Our focus this week is on Dublin, where we visit famed department stores Brown Thomas and Arnotts, and find out more about the capital city’s property market. We also meet video rental retailer Xtra-Vision as it embarks on recovery plans, examine the Irish supermarket scene, and take a look at events in Belfast and Cork.

Brown Thomas luxury department stores still remain at the top of their game

The roar of the once rampant Celtic tiger is now more akin to a banshee scream these days as Ireland confronts economic catastrophe.

But while the wail may reflect real financial hardship for consumers and retailers alike, it does not foretell doom. Conditions may be dismal, but store groups are determined not just to trade their way through, but emerge stronger.

That might seem over-optimistic in grim circumstances. Retail Excellence Ireland reported this month that retail sales in the Republic fell 6% year-on-year in the second quarter – double the 3% drop in the first quarter. June was the 40th consecutive month of sales decline.

But walk down Dublin’s Grafton or O’Connell streets and there are plenty of people shopping. The carrier-bag count may seem skewed to Primark’s Irish value chain Penneys, but there is still some money being spent.

And faith in eventual recovery is evident in the number of retailers heading for Dublin. In the past few months, Disney Store and Hollister have opened in the city, following hot on the heels of Forever 21. And earlier this month Poundland revealed plans to launch in Ireland trading under the Dealz fascia.

Fighting spirit

The new arrivals will trade against established retailers, many of whom show no sign of giving up the ghost even though recessionary conditions have inflicted deep wounds on some.

The fighting spirit is displayed at department store Arnotts, a Dublin retail institution on Henry Street undermined by the downturn but being reinvigorated by new management.

Arnotts, founded in 1843 and which also runs the Boyers & Co store in Dublin, hit trouble as a result of its property interests as the impact of the financial crisis took hold. In August 2010 lenders Ulster Bank and Anglo Irish Bank took control, parachuting in Mark Schwartz as chairman.

Schwartz, a former chief executive of shoe group Nine West and of restructuring specialist Gordon Brothers, has set about restoring Arnotts’ fortunes along with newly drafted in directors including former Harrods director Nigel Blow, who is chief executive.

Schwartz describes his task at Arnotts as “rebuilding a great tradition” by restoring the company’s retail credentials, which had taken a back seat during the boom years when property became a preoccupation.

“During the Celtic tiger years the management was focused on the Northern Quarter development,” he says. “My opinion is that with everybody focused on the development you can lose sight of the retail customer. We needed to step back and refocus.”

The customer took centre stage again, and the store is being remodelled to serve the customer better. Interviews and other research enabled Arnotts to understand and reconnect with its core shopper, dubbed Sarah by the retailer.

Schwartz does not want to go into detail about who Sarah is but says: “We have a broad range [of shoppers] but if you can understand who the bullseye target is, it should be attractive to Sarah’s parents, children and friends.”

Having done that, the strategy could begin to be implemented. “What brands does Sarah want? We had some, but we needed new ones. What services does Sarah want?” explains Schwartz. “Whether Sarah needs a new work dress, a party dress or something for the home she should say ‘I’m going to Arnotts’ not ‘where shall I go?’”

So there have been many changes to the shop and there will be more to come. In-store navigation has been improved, space has been reconfigured and categories shifted around. New brands, such as LK Bennett and innovations such as an Apple Store, and the revamp of in-store restaurants in partnership with Irish celebrity chef Clodagh McKenna all represent footsteps along the journey.

Despite the context of economic difficulty, it is concentration on the business of retail that bodes well for Arnott’s in the long run says Schwartz.

He maintains: “We are investing heavily in the future, totally repositioning the store. Even though the economy stinks and there will be bumps along the way, they are the challenges of any retailer and despite short-term and long-term challenges in the economy we need to look several years ahead.”

There is plenty still to do but the early signs are that the improvements are having an effect. Figures have not been disclosed for 2010, but when they are they are expected to show an improvement on the previous year.

Schwartz says the banks have been very supportive of his efforts to make Arnotts better. “The best way to recoup value was to make Arnotts a healthy retailer,” he says.

