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Retail News Interview

Super Quinn Senator Feargal Quinn discusses the big issues facing Ireland’s retail sector, including upward-only rent reviews, the high cost of doing business in Ireland and the proposed introduction of plain packaging for tobacco products.

SENATOR Feargal Quinn is probably Ireland’s best known and loved grocery retailer, despite the fact that he hasn’t been a practicing retailer since 2005, when his beloved Superquinn was sold.

Since forming Quinn’s Supermarkets in Dundalk in 1960, Quinn quickly established himself as arguably Ireland’s most progressive retailer. For 45 years, he was a familiar figure on the shop floor, greeting customers personally and listening to their needs, even when Superquinn grew to become one of the foremost names in Irish grocery retailing. His philosophy

of ‘Crowning The Customer’ is one that served him well and helped to change Irish retailing forever.

A member of the Seanad since 1993, the affable workaholic has for years provided the voice of reason when it comes to the retail grocery sector, never afraid to take on the Government when he feels policy changes will effect retailers and retail jobs. Indeed, recent years have seen Quinn famously help other retailers via RTE’s ‘Feargal Quinn’s Retail Therapy’, whereby he uses his business acumen to aid ailing store owners to turn their business around.

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Retail News Interview Not one to rest on his laurels, Seanad reform is currently high on Quinn’s agenda. “I believe that when the Referendum was lost by the Government, it was lost to people who wanted to see a reformed Seanad and not just a retained Seanad,” he says. “I’m putting my heart, soul and effort into seeing if we can convince the Government to have a reformed Seanad, one that would be more democratic, in which every citizen would have a vote. Ireland would have a much better democracy if the citizens owned the Seanad.”

In a wide-ranging interview, Quinn is typically forthright in his views on the state of Ireland’s grocery market in 2014, the issues affecting the sector and how the Government can help the category back to growth.

Do you think that the Government is doing enough in terms of helping Ireland’s beleaguered retail industry?

I think the Government is doing its best but there is so much more it could do. For instance, it can make it much easier to set up a business. Firstly, according to The World Bank’s Cost of Doing Business Report 2014, it takes four procedures and as long as 10 days to start a business in Ireland. In New Zealand, it takes just one procedure and half a day to set-up a business, costing just €100. We should be aiming towards this.

Also, the Government could look at getting rid of old legislation and redtape that hinders the retail industry.

In the UK, they introduced a system called ‘one in – one out’ whereby if the Government introduced one measure that affected business, they would have to take another one out. They have moved further on that now and the new system is called ‘one in – two out’ whereby the Government pledges to remove two pieces of legislation for every one they introduce. These measures have saved UK businesses around £1bn in burdens since 2010. We should be looking to do this here.

On this note, the Government should examine the possibility of not imposing the same burdens on small retailers or SMES as those placed on a multinational company. Should we impose the same legislation on a company of, say 500 people and a company of, say, four, people? Look at France, where many regulations come into force once firms employ 50 workers. We should consider doing similar here.

The retail grocery sector is a massive source of employment in Ireland.

How do you think employment in this

sector could be increased?

We are seeing much more competition in this area, which is always a good thing for the customer. I think that something that is often not mentioned is the fact that in the natural scheme of things, we are going to see more employment in the grocery retail sector, given that Ireland has the fastest growing population in the EU. This is an amazing opportunity. We are going to need more grocery retailers and staff in the sector to serve the bigger population.

Many small businesses, including grocery retailers, feel they cannot increase staff levels due to the high costs of doing business in Ireland (labour, energy, Local Authority charges etc). What can be done to relieve the burden on retailers, so they can start to hire new staff?

We could give more tax breaks and consider some new ideas. What if we were to allow tax-credits to be converted to cash if a business hires an employee? That is, what if the tax credits that start-ups have at the end of the year could be converted into cash now? What SMEs and especially start-up companies need is immediate cash and cash-flow. If a start-up hired an employee, then the tax-credit could be converted into cash – this is what happened in the US and it was a big success. This cash incentive worked and I believe the Government should try this idea out.

The cost of labour, in particular, is extremely high here. The Government’s plans to reintroduce JLC rates has been broadly slammed by the trade. Where do you stand on this issue?

More barriers on business at this time where the economy is starting to recover is not the way to go. The Government should first tackle issues like Sunday pay, which can be a massive cost on business. I welcome that Government is moving in this area with regard to hotels and restaurants.

Another massive cost is rent, with a large proportion of landlords either refusing to engage with tenants on rent reductions or imposing upwardonly rent reviews. The Government initially proposed to reform and streamline landlord and tenant law for businesses but subsequently rowed back on this. You brought a bill do abolish upward-only rent reviews to the Seanad. What more do you think can be done?

I have worked for over a year with experts to come up with a viable

solution – a piece of legislation that overcomes the argument that we cannot get rid of upward-only rent reviews because of the Constitution.

