For a few mad years, Irish consumers and their money were easily parted. But now that the boom is over it is finally dawning on us that Rip-Off Ireland was a fact, not a slogan
EVERYONE HAS their favourite tale of Rip-off Ireland. Mine dates back a few years, when I called in to a well-known shop that installs kitchens just as an expensively-dressed woman flounced out. The owner was shaking his head: “I tried to put her off, because I’m run off my feet, but she insisted. I quoted her €37,000 to get rid of her. The kitchen costs €20,000. But she said: ‘when can you start?’”.
But Rip-off came in all shapes and sizes in the bad old days, from sheds sold in Dublin 4 for six-figure sums to the 50 cent some shops charged for an extra slice of bread with your soup or a second biscuit with your coffee. A supermarket owner recently complained to me how, to satisfy suppliers, he had to sell well-known brands in his stores at twice the price charged in the UK: “You’d have the same packaging and the same soup from the same factory in France. The only difference was that the British pack was slightly bigger, and the Irish product was twice the price.”
Back in the boom days, none of this mattered. Fools and their money were easily parted, but there was always more credit on tap. Property investment was a form of pyramid selling, and a new sucker was sure to turn up to take that dismal two-bed in Ballygoupwards or Bucharest off your hands at a hefty premium.
“The credit card was king,” says Niall McHenry of consumer website saveafewbob.ie. “The buy now, pay later mentality was rife. There was a ‘wealth effect’ with people spending based on the perceived value of their assets.” But not any more. Shoppers are shopping around – finally. Cosy business relationships have splintered. The banks have rolled down the shutters on feckless credit. Thrift is the new paragon. And all this happened before the recession turned money-saving into a necessity rather than a sport.
“People are no longer blasé about accumulating debt. What’s more, their wealth has diminished. The feeling now among consumers is that we are facing into a few years of pain. Many will be waiting years to get back to breakeven,” says McHenry.
Now we revel in our value-consciousness. We outdo each other with stories of bargain deals. We haggle as we never did – apart from in a Moroccan carpet factory. We try out goods in shops, then purchase them on the internet. As consumers, we don’t get angry anymore – we get even.
McHenry talks of a new paradigm among consumers expecting to get value for money. “This mindset is not a fad. It is here to stay. For a whole generation of consumers mostly in their 20s, 30s and 40s, the repair job on their mortgage, investment portfolio or pension fund is going to take a number of years. They will be on a constant look-out for good value or trying to secure a good deal.” That’s why 4 per cent of the Irish grocery market moved North, until retailers in the Republic finally got the message earlier this year. Or why more than 200,000 electricity customers have switched from the ESB to Bord Gáis or Airtricity in search of handsome savings.
THE JOURNEY FROM Rip-off Ireland to Cheap Ireland is a long one and it’s by no means finished. In 2005, the Consumer Strategy Report (CSR) commissioned by the government found that Ireland was the dearest country in the euro zone for food, soft drinks, tobacco and rent, and the second most expensive for alcohol, restaurants and pubs. Only this week, a CSO report said Ireland had the second-highest prices in Europe, at over 25 per cent more than the EU average. The CSO figures, however, dated from 2007 and 2008, before the new economic realities asserted themselves and consumers took matters into their own hands.
High prices were only part of the story. Massive consumer inertia presented retailers with huge captive audiences, regardless of the price or quality of their offerings. The public wanted what the public got because they didn’t know any better. The majority of consumers found the area of consumer rights both complex and confusing, according to the CSR report.
Consumers’ refusal to vote with their feet was intimately tied in with weak regulation. Consumer protection equated to a few prosecutions against retailers for overcharging, or for cheating on weights and measures, while the big picture was lost. Consumer groups, run on a shoestring, were mere minnows against the power of giant corporations.
The other reasons for persistently high prices were well known; they included a lack of competition in many sectors, overly cosy relations between supposed business rivals and between government and business, and the booming economy, which taught us all the price of everything and the value of nothing.
Yet in spite of the grumbling about the patent unfairness of it all, nothing changed. Ireland regularly topped the charts internationally for cost of living. Even our best-known exports, such as Guinness or Kerrygold, cost less abroad than in their country of manufacture.
But then, some years ago, things did start to change. Slowly, at first.
The Ryanair generation started asking why it cost more to take a taxi to the airport than it did to fly to the Continent. Eddie Hobbs stoked the latent ire of consumers on rabble-rousing television programmes. Towns around the country started agitating for discount supermarkets. The first of the foreign invaders arrived in banking (Royal Bank of Scotland, Halifax) and retailing (Aldi, Lidl) to shake up domestic markets.
Near-continuous sales became the norm as department stores and other retailers switched over to a more American style of business. The internet opened up endless new possibilities and new choices for consumers.
Growing consumer power led the government to establish the National Consumer Agency (NCA) in 2007, which was given a raft of new powers to investigate business malpractice. The NCA has had a mixed time, but its shopping surveys undoubtedly concentrated the minds of consumers, retailers and Government on the Rip-off prices charged for groceries in the Republic.
