Well of course it is really early days and we have no idea what the impact will be in 5 or 10 years’ time - but there are some immediate Brexit impacts we need to think about even if you don’t feel any action is required yet: namely the threat of cost price inflation and the impact on consumer spending.
The value of the pound is critical, even if you are not importing products from Europe or further afield your suppliers will be buying products or components to make products here in the UK and the stock they bought at pre-Brexit prices will only last so long. With margins tight for suppliers they will only be able to absorb a certain amount of the increase. It may be that you are not asked to pay higher prices until after your Christmas orders have arrived, or it may be that you have had your first email…
You will need to decide where you can pass the prices increases on to your customers and where you can/will need to absorb it. Your decision may be influenced by what you see your competitors doing. It is worth thinking about it now as it may influence what you want to stock and/or how you want to change your range in the next few months.
If you are in a tourist destination you may find that there is an increase in foreign visitors this year which could also be a benefit for you. Similarly, if you are selling products abroad the value of the pound may boost sales for you.
Shopping habits changed significantly following the 2008 recession, so the big question is will we see a drop off in demand as consumers feel uneasy about what will happen next?
Concerned we may slip into recession again, The Bank of England has already cut interest rates and resumed its programme of quantitive easing to boost spending… but of course we may not?
A good acid test is to think about how you are feeling as a consumer: are you putting off purchasing decisions? Happily July’s retail sales figures saw spending up which was a pleasant surprise.
After 2008 we found the luxury sector was unaffected… will it be the same this time? There are no answers yet and there won’t be for a while but you need to be planning what your reaction will be in answer to the various scenarios.
At the Giftware Association we recently polled members to see how they are feeling and what support they want from us initially over the next few months.
Here's a summary of their views:
- The majority feel that their UK sales prospects will be worse in the coming months; of those who replied only 4% felt they would improve.
- 54% felt their export sales would drop; 6% said they would improve.
- 88% that their costs will be higher, the remainder that they would stay the same.
- These responses are in stark contrast to the poll done in mid-March where the response was much more upbeat.
- Having said that some respondents did recognise that there were bound to be positives too.
It is at times like this that trade associations like the Giftware Association can come in to our own in supporting members because we understand the issues that are particularly relevant to them and can be there with expert advice to help cushion the BREXIT blow.