“Arnotts was important from an employment and economic perspective as well – they recognised its importance. The banks are now shareholders as well as lenders.”

Time to act

Across the Liffey on Grafton Street, Brown Thomas managing director Stephen Sealey has not had the same problems as Arnotts, but he is not complacent. He has made it his priority to ensure that the upscale department store business, which has shops in Cork, Limerick and Galway as well as Dublin and a handful of smaller BT2 boutiques remains at the top of its game.

Although the retail environment is tough, Brown Thomas is doing “OK”. “I’d attribute that to continuing to invest in the business,” Sealey says. “My view is that you can sit there and moan or get up and do something. You drive more business by events, reaching out to the customer and looking after the customer.”

Newness is evident in innovations such as the opening of a Christian Louboutin shoe boutique – the only one in Ireland – or the launch of the Marvel Room gifts area at Christmas, for which businesses such as Louis Vuitton and Tiffany supplied exclusive product.

Events – as many as 400 a year – have included everything from fashion workshops to the Kellydoscope, a giant Grace Kelly-inspired bag by Hermes that customers could go inside to watch a film.

“There’s a lot of doom and gloom. We want people to leave their cares at the door and see things that engage and entertain them,” says Sealey. “To me, it’s all about ‘Oh my God’ moments. We’ve all walked round [shops] and found nothing to buy.”

Despite its upscale nature, Sealey aims to draw a wide range of shoppers while acknowledging “we’re never going to be the cheapest”. His customers range from teenagers who come in for MAC cosmetics to older women who want Hermes, and he hopes to capture the customer for life by recognising and reflecting their changing preferences at different stages.

That requires sharp editing of the offer – a theme that Sealey returns to frequently as a reason for the retailer’s appeal: “Our vision is product excellence. It’s an edit of well-chosen ranges.”

Although part of the same group as Selfridges and owned by Weston family members, Brown Thomas has important freedom of action.

Sealey says: “We have our own buying team. If you take the point about editing, we take notice of what our customers in Galway want and what our customers in Dublin want. The buyer knows the store and the customer.”

He views Brown Thomas in an international as well as an Irish context and there has been big investment – in the region of e40m (£34.9m) over the past six years in revamping areas. “Our customer travels,” says Sealey. “They’re exposed to great retail environments and we need to make sure we compete.”

Come back brighter

Although Arnotts and Brown Thomas are different businesses, their bosses share one thing – a conviction that Ireland will emerge successfully from its present problems.

Schwartz says: “Everybody is careful. People might buy one outfit rather than two, but they take pride in their appearance. They want affordable luxury.

He believes recovery is not if, but when: “It’s been four years or so of the economy trending down. But this is a strong country with a well-educated workforce so there’s new investment. We’ll do better as retail picks up.”

Sealey is similarly confident: “If you invest and look after the customer, you can succeed – and succeed at full price.”

Nobody really knows when the economic trend in Ireland will turn. Irish consumers, like their counterparts in the UK, face further squeezes on their disposable income – only last month plans for a e100 (£87.50) a year “household charge” were unveiled and more new taxes are likely to follow.

Sealey says: “What people need to realise about Ireland is there are people who have been adversely affected by the recession, but a lot who haven’t. They need confidence about things like taxes.”

But confidence remains that the economic and retail scars of the financial crisis and its aftermath will, like the famous bullet holes in the Dublin GPO dating from the 1916 Easter rising, eventually be part of Ireland’s history rather than its present.

Xtra-Vision - A new lease of life

Straight after talking to Retail Week, Xtra-vision chief executive Peter O’Grady Walshe had an appointment in court.

He was there to find out whether the movies specialist would be cleared to proceed with restructuring following its placing into examinership – a status similar to Chapter 11 in the US.

He got the answer he wanted and now plans to get the retailer into shape for the digital era.

O’Grady Walshe’s involvement with Xtra-vision is long-standing. He led its acquisition in 1994, sold it to Blockbuster and then bought it back from the US giant – which by then was embroiled in difficulties of its own – in 2009.

But a combination of declining sales as the downturn bit and long, upward-only leases resulted in the business being put into examinership in April this year.