The internet drove the new zeitgeist, by providing shoppers with alternatives to over-priced high street stores, a mine of comparative information and a growing number of consumer-oriented websites. The excesses of Rip-off Ireland were documented in loving detail on forums such as askaboutmoney.com and boards.ie, and afficionados set up specialist sites devoted to “cheap eats”, “Lidl treats” and the like.
ValueIreland.com was set up six years ago, at the height of the Rip-off Ireland phenomenon: “At the time, there was only one other consumer focused website around – the boards.ie Rip Off Ireland forum – still in place today.
“In the past six years, many other websites with a consumer focus have come and gone but in the past two years particularly there has been a marked increase in the number of Irish consumer-focused websites – I count upwards of 78 different sites today. This is brilliant for Irish consumers – the more information they have to hand, the better they can decide how, where and when to spend their money wisely.”
Niall McHenry is a more recent entrant to the internet, and his venture is driven to some extent by necessity. “I lost my job 12 months ago, as did a number of my friends and colleagues. Other family members and friends had their hours reduced and their salaries pared back. Everyone was cutting back on their spending and becoming more conscious about obtaining value for money. I felt there was no website offering ‘value conscious’ consumers the right mix of research, editorial and deals.”
The traditional media has also responded to the new sentiment, with the appointment of consumer correspondents in many newspapers and the creation of specialist columns, such as the popular PriceWatch column in this newspaper.
It wasn’t just that we changed our habits; our mindsets changed too. There were no red faces in the queue of shoppers driving into Sainsburys in Newry, in spite of suggestions in some quarters that cross-Border shopping was unpatriotic. Even comfortable middle-class shoppers started boasting about the value they found in German discount stores. (This week, I was invited to a dinner during which the host proudly announced that everything used in the meal had been bought in Lidl.) What started as a trickle of change became a dam-burst in the past year.
Homeware and clothing prices tumbled as outlets discounted heavily; mark-downs of up to 70 per cent were common during the January sales. A price war broke out among the big supermarkets, which have cut food prices by about 20 per cent since the start of the year. Increased competition in the electricity and phone markets encouraged consumers to switch in greater numbers than ever before.
Some parts of society have proved more resistant to change. The cost of education and medical services is actually going up, this week’s CSO figures show. Insurance companies are pushing up premiums even though accident rates have fallen. It now costs up to €60 for a 10-minute appointment with a GP, even when the purpose of the consultation might only be to obtain a prescription or a referral.
Last month, a survey by the Consumers’ Association of Ireland found that the cost of services such as dentistry and plumbing were on average 30 per cent higher in Dublin than in Belfast. These figures appear to bear out the recent assertion by the Tánaiste, Mary Coughlan, that some sectors had yet to feel the “chill winds of economic reality” – she singled out “engineers, architects, the legal profession, dentists and others” – by showing how they intended to reduce fees and charges.
Not surprisingly, the professions took umbrage. Architects pointed out that half of their number are currently unemployed, and engineers were similarly appalled. “The Tánaiste was mistaken; we’re facing an arctic gale, not a chill wind,” says Ken Murphy, secretary general of the Law Society. “All the evidence is that there is significant downward pressure on solicitors’ fees.”
Even some food staples have resisted the downward trend in prices; lamb, bread, milk and butter have all increased over the past two years, the CSO figures show. “The figures show that for people on the margins, the cost of some of these basic items hasn’t changed a lot,” says Lorraine Mulligan, a policy analyst with Siptu. The bulk of recent deflation is accounted for by reductions in mortgage rate interest, which obviously benefits only homeowners.
NOW THAT WE’RE all so value-conscious, are we better off? The astute shopper probably is; these days, every time I pick up a tub of infant formula for €8.50 or so, I marvel at the savings before asking how it was that I paid €15 for the same product for years in the bad old days.
But as Mulligan points out, there can be a major downside to the hunt for ever lower prices. “It’s all very well to get cheaper produce, but you also have to think about employment and local jobs.” In the retail sector alone, economist Jim Power has claimed 100,000 jobs could go if the main supermarkets switch to sourcing cheaper products from abroad rather than buying closer to home.
Food scientist Prof Pat Wall of UCD has warned of the dangers of a “race to the bottom” in terms of price on the quality of the food we eat. The demand for ever-cheaper chicken, for example, may push producers to cut corners on food safety and animal welfare to meet the voracious demands of retailers. And while consumers may welcome ever falling prices of clothes, concerns have been raised on many occasions about the conditions under which workers in developing countries operate to produce them.
“Whether it’s Irish farmers or garment workers in the developing world, you have to pay the people involved a fair price as well as taking a close look at the margins being charged at the retail end,” Mulligan says.
Lower prices are also the result, in many cases, of lower wages. Pay cuts of 5-10 per cent have been implemented in many private sector companies, and longer working weeks are the norm. So while there may be bargains out there, we’ll have less time and less money to avail of them.
However, thrift and the search for value is now a necessity, not an option. As McHenry remarks, “nobody is ashamed to look for a good deal because we are all in this together. Not just those who have been unfortunate enough to have lost their jobs.”