Sterling’s exchange rates against the dollar and euro have dropped so we are able to buy less for our pounds. For those buying imported products or components it is going to make them more expensive. From June-December most suppliers had bought products and currency ahead at the higher exchange rates and this covered most through to the end of December. While January is usually a time of cost price increases, this year I believe we will see even more of them and by bigger percentages - maybe as high as 10%.
But its not all doom and gloom!
If a significant percentage of your business is export then this change in exchange rates should make your products more attractive so make sure you are using your distributors effectively, contacting them and encouraging them to promote your products. If you don’t have any now is the time to consider if they could help your business. (If you are new to export it may not be as difficult as you think – so consider contacting DIT, the renamed UKTI, who can offer advice and help.)
The improved dollar/euro exchange rate has also encouraged many more tourists and this is having a really positive effect on sales in popular tourist destinations - in shopping areas like London’s West End and other centres like Stratford Upon Avon. A report a few weeks ago said that we had seen a 40% increase in Chinese visitors in 2016 bolstered by a change in visa controls making it easier for them to visit. The really good news about Chinese visitors is that they are the highest per capita spenders averaging £2.7k per person per visit!
And of course as we get closer to summer we will have lots of European visitors heading to the coast. It is also likely to encourage a lot of Brits to Staycation in the UK this year and this should be really good news for all sorts of holiday locations around the country.
But of course there are pluses and minuses for everything and we saw a slight increase in inflation as the first price rise driven by the change in exchange rate started to impact and RPI increased from 1.6% to 1.9%. While this is not ideal, especially when many government targets are related to the inflation rate (e.g. rail tickets which we saw go up by an average of 2.3% in January) – a little bit of price inflation can be helpful for businesses. Consumers have been enjoying price deflation for the last 4 years, but now businesses have some flexibility to tweak their prices. That said, if everyone increases prices it will impact on consumer’s disposable income and how they spend it.
For British manufacturers a Buy British focus may present a really big opportunity for you, particularly where this allows you to keep your prices down and therefore your products are more competitively priced. At Spring Fair in February, The Great British Exchange showcased a range of small British producers and was a great place for retailers to find interesting new suppliers.
For retailers a Buy British or Buy Local focus could be a really big opportunity - and for you too if it is relevant to your customers; again this may be particularly strong in areas with a high volume of visitors and tourists.
So instead of talking about potential ‘decline’ – I’m putting together a series of blogs on how we can prepare our retail businesses and get them in the best shape to have our best summer ever in 2017.