Chapter 1: What is the current state of retail pay and its increase since 2020?
Now, this is Breakfast Business with me, Emmet Oliver.
You're very welcome along. As you know, over the last few weeks and into the next few weeks, we'll be spending a lot of time where? Well, in retail premises, shops of all kinds, whether they're pop-up or more stationary or otherwise. And a lot of them are struggling or certainly facing a lot of headwinds at the moment. One of those is pay.
Retail pay has increased by 40% since 2020, the year of COVID. The national minimum wage is set to reach €14.15 per hour this January coming. And of course, there's a lot of other things in the pay area that retailers are having to be balanced about. Competitiveness and cost control is top of their agenda. So what exactly is happening in the sector?
Nicky Moran is the Director of Grocery Retail at XL and he joins me now. Good morning.
Good morning.
How are you? Nicky, I just wanted to ask you, first of all, we've known there's been a number of different pay components, minimum wage. It's when you put it all together, it's quite a large, large increase. Have the retailers been able to offset some of that with the price increases? Because we do see obviously inflation problems. So how are they balancing those two?
Well, I suppose when you're looking at the increase, I don't think it's reflective of inflation. So like you mentioned, it's been 40% in the last six years, where inflation is somewhere between 7% and 8% in that period. So, you know, certainly that's not picking up the difference there.
If you talk in real numbers, you know, you're seeing about 1,300 increase per employee in the store, which in a convenience store costs about 40,000 a year and in a supermarket is about 130,000 a year. So, again, I think, you know, many people would accept that they're not seeing their grocery bills going up quite that much. So, no, we're...
The difference that's been covered is from the retailer's margin from their bottom line.
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Chapter 2: How are retailers managing the impact of rising labor costs?
It's very broad-based.
Yeah, so it's kind of a knock-on effect is what you're seeing there. So when the minimum wage goes up for your junior staff or your entry-level staff, you're looking at the supervisors, the training managers and the department managers, and they're looking to maintain that difference between them and the staff below them. And then that has a knock-on up the way.
You're seeing an increase in fresh food. We've seen that again and again because a lot of stores are... looking for exceptional talent around fresh food. So they're willing to pay a little bit more for that. And that's the point of difference that they're offering in their store. So you'll see some of the retailers and the fabulous fresh food offerings across the businesses.
And then the retail security officers, the reason their salaries has gone up is it's a supply and demand thing. So As we mentioned, crime's gone up quite substantially over the last few years. And so retailers are investing more in their retail security officers. And so the demand has gone up for them. And so when demand goes up, as we know, prices go up.
Now, you're not a retailer. You're looking at the sector from outside. But a lot of people would say, hang on a second, the supermarkets and the retail businesses seem to be doing OK. You've got a profit margin at Tesco of almost 4%. It's lower for super value and other Aldi and Lidl, of course, it's much tighter. But how are they paying all this money?
You know, they seem to be still able to turn out a reasonably, probably falling, but a reasonable profit margin nevertheless.
Well, I suppose, first of all, I would say I'm a retailer, I grew up in retail. And so that's where, you know, our understanding has always come from is that we've all grown up in the industries that we recruit for. And so, yeah, you're seeing, you know, you mentioned that they still have a healthy lifestyle.
profit margin but I suppose you're not looking at where the profit margin was and what's still to come out of that you know you've seen retailers and you know I think you'd agree over the last number of years you've seen retailers take a lot of those profits and they constantly invest them back in the stores back in communities and so you know you know, they are squeezing that.
And again, if you look, you know, it's one thing looking at the bigger chains, but if you're looking at local convenience stores up and down the country, you know, there is a question, how do they shoulder these costs year after year after year? And, you know, that
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