Tesco delivered a jolt to the fashion industry in the Republic of Ireland this week by introducing euro/sterling price parity on 7,500 clothing lines in 75 of its stores across the country.
At current exchange rates, Tesco’s price reductions mean shoppers in Ireland will pay about 7% less than those in Northern Ireland for an identical garment. At present, shoppers can get some goods 30% cheaper in Northern Ireland than in Ireland because of exchange rates and differing VAT rates.
The price parity strategy is thought to be part of a wider €20 million (£18.8m) price restructuring at the grocer.
Traditionally, UK-based retailers have sold identical garments at higher prices in Ireland, blaming higher rents and employment costs in the country. This has led to the Consumers’ Association of Ireland campaigning against ‘rip-off’ prices at UK retailers.
Although clothing accounts for just 5% of Tesco’s sales in Ireland, the grocer is thought to have introduced price parity in an attempt to secure massive publicity and grab market share from rival fashion retailers.
Irish retailers told Drapers they may be forced to follow Tesco’s lead or risk losing out, but pointed out that the margin hit would not be easy to swallow.
The Irish retail market has been hammered by the recession, which has been compounded by an increase in VAT to 21.5% coupled with the strong euro against the pound, all of which has sent thousands of shoppers across the border to Northern Ireland, where goods are up to 30% cheaper.