Xtra-Vision

Xtra-Vision

Unlike administration in the UK, examinership leaves a company’s management in control and a compelling, independently audited case must be made that a viable business can be rescued.

O’Grady Walshe inherited a business without any central database and run through standalone PCs in stores. He quickly set about updating the EPoS system and repaid acquisition debt.

Although discussions began with landlords about improved terms, not enough acted voluntarily, hence examinership, which enabled the closure of loss-making stores.

Now that Xtra-vision is out of examinership, its owners are pumping in e8m (£6.9m) of investment to shift the retailer to a model more appropriate to changed times and the shift towards digital delivery.

“We’ve been cleaning the information to move to proper CRM as a progression towards digital delivery – clearly that’s something customers want,” he says.

Digital delivery is likely to be essential, because apart from anything else Ireland’s lack of postcodes makes it difficult to offer the rent-by-mail system used by Blockbuster and Lovefilm in the UK.

“You can’t pre-sort and get bulk reductions,” explains O’Grady Walshe. “The Irish postal system doesn’t lend itself to online retail. There’s supposed to be a postcode system next year but I’m not sure it will be meaningful.”

But what does work at present, he says, is the Argos model of order online for collection in-store. That is a priority at present and a click-and-collect service is planned. “That will materially add to the amount of stock we can carry,” he says.

He is convinced too that movie stores have a future. “A very high proportion of rental and sales is impulse,” he says.

“Rental has held up fairly well, it’s reasonably recession-resistant,” he observes.

Xtra-vision has also broadened its offer with some success into categories such as games, confectionery and mobile phones “The only thing we couldn’t deal with was the rent,” he maintains.

Now, however, relieved of that burden, he is focused on creating a business fit for the future.

Property - The bubble that burst

While retail sales may be in freefall, perhaps it is property more than anything that was representative of the bubble that puffed up then burst the Irish economy.

Grafton Street, Dublin

Grafton Street, Dublin

Whether housebuilding or retail space, property valuations have plunged. Last month Irish toxic debt agency NAMA, the so-called ‘bad bank’, put 1,000 properties on the market – a number symbolic of the madness of the property spree.

But the crash has brought a new realism, according to CBRE pan-Ireland head of retail Michael Harrington. He says that rents in locations such as Dublin’s Grafton Street, which during the boom years was said to be the fifth-highest rented street in the world, have come down in reflection of the new reality.

That means new entrants are arriving and more are expected. Whether Hollister, Abercrombie & Fitch or franchised sweets chain Mr Simms, a variety of retail names are making their debut in the Republic.

“It’s interesting for people on the outside looking in. Ireland is competitive again, “ says Harrington. “There appears to be quite a few people looking at Grafton Street and the perception of value is there.”

There is also appetite for space in other cities, such as Cork, he says. As in the UK, it is all about the right location – for the wrong sort of space there are no takers, while appealing properties could be filled several times over.

Grafton Street, Dublin

Grafton Street, Dublin

Harrington is blunt about what happened. “The year 2009 could be characterised as the year that retailers recognised there was a new reality; 2010 was the year that landlords recognised it,” he says.

Last year, upward-only rent reviews were outlawed in Ireland on new deals. However, that leaves many people lumbered with over-priced property. Nobody has campaigned on the issue of upward-only rents as much as John Corcoran, owner of the Korkys shoe chain and familiar to Retail Week readers for his frequent website correspondence on the issue.

Grafton Street, Dublin

Grafton Street, Dublin

Retailers such as Corcoran are stuck with high rents while sales take a bashing. He took on a lease at e140,000 and it is now e440,000.“In any other European country we could have handed the lease back but we’re locked in and it’s a ratchet job,” he said. There is speculation that upward-only rents might be changed retrospectively.

Xtra-vision chief executive Peter O’Grady Walshe thinks retrospective change could just happen. He says it was not realised in the past how flawed the rent review process was and that it was retailers who suffered from the lack of evidence available about comparative rents.

Corcoran dismisses the view that he is obsessed with only one of the problems facing retailers. “If I was done for a murder I didn’t commit, I’d be consumed by it,” he says. “If people don’t like it, they’re kicking the guy not the ball.”

