If you drive through the countryside along Ireland’s narrow, winding roads, you won’t pass by Wal-Marts or Home Depots or any huge hypermarkets. This is because the Irish government adopted a cap on the size of stores back in 1998. The cap prevents the development of supermarkets bigger than 3,000 square meters, except in Dublin, where they can be 3,500 square meters. But this May, the Irish Minister for the Environment, Martin Cullen, announced that he was reportedly commissioning a study on the impact of the cap. Irish officials are concerned about reducing the rate of inflation in the country, and conventional thinking is that food prices are part of “rip off” Ireland. Analysts respond that retail food inflation is only 2.2% — half of the consumer price index increase. The reasoning to un-cap goes, if the government removes the cap, superstores will be built, bringing more competition to the marketplace, thereby driving down the cost of prices, and lowering inflation for the consumer and the economy. The Tanaiste, or Vice Prime Minister, Mary Harney, is also considering making changes to the 1991 Groceries Order, which bans below-cost selling. Local retailers, meanwhile, are dealing with the onslaught of smaller German retailers, Aldi and Lidl, which in just several years have eaten into nearly 5% of the food market share. The notion of restricing retail size was based on a number of reports in Britain and Ireland that suggested unrestricted planning would decimate traditional town centers, and lead to the closing of thousands of small businesses. The Irish Retail Planning Guidelines recommends that “retailing should generally be directed to existing settlements and development in the countryside should be resisted.” But companies like Swedish furniture retailer IKEA are pressuring government officials to lift the cap, so it can build stores ten times the cap level. Ireland has also adopted a National Spacial Strategy, which views town centers as playing “vital social and economic functions” for their communities. Local retailers also point out that foreign companies source few of their items from Irish producers, and that superstores in Germany like Wal-Mart were forced to lift their prices when they were caught selling products below cost. The German Office of Competition said such pricing policies would do “clear and lasting” damage to the economy.
I spoke recently at a Retail Summit in Dublin, at the invitation of Shelflife magazine. I pointed out that Wal-Mart has a major push to expand internationally, and if its international division were a stand alone company, it would rank 33rd on the Fortune 500 list. The international Wal-Mart division had $41 billion in annual sale, or 17% of the company’s total. I urged Irish retailers to develop a “Shamrock Alliance” effort to promote stores that sell Irish products, to sell their own store “extra value” labels, and to lobby the Irish government to understand that companies like Wal-Mart have been the end of competition, not the beginning. As Wal-Mart admits: “At Wal-Mart we make dust, our competitors eat dust.” I told the Irish retailers: “Why would a country that spent so much time and energy driving out the snakes, now turn around and invite them back in?”