My Bill will get rid of upward-only rent reviews and aims to give business leeway to agree a level of rent that reflects the current rental values along their street - a value that reflects the economic realities of 2013, not a value which is stuck in 2006. This is a real and concrete example of what the Seanad can do - to bring a sensible solution to an issue which the Government has simply not tackled.

The Government can simply get behind my Bill. If we can get rid of upwardonly rent reviews for businesses that are locked into massive rents, then we can set the conditions for more growth in the retail sector. The Government will simply be fulfilling an election promise if they support my Bill on upward only rents.

How can landlords be made to realise that they are better off with a tenant paying a reduced rent, in line with the market, than to have a vacant property on their books?

In the normal life of a business, businesspeople are able to renegotiate on almost a daily basis to keep their business viable. I know this situation very well. However, at the moment, the painful status quo means that businesses have to pay exorbitant rates come hell or high water. In terms of businesses stuck in Celtic Tiger era rents, if the Government supported my Upward Only Rent (Clauses and

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Retail News Interview Reviews) Bill 2013 Bill, it would give businesses the freedom to renegotiate their rents and landlords would soon realise they are better off getting a reduced rent than have a vacant property.

The rates issue is not going away, with many retailers struggling to pay Local Authority Rates, which they feel are excessive and anti-competitive How can this issue be addressed?

This is something the Government has to look at urgently especially in terms of even more charges like water charges being imposed on retailers.

We need not only to think of new business – but to make sure that existing businesses survive. This can be done by examining all regulations, taxes and barriers on businesses and perhaps giving temporary relief at this challenging time.

Again, some retailers feel rates are unfairly calculated, in that they are based on store size rather than turnover. Surely a rural store with low footfall and consequently low turnover is at a disadvantage when compared to a small, high density urban store? How can this be addressed?

This is a difficult question as there are so many variables. The rural store may have a very small rent compared to the city centre shop.

Again I would say that all barriers need to be examined and perhaps some temporary relief can be granted by the Government.

The energy market is another source of high costs. Cost increases from both ESB and Bord Gais will put added pressure on already stressed retailers and suppliers. What more can be done to ensure Ireland’s energy costs are in line with our European neighbours?

This is a massive concern for businesses up and down the country. I think that reduced VAT rates on some of those services for some businesses could be one way to go to make sure that retailers survive this turbulent time. I have never understood the idea that the ESB is not profitable enough and we have to put prices up to encourage competition. We need to continue this drive towards competitiveness and continue to bring down rent, wages and energy prices, amongst other costs.

Unfortunately in Ireland, there is no debate on alternative sources of energy such as hydraulic fracturing.

Shale gas has slashed energy costs for businesses and households in the US and provided a massive stimulus to the economy. I am not saying this is the right or wrong way to go but I am

saddened to see a lack of debate on some issues that are simply considered ‘taboo’ with politicians just looking at the next election and not on the national, long-term level.

Access to credit has been a major problem for retailers, since the economy went into recession. On one hand, the banks insist they are offering loans to SMEs, yet anecdotal evidence suggests that it is now harder to get credit than ever before.

What can the Government do to ensure that our small businesses, the lifeblood of our economy, can access the necessary credit in order to survive?

I think that banks need to be analysed much more closely in this regard. I am not sure that enough is being done to monitor if loans are getting to the right SMEs. In credit to the Government, they have supported several microfinance schemes but for one reason or another, there has not been a large take-up. Much more needs to be done in this regard to make SMEs aware of such credit. Also, we need to encourage SMEs to look beyond the banks and consider crowd-funding.

Linked Finance, where I am involved, is a great example - businesses have to prove to customers and supporters online that they are worthy of credit.

It is an easy and straightforward way to access credit and I believe it is the future.

There has been a lot of debate on the issue of below cost selling and calls for a Grocery Code of Practice to regulate supplier-retailer relationships.

As someone with extensive experience of the grocery trade, do you feel there is a need for a statutory code of practice and an ombudsman?

I don’t think there is a need for a Code of Conduct and an Ombudsman, as the retail sector employs a massive number of people and I am wary of job losses that may result due to more regulations and costs put on business.

I think it worth re-iterating the arguments of Retail Ireland when it comes to the possibility of introducing a Code of Conduct in the grocery goods sector. They have made the very valid point that the Competition Authority has already stated that the retail sector is competitive. I know from my own experience as a retailer, that it is an extremely competitive sector where you cannot stand still for a minute. I had to make sure that customers came to my shop instead of my competitors down the street. That meant giving them the right product at the right price at the right time. We had to

“We have a low smoking rate compared to most of the world and often we forget this.

I don’t think that lumping more taxes on cigarettes at each budget is the way forward. We are just forcing people to the black market, where arguably even more dangerous products are available.” innovate to do that. Indeed, there were very tight margins. Given the crossborder nature of retail, I would be slightly concerned that if Ireland was to go alone here, we would be making ourselves less competitive. Ireland, going alone with a statutory Code of Conduct, may not be the best idea at the moment. Perhaps if this was done on the EU-wide level, there would be more of an argument.

