The Irish retail sector is poorly prepared for European legislation that will require companies to have "track and trace" software in place by January 1, according to a new survey.

The Republic is also behind the rest of Europe in using software to automate the retail supply chain process, said Mr Ken Halpin, managing director of Dublin-based Celerity, a retail management solution consultancy.

"The impact of this legislation is quite significant because lots of companies are not ready to track their products and processes," he said.

Business process software connects retailers and suppliers. It allows retailers to trace all products on their shelves, account for goods purchased from suppliers and track who they've been sold to. A 2002 EU directive requiring this capability from retailers goes into effect here in January.

Using such software helps reduce operational costs and gives traditional retailers the ability to compete more effectively against discounters such as Aldi and Lidl, survey respondents believe.

The survey highlights the retail trade's view of the continuing impact the discounters will have on the Irish retail market.

Some 75 per cent of retailers acknowledged in the survey that traditional Irish retailers would drop prices to remain competitive with the discounters, and over 80 per cent believed traditional brands would lose market share to discounters' "own brands".

Over 90 per cent of respondents said they believed high labour costs in the Republic would result in them shedding employees to remain competitive.

Mr Halpin said bringing in automation would help trim costs for the retail sector but he noted that the movement towards automation had been slow.

Over 40 per cent of survey respondents - all in senior management - said they did not know the state of their company's preparedness in conforming with the EU track and trace legislation, though the deadline was only nine months away.

A majority of respondents also said they believed Ireland was "moderately behind" other EU countries in using process automation software.

It's not that companies are unwilling to implement the software but that doing so requires "changes in management procedures, retraining, and education", Mr Halpin said.

The survey, commissioned by Celerity and conducted by Interactive Return, questioned senior executives in the retail industry.