29/05/2009

Cross-Border Shopping Spurs Tesco Supplier U-Turn

Tesco is to lay off staff at its Republic of Ireland headquarters in Dún Laoghaire - and all because of increasing levels of shoppers heading North.

Around 140 workers are to go following its decision to import more goods directly from the UK rather than sourcing them through Irish suppliers.

It has been reported today that it also tried to 'hide' its new policy of buying directly from UK suppliers and has been spurred into the move by the continuing exodus of shoppers across the border into Northern Ireland.

Ensuring its policy of taking deliveries from UK suppliers 'went unnoticed' was a key objective for the leading multiple, said today's reports.

A contentious Tesco policy document is said to have given the objective as "to deliver an efficient value chain on key categories, that is invisible to the Irish customer and the UK Commercial team, but allows Tesco Ireland to utilise Tesco UK scale in terms of its customer offer and trading terms".

Tesco told suppliers that a change was required because 40% of Irish consumers were "actively shopping" in Northern Ireland.

The document aimed to explain changes in its policy on sourcing branded goods directly from the UK, rather than using local distributors.

Unsurprisingly, Tesco's new policy is reported to have caused outrage among local suppliers who claim they are facing financial ruin - all due to its bid to beat the competition from Northern Ireland.

The company last week unveiled the new cost-cutting strategy at its stores near the Border, involving average price reductions of up to 10%, which it said was aimed at stemming the flow of shoppers heading North.

However, the Irish Times revealed this week that the company makes annual profits of about €250 million in the Republic.

Profit margins in Ireland are 9.3%, significantly higher than in other parts of the group.

(BMcC/JM)

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