Minister Reilly’s proposal to introduce plain packaging for tobacco products in Ireland will probably have many unintended consequences for retailers. How do you think plain packaging will directly impact on the retail trade in Ireland?

While everyone is well aware of how harmful cigarettes are, this measure will likely impact negatively on small retailers. There is an argument that the measure actually aid counterfeiters and fuels the black market, impacting especially upon smaller retailers. We should be doing everything to cut out the black market, and that includes areas like fuel laundering, which is thriving, largely due to high taxes on fuel. Also, there are a lot of other concerns surrounding plain packaging, such as the fact it may take longer to serve customers and customers are much more likely to get the wrong product. It may also be difficult to see what exactly effect plain packaging

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Retail News Interview itself has on reducing smoking.

How do you believe the introduction of such a measure may impact on the illicit tobacco trade in Ireland, which is already at unacceptable levels and costing the state in excess of €250 million per annum?

I think the Government forgets the Laffer Curve in this regard – now that the cost of cigarettes is around €10, it is fuelling the black market. The Government forgets that sometimes if you lower taxes, you bring in more revenue and you stifle the black market at the same time. Any proposal to raise taxes should take into account the very basic principle of the Laffer Curve.

Do you believe this will lead to a reduction in youth smoking in Ireland or should the Government consider alternatives to help achieve this aim?

We have a low smoking rate compared to most of the world and often we forget this. I don’t think that lumping more taxes on cigarettes at each budget is the way forward. We are just forcing people to the black market, where arguably even more dangerous products are available. One of the interesting findings of recent studies is that young people have little problem getting cigarettes from their parents and this is an area that deserves more attention.

What are your thoughts on the slippery slope argument, that it is tobacco today and potentially alcohol tomorrow? Don’t you believe this will cast a lot of doubt on Ireland as a place to do business?

Now that we have regained our economic sovereignty, I would like to see more public debate on freedom in all levels of society. I think that people are too passive when it comes to Government making laws. Politicians make laws which often put

more restrictions on people’s lives but Government never withdraws laws – I hate to see a move towards the nanny state. Indeed, often the Gardaí are used by the Government to check tax on cars for instance, rather than concentrating on areas of concern to citizens such as burglaries or violence. There is no debate on how the Gardaí are manipulated. In terms of business, Governments put more and more regulations on business but they never withdraw them – that is something the Seanad could do, removing laws so that the environment is easier for businesses.

The quest for value has seen huge price slashing and deep discounting right across the FMCG spectrum.

Have we bottomed out?

We probably have hit somewhere near the bottom.

This competition is good for the customer but it is not really sustainable over the longer term. There is a general sense in the retail trade that there is a recovery ongoing, and there is a lot more confidence.

Therefore, I think it is safe to say that there is a general inflationary trend with an improving economy.

You have always been an advocate of crowning the customer. Yet, in the current climate, value and price has taken precedence over

customer service. How can this be addressed?

In particular, SMEs can take advantage at this time – they can offer something different that the big multiples are no-longer offering – superior customer service. I feel that many businesses often got a ‘free pass’ during the boom years and took their customers for granted. Businesses must step up to the plate and increase their standards in spite of the economic environment. They are the ones that are succeeding. I know of one business from Retail Therapy that we worked with which had a 100% increase in sales in just a few months when it improved its business, in particular its customer service. Retailers should be looking for ‘The Boomerang Effect’ - “You want the customer to come right back to you – superior customer service will result in more business”.

Does customer service still matter as much as it did in the heyday of Superquinn?

It certainly does. SMEs must have a unique selling point that will make them stand out from the competition and attract customers to their door. In many cases, it is your own personality that brings the customer back! It is so important to be great at one thing so that customers will bypass the competition.

There must be one thing that people say, ‘I’m going

to go past that shop across the road, at the other end of town or next door, because I really want what that retailer has.’

How did you feel when Superquinn was sold to the Musgrave Group and the subsequent news that its stores are to be rebranded as SuperValu?

I was of course sad to see the Superquinn name go, given the fact that the brand is so well known and it carries such cache in marketing terms. I can understand the wish to bring the company’s brands into line, but I think simply disposing of a brand that customers love and trust with a reputation that took over 40 years to buildup is something that could be a questionable move.

In general terms, how do you feel Ireland’s indigenous retailers can help to lift the economy out of recession?

They are helping and many are thriving in the current climate. They are the main drivers of recovery. What I would say is that retailers have to take account of the fact that Ireland has the fastest growing population in the EU so there is a need for even more retailers to provide for the growing population. They need to look at the medium and long-term, which is very bright for retail in Ireland.

Economies by their nature are cyclical– prosperity will come back. I have lived through several economic downturns – there will be good times and harder times.

I opened in a recession, so they don’t scare me hugely.

When I go back and think of when I started in 1960, I was 23. The economy was very poor at the time. In the 1970s, we had expanded and things were very bad at that stage as well. When you look back into the 1980s, things were tough in those times too. I didn’t know what a recession was – all the time was a challenge for business.