The grocers - All change at the top

Food retail in the Republic of Ireland has been transformed since the 1990s and is undergoing big change again. The arrival in the 1990s and subsequent growth of international retailers such as Tesco and Lidl upped the competitive ante. But it is an Irish retailer, Musgrave, that is likely to benefit from industry changes resulting from the financial crisis.

Musgrave, whose brands including SuperValu, Centra and Budgens in the UK are typically run by independent shopkeepers, is expected to take control of Superquinn, the 23-store grocer especially strong in Dublin and which collapsed under the weight of its debts in July.

Although it briefly looked as if Musgrave’s deal might be opposed after an attempt to put Superquinn into examinership was considered, the takeover is now expected to proceed unhindered.

The deal will propel Musgrave into the top spot in Irish grocery market, leap-frogging Tesco. It will have a share of 27.8%, just ahead of Tesco’s 27.6% and come way ahead of Dunnes with a 23.4 % share. Superquinn, with a 6.1% share in the most recent figures, had been losing ground.

One of the big questions being asked now is whether Musgrave will retain the Superquinn name. Kantar Retail director of retail insights Bryan Roberts thinks there is a lot of mileage in the brand. He said: “It has a huge reputation among Irish shoppers for quality and service. There are a lot of possibilities to exploit the Superquinn across the Musgrave group rather than jettison it.”

Fit for a Queen - Cork’s English Market

Not once since the foundation of the Republic of Ireland has the king or queen of England visited, writes Eoin McGettigan. Not once, that is, until May 2011.

Among the heavily symbolic places on the Queen’s itinerary was one location that delighted the retailers of Cork. The Queen would visit the English Market (pictured). Cork is Ireland’s second city after Dublin, but its residents call it the real capital. At the centre of the city is the jewel that is the English Market.

It’s a covered market of some 100,000 sq ft. In 1788 the ‘English’ corporation that controlled Cork founded the market, 80 years before the Catalan equivalent, La Boqueria in Barcelona.

It has survived the famine, revolution and the burning of Cork. Under its roof are dozens of food stalls: fishmongers, butchers, greengrocers all vie for your attention in a cacophony of yells and clatters. The standards are high and yet there is an old-world feel. Customers haggle with the stallholders. Tesco, along with my old employers SuperValu and Dunnes Stores all have shops within walking distance, yet the English Market thrives. It offers a connection with the purveyor that modern shops deny. It connects the producer, the product and the customer in a way that is lost to us in modern retailing.

There is something intrinsically human about this connection and thanks to the English Market it’s not lost to us here in the real capital of Ireland.

Eoin McGettigan is the owner of McGettigan & Associates, and a former chief executive of Lifestyle Sports and director of Dunnes and The Co-op

Northern Ireland - Potential but concerns

Separated by culture as well as water from the UK, and equally distinct from its neighbour the Republic, retail in Northern Ireland is different from elsewhere.

There are sizeable businesses based there, ranging from 50-store curtains and bedding specialist Harry Corry to cycling etailer Chain Reaction, and over the past 10 to 15 years many ‘mainland’ retailers have expanded there.

In Belfast, schemes such as Victoria Square have enlivened the city’s retail scene and the Titanic Quarter on the waterfront will being more retail and leisure space.

Belfast has the potential to be a much bigger retail destination than it is at present, says Northern Ireland Retail Consortium director Jane Bevis. The city ranks in 14th place in the UK, versus Glasgow at number two and Cardiff at six, so at present it punches below its weight.

But retailers face many difficulties. Licences to sell alcohol or open pharmacies, for instance, must be acquired from an existing holder. Asda’s inability to secure an alcohol licence prompted the grocer to abandon plans for a new store in north Belfast.

But perhaps the biggest threat to retailers in Northern Ireland at present, says Bevis, is the plan to introduce a levy on big retailers. The proposal is being consulted on at present, but the intention is to introduce it in April 2012. “We are opposing it very strongly” says Bevis, who would rather see business improvement districts created. BIDs, she believes, would better facilitate the levy’s intended aim of helping small businesses.