency costs, travel and journey times are taken into account, we believe many customers will find it is cheaper to shop in these stores south of the border.”
“We are starting this in these 11 stores to secure jobs and livelihoods in the border towns,” he said.